SAP Stock Drops Sharply Following Cloud Growth Miss

German software giant SAP saw its shares drop up to 14% on Thursday after reporting weaker-than-expected growth in its cloud order backlog for Q4. This marks the company’s largest daily decline since October 2020, when the stock fell 22% following disappointing Q3 results. The stock is also heading for its lowest closing price since mid-2024.

Cloud Order Backlog Falls Short of Expectations

SAP’s cloud order backlog grew 16% in Q4 to €21.1 billion ($25.3 billion). UBS analysts described the growth as a “disappointment,” compared with previous expectations of 26%.

The company noted that “large deals, strong revenue growth in cloud in recent years, and statutory convenience clauses negatively impacted Q4 cloud backlog growth by approximately 1 percentage point in constant currency.”

CEO Christian Klein stated that the current cloud services backlog has laid “strong foundations” for accelerating revenue growth through 2027, although he expects cloud order backlog growth to “slow slightly” in 2026.

Revenue and Operating Profit in Q4

SAP reported total revenue of €9.7 billion, a slight increase from €9.4 billion in the same period last year. Operating profit rose to €2.6 billion from €2 billion.

While the company has shifted from selling on-premise software licenses to focusing on cloud services, the AI boom has raised investor concerns around legacy software providers.

Artificial Intelligence and Future Growth Challenges

CFO Dominic Ssang commented on CNBC’s “Squawk Box Europe”:

“One of the most important applications of AI is to completely change how companies develop code. The question is whether customers can now do everything themselves, which could shrink the pie.”

Ssang added:

“The challenge for us at SAP is to adopt these technologies quickly in our R&D portfolio to maintain a relative advantage. Day by day, we work on this and aim to lead AI adoption among our 35,000 developers.”