TLDR
- SAP stock fell despite strong cloud revenue and earnings growth in the second quarter.
- Cloud ERP revenue rose 25% with cloud backlog reaching €22.9 billion.
- Free cash flow increased by 27% to €3 billion in the second quarter.
- Total revenue rose 9% as cloud business offset software decline.
- SAP updates its 2026 forecast following acquisitions of Dremio and Prime Labs.
SAP SE (SAP) shares closed at $146.38, down 1.59%, before rising 1.79% to $149.00 in after-hours trading following Q2 earnings. The software company reported stronger cloud growth, higher profits and expanded free cash flow despite slowing software license sales. The results also reflect continued demand for cloud enterprise products and AI-driven business software.
The cloud business is driving revenue growth and expanding backlog
SAP reported a current cloud backlog of €22.9 billion during the second quarter. The figure rose by 27% year-on-year and 26% in constant currencies. Furthermore, the company said its cloud business backlog benefited slightly from the Reltio acquisition.
Cloud revenue reached €6.28 billion during the quarter. This result was up 22% from the previous year and 24% in constant currencies. Cloud ERP Suite revenue increased 25% and 27% in constant currencies.
Cloud and software revenues rose 11% to €8.85 billion. the total profit It rose 9% to 9.88 billion euros and 11% in constant currencies. Services revenues fell by 3% to €1.03 billion, while software license revenues fell by 32% to €131 million.
Software support revenues also decreased by 8% to 2.44 billion euros. Stronger cloud performance offset those declines in the broader business. As a result, cloud products remained the primary driver of SAP’s growth during the quarter.
Earnings rise as acquisitions impact expectations
SAP achieved IFRS operating profits of €2.64 billion during the quarter. The score increased by 8% from the previous year. Non-IFRS operating profit was €2.74 billion, up 7% and 9% in constant currencies.
Profit after tax rose by 26% under IFRS to €2.21 billion. Basic earnings per share increased by 30% to reach €1.89. Non-IFRS earnings per share rose 6% to €1.59.
Total cloud revenue reached €4.66 billion, up 22% year-on-year. IFRS cloud gross margin fell slightly to 74.3% from 74.7%. Gross profit rose 9% to €7.23 billion despite modest margin pressures.
SAP has updated its 2026 non-IFRS operating profit forecast following the completion of the Dremio and Prime Labs acquisitions. the a company These acquisitions created a dilutive impact on expected operating profits, it said. It also noted a slowdown in sequential operating profit growth due to increased research spending, stock-based compensation changes and the effects of acquisitions.
Cash flow is strengthening as stock buybacks continue
SAP generated operating cash flow of €3.15 billion during the quarter. Free cash flow was €3.00 billion, representing a 27% increase over the previous year. These gains reflect stronger operating performance despite continued investment spending.
In the first six months of 2026, revenues totaled €19.43 billion. Cloud revenue rose 21% to €12.24 billion during the period. Operating profit also increased by 12% under IFRS and non-IFRS reporting.
Free cash flow for the first half amounted to 6.25 billion euros. Operating cash flow increased by 5% to €6.67 billion. Underlying IFRS earnings per share rose 19% to €3.55 over the six-month period.
SAP also continued its previously announced announcement Stock buyback program. The company had repurchased more than 16.28 million shares by June 30. These purchases totaled approximately €2.6 billion at an average price of €161.16 per share within the framework of the €10 billion program announced in January 2026.
SAP has continued to shift its business toward recurring cloud revenue in recent years. This strategy has reduced reliance on traditional software licensing while expanding subscription-based enterprise software. Recent quarterly results showed that cloud demand continued to support revenue growth, profitability and cash generation despite acquisition costs and continued investments in artificial intelligence and research.
