SAP Software Licensing Revenue Takes a Hit, But Cloud Revenue Prevails On

On April 8, 2020 SAP (SE) announced the First Quarter Results ahead of schedule. They reported that Cloud revenue, total revenue, and operating profits all grew over the course of Q1, but also reported that software licenses revenue took a hit. While this is unusual for SAP, it isn't unusual with many companies working remotely, due to the Covid-19 pandemic.


SAP is taking measures in response to the current environment, implementing a virtual sales strategy. They are saving revenue through limiting hiring and the cancellation of in-person events. The company is confident in the fact that they will emerge greater than ever before, after this crisis.


"To support them, we made our vast business networks and technology available for companies to find new sources of supply and manage demand, understand and act on sentiment across value chains that went virtual overnight, and support learning efforts at scale", CEOs, Jennifer Morgan and Christian Klein stated.


SAP has also made it their goal to help customers in this time of need by Implementing new learning initiatives, managing supply chain disruption, virtual events, etc.


Business Updates:

•IFRS Cloud Revenue Up 29%; Non-IFRS Cloud Revenue Up 27%

•Software Licenses Revenue Down 31%

•Total Revenue Up 7%

•IFRS Operating Profit Up More Than 100%; Non-IFRS Operating Profit Up 1%

•2020 Outlook Updated to Reflect Estimated Impact of COVID-19


Cloud revenue is still on the up

Cloud revenue grew 29% to 2.01 billion (IFRS), 27% to 2.01 billion (non-IFRS) and 25% (non-IFRS at constant currencies). Cloud and software revenue grew 7% to reach 5.4 billion. The total revenue of SAP went up 7% to reach 6.52 billion. The one report that stands out the most is that Software licenses revenue took a hit, falling down by 31%.


In regards to the rest of 2020, SAP has updated their sales predictions in conjunction with the effects of Covid-19.

Sap expects that Non-IFRS cloud revenue to be between 8.3 billion -8.7 billion, previously predicted to be 8.7 billion - 9 billion. Non-IFRS cloud and software revenue is expected to be between €23.4-24 billion, previously expected to be between €24.7-€25.1 billion. Total revenue for Non-IFRS is now expected to be between €27.8 and €28.5 billion, lower than the original expectation of €29.2 to 29.7 billion.


The operation profit originally expected to be €8.9 to €9.3 billion, is now expected to be €8.1 to 8.7 billion. While there were a lot of changes made to the 2020 year's predictions, SAP stated that their long-term goals for 2023 will stay the same and they expect them to bet met.


To read the full Press Release, click here.


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