Software licenses, which I expected would have fallen year over year grew 7% to €1.01 billion and overall, total revenue grew 17% to €4.98 billion. The combination of increased licenses and cloud revenue that was ahead of expectations meant that the operating profit grew five percent to €1.21 billion.
In prepared remarks, SAP CFO Luka Mucic said:
“Our strong double-digit growth in cloud and software revenue was mainly driven by excellent results in mature markets. SAP’s global resilience helped us also sail through stormy waters in emerging markets where we expect to continue to see volatility and economic challenges. Our surge in operating profit reflects our business transformation’s continued success and the improving profitability of our cloud offerings.”
That's interesting at several levels.
This is the first time I heard a global software vendor talk specifically about tough market conditions. Earlier in the week, Vishal Sikka, CEO Infosys made similar remarks as they relate to vertical markets but not geographies. This topic will be explored further on the earnings call but I suspect that SAP will use it as a way of pre-warning the market not to expect a blow out Q4 --- at least not for traditional licenses.
Factor in the fact SAP and Volkswagen (which had its own reality check recently) are close partners and you can already see at least one potential dent in the Q4. Unsurprisingly therefore, SAP is sticking to its full year outlook.