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SAP earnings Q3 2021

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At its Walldorf headquarters, Germany’s software giant SAP, the logo was taken May 12, 2016

Reuters| Reuters

Software giant in Germany SAPThe company reported a surge in revenue from its cloud-based unit on Thursday. This helped improve the quarter’s earnings.

SAP reported cloud revenue of approximately 2.4 Billion Euros ($2.8 Billion) in its third quarter, an increase of 20% compared to the year before. Meanwhile, SAP’s backlog of cloud contract renewals grew by almost 1.3Billion euros (58%).

The overall adjusted revenue rose 5% to 6.8 billion euro, thanks to cloud growth. Meanwhile, adjusted earnings per share rose 2% to 1.74 Euros, due to profit-making start-up bets by spinoff Sapphire Ventures.

SAP announced plans last year to shift away from on-premise IT infrastructure and move towards remote cloud computing. SAP’s new focus on the cloud has been a major challenge for enterprise software competitors like Salesforce Oracle

As European markets opened Thursday’s trading session, SAP shares rose 0.7%.

Christian Klein, SAP CEO and founder of Squawk Box Europe told CNBC that they had “pivoted this company towards the cloud.”

“We are changing the business model of our company by ourselves… switching from upfront licenses on premises to a subscription-based model in cloud.”

Last week, SAP raised its full year outlook due to momentum in the cloud business. On Thursday, the firm stated that it expects cloud revenue growth of between 16% to 19% by 2021.

Klein indicated that Klein was confident in the company’s ability to deal with disruptions and uncertainty caused by coronavirus in global supply chain networks.

He said, “Technology can help to overcome these problems.” Technology is essential to the future of work. “Technology must be used to foster collaboration when discussing the future. When you talk about resilient supply chain, look at all the container ships that are in front of the harbors that cannot come in; that is where technology — where our business network — can help.”

After it reduced sales guidance last October due to concern about the effects of Covid-19, SAP’s stock plunged precipitously. The stock has been recovering and has risen more than 11% in the first half of this year.

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