SAP preliminary Q4 results stronger than expected - cloud revenue up 28%

Late last night German software giant SAP released some preliminary fourth quarter and full year figures, which show stronger than expected growth for the company's cloud business. SAP also pointed to a "rapid expansion" of its current cloud backlog, as well as its S/4 HANA cloud backlog, which it said has been driven by strong adoption of ‘RISE with SAP'. 

The latter numbers will be welcome news for the organization, as it has been pushing RISE as a simpler approach for buyers to shift to cloud and S/4 HANA . diginomica's Jon Reed did a recent deep dive on SAP's cloud number's, which are often hard to get to grips with. 

But the preliminary results released this week will be a boon for CEO Christian Klein's strategy, which saw Q4 cloud revenues jump 28% to €2.61 billion and up 24% at constant currencies. SAP S/4HANA cloud revenue was up 65% to €329 million and up 61% at constant currencies.

Equally, software licenses revenue was down 14% year over year to €1.46 billion and down 17% at constant currencies, indicating the shift the install base is undergoing from on-premise to cloud. 

Cloud and software revenue as a whole was up 6% to €6.99 billion and up 3% at constant currencies. Services revenue was up 3% year over year to €0.99 billion and total revenue was up 6% year over year to €7.98 billion and up 3% at constant currencies.

Commenting on the numbers, CEO Christian Klein said: 

The magnitude of our cloud strength is evident. More and more companies are choosing SAP to help them transform their businesses, build resilient supply chains and become sustainable enterprises as they move to the cloud. 

This momentum is reflected in the tremendous success of "RISE with SAP", our signature cloud offering, as well as excellent growth across our entire portfolio. Our growth acceleration points to even greater potential ahead.

In Q4 SAP also said that its current cloud backlog was up 26% at constant currencies, to €9.45 billion, and that its SAP/S4 HANA cloud backlog was up 76% at constant currencies. 

SAP hit the high end of its revised 2021 cloud revenue outlook range and exceeded overall expectations. Looking ahead to 2022, SAP said that it expects its cloud growth to continue to accelerate. 

For full year 2022, SAP expects: 

• €11.55 - 11.85 billion non-IFRS cloud revenue at constant currencies (2021: €9.42 billion), up 23% to 26% at constant currencies.

• €25.0 - 25.5 billion non-IFRS cloud and software revenue at constant currencies (2021: €24.08 billion), up 4% to 6% at constant currencies.

SAP CFO Luka Mucic said: 

I am proud that our team has delivered an exceptional year with strong results, far exceeding our expectations. After three quarters of home runs with our cloud momentum, we hit it out of the park this quarter. 

We are confident that we will continue our Q4 current cloud backlog growth in 2022. This is reflected in our accelerated cloud guidance for 2022 as we make great progress towards our mid-term ambition.

My take

It's still early days in the grand scheme of things - RISE with SAP is still very new and has a lot to prove (see my recent write up here) - but after a rocky few years, this set of results will no doubt be very welcome news to the company and its shareholders.