SAP SE (NYSE: SAP) reported robust second-quarter results for the three months ended June 30, 2025, with cloud momentum accelerating and restructuring drag diminishing, driving strong double-digit profit growth. Total revenue rose 9% year-on-year to €9.03 billion, while cloud revenue expanded 24% to €5.13 billion, underpinned by a 30% jump in Cloud ERP Suite revenue and solid customer additions across all regions.
Net cash flow from operations surged 71% to €2.58 billion in the quarter, while free cash flow soared 83% to €2.36 billion. Operating profit more than doubled year-over-year under IFRS to €2.46 billion, while non-IFRS operating profit climbed 32% to €2.57 billion. Both were aided by a sharp decline in restructuring costs following the completion of SAP’s 2024 transformation program.
CEO Christian Klein described the quarter as “outstanding,” emphasizing that new AI products like Joule and the expanding footprint of SAP Business Data Cloud were “positioning the company to lead the next era of enterprise innovation.” CFO Dominik Asam added that despite geopolitical risks and public sector uncertainties, SAP was entering the second half with cautious optimism.
How did SAP’s cloud ERP and AI strategy drive performance across all key financial metrics in Q2 2025?
SAP’s Q2 2025 results demonstrated the growing leverage of its cloud ERP-focused strategy, particularly the RISE with SAP initiative. Cloud ERP Suite revenue increased 30% year-over-year to €4.42 billion, representing nearly 86% of the total cloud portfolio. At constant currencies, growth was even stronger at 34%, reflecting resilient enterprise demand for integrated digital transformation solutions.
The broader cloud revenue, including SAP’s Extension Suite and Infrastructure-as-a-Service (IaaS), reached €5.13 billion, up 24% reported and 28% at constant currencies. However, IaaS revenue declined by 37% to €85 million, indicating a continued shift away from hosting-centric legacy services.
In terms of product mix, the Cloud and Software segment grew 11% year-on-year to €7.97 billion, with software license revenue dropping 15% to €194 million. This signals continued migration away from perpetual licenses toward SaaS models. Services revenue declined 5% to €1.06 billion, in part due to rationalization of consulting engagements and a higher share of predictable recurring revenue.
The company’s cloud gross profit rose 27% year-on-year to €3.86 billion on a non-IFRS basis, yielding a gross margin of 75.2%—up 190 basis points from a year ago. The improvement was driven by cost efficiencies from the 2024 transformation program and lower share-based compensation.
What role did restructuring savings and disciplined cost control play in SAP’s Q2 margin rebound?
SAP’s second-quarter margin recovery was led by a significant drop in restructuring expenses, which fell from €631 million in Q2 2024 to just €18 million in Q2 2025. The company’s 2024 transformation program, which incurred total expenses of €3.2 billion, concluded in Q1 2025. With most severance-related and optimization costs now absorbed, SAP has seen its profitability normalize and expand.
Non-IFRS operating margin rose by 500 basis points year-on-year to 28.5%, with constant currency margin growth of 480 basis points. IFRS operating margin reached 27.2%, up from 14.7% a year ago. Operating expenses declined 7% under IFRS, reflecting lower headcount costs, rationalized GTM activities, and SAP’s pivot toward scalable AI services.
On a per-share basis, IFRS basic earnings increased 91% year-on-year to €1.45. Non-IFRS EPS rose 37% to €1.50. These gains outpaced revenue growth and reinforced the financial impact of SAP’s margin-first execution strategy.
Which geographies and customer segments contributed most to SAP’s second-quarter cloud acceleration?
Cloud revenue growth was geographically broad-based, but especially strong in the Asia-Pacific-Japan (APJ) and Europe-Middle East-Africa (EMEA) regions. In constant currencies, cloud revenue rose 37% in APJ, 30% in EMEA, and 22% in the Americas. High-performing countries included Brazil, Chile, France, India, Italy, South Korea, and Spain. North America—particularly the U.S. and Canada—also saw meaningful growth, although currency headwinds were evident.
SAP continued to sign high-profile global clients onto RISE with SAP and SAP S/4HANA Cloud in Q2. New customers included Acron Aviation, Alibaba Group, Bell Food Group, GSK, J-POWER, Mercedes-AMG PETRONAS Formula One, and Votorantim. Companies like Alivus Life Sciences and Rico Auto Industries went live on S/4HANA Cloud, while firms such as EGYM and PwC adopted GROW with SAP—a package designed for rapid cloud ERP onboarding.
The German software leader also reported major wins across its wider portfolio, securing deals with Accenture, Adobe, BAE Systems, BMW Group, Deutsche Börse, IBM, Infosys, and Zurich Cantonal Bank.
How has the SAP Business Data Cloud and AI integration strategy enhanced its platform narrative?
SAP is increasingly positioning its SAP Business Data Cloud and Joule AI assistant as differentiators in the next generation of intelligent enterprise solutions. The Q2 earnings call emphasized that Joule is being embedded across key modules, while the data cloud is integrating with partner platforms like Palantir’s Ontology and AIP.
These moves, combined with the May 2025 partnership announcements with Accenture and Palantir, suggest that SAP is aiming to become the central data layer for AI-driven enterprise decisions. Analysts believe this positions SAP to capture incremental spend in predictive planning, compliance automation, and hybrid workforce orchestration—areas where SAP has lagged competitors like Microsoft and Oracle in recent years.
What is the 2025 outlook and how are currency risks expected to impact reported results?
SAP has maintained its full-year 2025 guidance across all major financial metrics. The company continues to expect full-year 2025 cloud revenue to range between €21.6 billion and €21.9 billion, representing an increase of 26% to 28% at constant currencies. Cloud and software revenue is projected to reach between €33.1 billion and €33.6 billion, reflecting anticipated growth of 11% to 13%. The company also reaffirmed its guidance for non-IFRS operating profit in the range of €10.3 billion to €10.6 billion, marking a 26% to 30% increase over the previous year. Free cash flow is expected to rise significantly to approximately €8 billion, up from €4.22 billion in 2024.
However, SAP flagged meaningful foreign exchange headwinds for the second half. If June 30 exchange rates persist, full-year cloud revenue growth could face a 3.5 percentage point drag, and non-IFRS operating profit growth could be trimmed by 3 percentage points. The U.S. dollar weakening against the euro—from 1.08 to 1.17—is the key driver of this impact.
How are institutional investors responding to SAP’s share repurchase and balance sheet management?
As of June 30, 2025, SAP had repurchased 24.7 million shares under its €5 billion buyback program announced in 2023. The company has spent approximately €4.6 billion to date, at an average price of €185.51 per share. With €400 million remaining in the program, further repurchases could provide downside protection amid FX volatility.
SAP’s balance sheet remains solid, with net liquidity of €2.3 billion despite heavy buybacks and dividend payouts. In May, shareholders approved a dividend of €2.35 per share for fiscal 2024. Financial debt declined to €7.49 billion from €8.12 billion in Q1 2025, signaling proactive deleveraging efforts.
What are analysts and investors watching as SAP enters the second half of 2025?
Institutional sentiment toward SAP SE appears cautiously constructive. Analysts view the cloud ERP outperformance and cost discipline as bullish indicators, particularly when paired with rising margins and strong free cash flow generation. However, the absence of a raised full-year outlook suggests that management is factoring in potential macro shocks, including EU budget uncertainty, U.S. election-driven tech policy risks, and public sector slowdown.
Investors are also closely monitoring SAP’s ability to sustain momentum in net new cloud bookings. The current cloud backlog stood at €18.1 billion at the end of Q2, up 22% year-on-year, but showed slight sequential deceleration. The share of large cloud deals (>€5 million) remained stable at 53% of total order entry, while small deal share (<€1 million) held at 20%.
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