Key Morningstar Metrics for SAP
- : EUR 265Fair Value Estimate
- : ★★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
What We Thought of SAP’s Earnings
SAP SAP‘s first-quarter results beat the company-compiled consensus on the top and bottom line. However, a deceleration in growth was flagged for the second quarter, and the 2026 outlook commentary was modestly softened. Shares were up 6% intraday.
Why it matters: Key first-quarter numbers were strong, including constant-currency growth of 25% in current cloud backlog, 27% in cloud revenue, and 24% in EBIT. However, SAP noted “several quarter-specific effects” that affected growth in the first quarter and won’t repeat in the second quarter.
- SAP maintained the hard numbers in its 2026 guidance but acknowledged the soon-to-close acquisition of Reltio was needed to maintain the range. Reltio had annual recurring revenue of around EUR 185 million at year-end 2025.
- SAP changed its guidance on total constant currency revenue growth in 2026 to “remain at similar levels as 2025” from “accelerate.” It appears to be mainly related to service revenue. Ultimately, service revenue is much less important to the investment thesis than cloud revenue.
The bottom line: We maintain our EUR 265 (ADR USD 317) fair value estimate for wide-moat SAP and view the shares as undervalued. Our estimates are moderately higher than the company-compiled consensus on long-term growth.
- Shares have been heading south for several months, which we see as driven by indiscriminate market angst around the threat of generative artificial intelligence to all software companies. We think it’s highly unlikely that gen AI can displace SAP’s deeply entrenched position within its customer operations.
Coming up: SAP’s 2026 guidance is for EUR 25.8 billion-EUR 26.2 billion in cloud revenue at constant currencies (23%-25% constant-currency growth) and EUR 11.9 billion-EUR 12.3 billion in EBIT at constant currencies (14%-18% constant-currency growth).
- While total constant-currency revenue growth is now expected to be flat in 2026, SAP continues to expect acceleration in 2027.
