Key Morningstar Metrics for SAP
- Fair Value Estimate: EUR 265
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What We Thought of SAP’s Earnings
SAP SAP‘s third-quarter results were broadly in line with company-compiled consensus, and 2025 guidance was basically maintained. Management’s confidence going into 2026 appears strong. Shares were down around 2% intraday.
Why it matters: Cloud revenue and the current cloud backlog progressed as expected, both up 27% in constant currency. Management expressed confidence in its ambition to accelerate total revenue growth in 2026 and through 2027.
- Issues noted in the second quarter are fading. Specifically, business in the US public sector is starting to pick up again, and the pipeline for the fourth quarter and 2026 looks strong. Furthermore, SAP asserts it is gaining market share.
- The fourth quarter is by far the biggest in terms of bookings seasonality, leading to some higher uncertainty in the current cloud backlog compared with cloud revenue growth. Nevertheless, we expect cloud backlog growth of 26% or better at end-2025.
The bottom line: We maintain our EUR 265 (ADR $311) fair value estimate for wide-moat SAP and view the shares as slightly undervalued. Our estimates are broadly in line with company-compiled consensus.
- Shares declined after second-quarter results, which we see as mainly driven by indiscriminate market angst around the threat of generative artificial intelligence to all software companies. We think it’s highly unlikely that generative AI can fully displace SAP’s deeply entrenched position within its customer operations.
Coming up: SAP maintained its 2025 guidance but expects to land at the bottom of the cloud revenue range (EUR 21.6 billion-EUR 21.9 billion) and at the top of the range for EBIT (EUR 10.3 billion-EUR 10.6 billion).
