SAP SE has released its second-quarter 2025 results, indicating outstanding financial performance primarily driven by accelerated growth in its cloud business. The company is reporting impressive double-digit increases in cloud revenue and backlog, alongside significant growth in profitability and free cash flow. This success comes amidst strategic investments in Artificial Intelligence (AI) and internal transformation initiatives, positioning SAP strongly to capitalize on evolving global business market trends. Despite this optimism, management remains cautious regarding geopolitical developments and public sector trends, underscoring the need for continuous strategic navigation.

Accelerated Financial Performance: Cloud, Profitability, and Cash Flow

In the second quarter of 2025, SAP demonstrated impressive growth in its core metrics:

Current Cloud Backlog surged 22% to a value of €18.1 billion (an increase of 28% at constant currencies). This figure reflects sustained demand and customer confidence in SAP’s cloud solutions.

Cloud revenue grew 24% to €5.13 billion (an increase of 28% at constant currencies)

Cloud ERP Suite revenue rose 30% to €4.42 billion (an increase of 34% at constant currencies). This segment, which includes SaaS/PaaS solutions integrated with core ERP, is a key growth engine.

Total revenue increased 9% to €9.03 billion (an increase of 12% at constant currencies).

Operating profit (non-IFRS) jumped 32% to €2.57 billion (an increase of 35% at constant currencies). The growth in operating profitability is due to increased operational efficiency, achieved partly through the successful implementation of the 2024 transformation program and lower share-based compensation expenses.

Diluted earnings per share (IFRS) increased 92% to €1.44.

Opeating cash flow grew 71% to €2.58 billion.

Free cash flow surged 83% to €2.36 billion. The increase in free cash flow is primarily attributed to higher profitability and positive working capital development (besides restructuring-related impacts), lower share-based compensation payments, reduced restructuring payments, and lower income tax payments.

Christian Klein, SAP CEO, stated that the company achieved “another quarter of outstanding results”. CFO Dominik Asam added that “We achieved a very good second quarter – with accelerated revenue growth, strong profitability and strong free cash flow”. He emphasized that the performance was supported by “continued customer demand and disciplined cost control”.

AI Innovation and Business Transformation

SAP continues to position itself at the forefront of technological innovation, with a significant focus on Artificial Intelligence (AI) and assisting its customers with digital transformation:

Joule and SAP Business Data Cloud: Christian Klein highlighted the importance of AI innovations such as “our AI assistant Joule, which will be available everywhere and answer all questions,” as well as “SAP Business Data Cloud for faster AI deployment”. These tools are designed to strengthen SAP’s product portfolio and usher in “a new era for handling business processes”.

RISE with SAP and GROW with SAP: The company continued to see strong adoption of its flagship solutions for business transformation. Customers worldwide, including leading entities like Alibaba Group, Balluff, GSK, Mercedes-AMG PETRONAS Formula One, and Proximus Group, chose “RISE with SAP” to drive end-to-end transformation. In addition, companies like Daoudata, EGYM, and PwC opted for “GROW with SAP,” which enables rapid implementation of cloud-based ERP solutions with predictable costs and continuous innovation.

Strategic Partnerships: SAP announced the strategic extension of its long-standing partnership with Accenture, aiming to help companies implement end-to-end intelligent processes across all areas to act faster and more flexibly in the age of artificial intelligence. Furthermore, SAP and Palantir announced a partnership to support joint customers in their cloud migration and modernization programs by linking SAP Business Data Cloud’s end-to-end data environment, which provides extensive context, with Palantir’s Ontology and AIP. Additionally, SAP and Alibaba Group announced a strategic partnership aimed at accelerating cloud transformation.

Geographical Growth and Management Strengthening

SAP reported particularly strong cloud revenue development in the Asia-Pacific-Japan (APJ) and Europe, Middle East, Africa (EMEA) regions, as well as solid performance in the Americas. Specific countries like Brazil, Chile, France, India, Italy, South Korea, and Spain recorded excellent results, while Canada, China, Germany, Japan, and the USA achieved particularly strong results.

From a management perspective, SAP announced the extension of CEO Christian Klein’s contract for another five years until April 2030, and CFO Dominik Asam’s contract for another two years until March 2028. These extensions indicate stability and confidence in the current leadership.

2025 Outlook and Risk Management

SAP maintains its financial outlook for 2025 unchanged, despite the current dynamic environment and uncertainty

Cloud revenue (at constant currencies) is expected to range between €21.6 billion and €21.9 billion (26%-28% growth compared to 2024).

Cloud and software revenue (at constant currencies) is expected to range between €33.1 billion and €33.6 billion (11%-13% growth compared to 2024).

Operating profit (non-IFRS, at constant currencies) is expected to range between €10.3 billion and €10.6 billion (26%-30% growth compared to 2024).

Free cash flow is expected to be around €8.0 billion (a significant increase from €4.22 billion in 2024).

Non-IFRS effective tax rate is expected to be around 32%.

The company also continues to expect a slight slowdown in current cloud backlog growth in 2025 at constant currencies. CFO Dominik Asam noted cautious optimism for the second half, while “keeping a close eye on geopolitical developments and public sector trends”.

Conclusion and Forward Outlook

SAP’s second-quarter report paints a picture of a company at the peak of its strength, driven by the cloud revolution and bold investments in artificial intelligence. With consistent revenue growth, significant profitability improvement, and strong free cash flow, SAP is well-positioned to capitalize on the increasing demand for business digital transformation. The extensions of executive contracts and strategic partnerships with giants like Accenture, Palantir, and Alibaba reinforce confidence in its ability to lead the market.

Despite the financial optimism, the company’s caution regarding geopolitical developments and their impact on the public sector indicates an awareness of external risks. SAP’s ability to continue executing its plans, widely implementing AI innovations, and navigating the global macroeconomic environment will be critical to achieving its ambitious goals for 2025 and beyond.