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’s SAP second-quarter results were in line with company-compiled consensus, and 2025 guidance was maintained. However, the sales cycle elongated in certain sectors. Shares were down 4% intraday.
Why it matters: Fundamentals remain strong. Cloud revenue growth and cloud backlog progressed as expected, both up 28% in constant currency, and 2025 guidance looks very achievable. Indeed, the market may have been hoping for a guidance upgrade.
- The pipeline for the second half of 2025 was described as excellent in almost all markets and regions. For the newly launched Business Data Cloud, the pipeline is skyrocketing. In addition, over half of second-quarter cloud deals included AI use cases.
- On the other hand, the first cracks from a challenging macroeconomic environment were evident. The sales cycle elongated in certain sectors such as the US public sector and industrial manufacturing.
The bottom line: We maintain our EUR 265 fair value estimate for wide-moat SAP and view the shares as fairly valued. Our ADR fair value estimate is raised to USD 311 from USD 302 due to currency effects.
- Our estimates are broadly in line with company-compiled consensus.
Coming up: Business AI adoption is expected to accelerate, driven by innovation. In the first half, SAP released its first 14 AI agents. By the end of 2025, the total is expected to reach 40. Furthermore, SAP’s AI assistant Joule will be available everywhere across SAP and non-SAP systems in the third quarter.
- SAP has released more than 100 prebuilt managed data products for Business Data Cloud, which is expected to more than double by the end of 2025.
- SAP typically closes two-thirds of its annual cloud pipeline in the second half of the year. With some early signs of deal slippage, the market may have nudged its 2025 expectations down.
