SAP SE (SAP): history, ownership, mission, how it works & makes money

A Brief History of SAP

SAP SE, a German multinational software corporation, has been a leader in enterprise resource planning (ERP) software since its inception in 1972. The company has continually evolved, expanding its offerings to include cloud computing solutions and artificial intelligence. As of 2024, SAP is focused on transforming its operational setup to enhance scalability and efficiency, particularly in business AI.

Recent Financial Performance

For the third quarter of 2024, SAP reported total revenue of €8.47 billion, a 9% increase compared to €7.74 billion in Q3 2023. Cloud revenue specifically reached €4.35 billion, marking a 25% increase from €3.47 billion the previous year.

Strategic Changes and Restructuring

In 2024, SAP initiated a significant restructuring program aimed at enhancing its focus on key growth areas, especially in AI. The company has projected restructuring expenses of approximately €3 billion, with €2.82 billion already recorded in the first nine months of the year. This transformation is expected to affect 9,000 to 10,000 positions, primarily through voluntary leave programs and internal reskilling initiatives.

Market Position and Outlook

SAP's market position remains strong, with a current cloud backlog of €15.38 billion, reflecting a 25% year-over-year increase. The company anticipates continued growth in cloud revenue, projecting total cloud revenue for 2024 to be between €17.0 billion and €17.3 billion, a substantial increase from €13.66 billion in 2023.

Employee Metrics and Corporate Responsibility

As of Q3 2024, SAP has a total of 107,583 employees, with a notable 30% representation of women in executive roles. The company is also committed to reducing carbon emissions, aiming for net-zero emissions by 2030.

SAP's focus on innovation, coupled with its robust financial performance and strategic restructuring efforts, positions it well for future growth in the rapidly evolving technology landscape. The company's commitment to sustainability and diversity further enhances its corporate reputation and operational resilience.

A Who Owns SAP SE (SAP)

Major Shareholders

As of 2024, SAP SE's ownership is distributed among various institutional and individual shareholders. The largest shareholders include:

Insider Ownership

Insider ownership, which includes executives and board members, contributes to the overall governance and strategy of SAP. The following are notable insiders:

• Christian Klein (CEO): Holds approximately 0.1% of shares.
• Dominik Asam (CFO): Holds approximately 0.05% of shares.

Stock Performance and Share Repurchase Program

As of Q3 2024, SAP's stock price has experienced fluctuations, with a recent trading price of €157.09. The company has been active in share repurchase initiatives, with a total of €2.62 billion spent to repurchase 16,709,250 shares under a program announced in May 2023, which has an aggregate volume of up to €5 billion .

Financial Overview

Financial performance in Q3 2024 highlights include:

Market Capitalization and Valuation

As of October 2024, SAP SE's market capitalization stands at approximately €189 billion, reflecting a robust market presence and investor confidence amidst a transformation program aimed at enhancing operational efficiency and growth in cloud services .

Dividend Policy

SAP has maintained a consistent dividend policy, with the most recent dividend payout being €2.65 per share for the fiscal year 2023. This reflects the company's commitment to returning value to shareholders while investing in growth initiatives .

SAP SE (SAP) Mission Statement

The mission statement of SAP SE emphasizes the commitment to helping the world run better and improving people's lives through the use of innovative technology solutions. SAP aims to empower businesses and organizations to achieve their goals by providing exceptional cloud-based software solutions that facilitate digital transformation.

Financial Overview for 2024

As of Q3 2024, SAP reported significant financial metrics that highlight the company's strong performance:

Cloud Strategy and Growth Areas

SAP's strategic focus in 2024 includes enhancing its cloud offerings and driving growth in key areas such as business AI. The company aims to achieve:

• Cloud revenue expectations of €17.0 - €17.3 billion, representing a growth of 24% to 27% at constant currencies.
• An effective non-IFRS tax rate of approximately 32%.
• Continued investments in product innovation and customer engagement.

Employee Engagement and Diversity Goals

As part of its mission, SAP is also committed to fostering a diverse and inclusive workplace:

Restructuring and Transformation Program

In 2024, SAP initiated a transformation program to optimize its operations. The restructuring is expected to affect approximately 9,000 to 10,000 positions, with total costs estimated at around €3 billion. Key points include:

• Restructuring costs recorded in Q1-Q3 2024 amounted to €2.8 billion.
• The company anticipates exiting 2024 with a headcount slightly ahead of year-end 2023.
• Focus on scalability and AI-driven efficiencies.

Market Position and Competitive Landscape

SAP continues to maintain a strong position in the enterprise software market, competing with major players such as Oracle and Microsoft. The company's cloud offerings are positioned to capture a significant share of the growing demand for digital transformation solutions.

Recent Acquisitions

In line with its growth strategy, SAP acquired WalkMe to enhance its capabilities in digital adoption. This acquisition is expected to contribute positively to SAP's overall cloud revenue growth.

Outlook for 2024

Looking ahead, SAP is optimistic about achieving its financial and operational targets, driven by robust cloud growth and continued investment in innovation.

How SAP SE (SAP) Works

Company Overview

SAP SE, headquartered in Walldorf, Germany, is a global leader in enterprise application software. As of 2024, SAP focuses on providing solutions that enable organizations to operate profitably, adapt continuously, and achieve their sustainability goals. The company operates primarily through its cloud services, software licenses, and software support.

Financial Performance

In Q3 2024, SAP reported total revenue of €8.47 billion, an increase of 9% year-over-year. The cloud revenue reached €4.35 billion, up 25% from the previous year. The Cloud ERP Suite contributed significantly, generating €3.64 billion, marking a 34% increase.

Cloud Strategy

SAP's cloud strategy focuses on expanding its Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) offerings. The company aims to achieve €17.0 - 17.3 billion in cloud revenue for 2024, representing a growth of 24% to 27% year-over-year. The current cloud backlog is approximately €15.38 billion, reflecting a 25% increase compared to the previous year.

Operating Expenses

SAP's total operating expenses for Q3 2024 were €6.26 billion, up 4% from €6.02 billion in Q3 2023. The cost structure includes significant investments in research and development, which amounted to €1.57 billion.

Transformation Program

In 2024, SAP initiated a transformation program aimed at enhancing operational scalability and focusing on high-growth areas, particularly artificial intelligence. The restructuring program is expected to affect 9,000 to 10,000 positions and is anticipated to incur expenses of approximately €3 billion overall. As of Q3 2024, €2.8 billion has already been recorded as restructuring expenses.

Market Performance

SAP's stock performance remains robust, with the company executing a share repurchase program valued at €5 billion. As of September 30, 2024, SAP had repurchased 16,709,250 shares at an average price of €157.09, totaling approximately €2.62 billion.

Outlook for 2024

SAP's outlook for 2024 anticipates non-IFRS operating profit between €7.8 billion and €8.0 billion, with free cash flow projected to be between €3.5 billion and €4.0 billion. The company expects a non-IFRS effective tax rate of approximately 32%.

How SAP SE (SAP) Makes Money

Business Model Overview

SAP SE primarily generates revenue through its software and cloud solutions, focusing on enterprise resource planning (ERP), data management, and business technology platforms. The company operates under a Software-as-a-Service (SaaS) model, providing subscription-based services along with traditional software licensing.

Revenue Streams

SAP's revenue is segmented into several key categories:

• Cloud Revenue
• Software Licenses and Support
• Services Revenue

Cloud Revenue

In Q3 2024, SAP reported cloud revenue of €4.35 billion, which marks a 25% increase from €3.47 billion in Q3 2023. This segment is driven by the Cloud ERP Suite, contributing €3.64 billion, a 34% increase year-over-year.

Software Licenses and Support

Software licenses revenue decreased by 15% to €0.28 billion in Q3 2024, compared to €0.33 billion in Q3 2023. The software support revenue was slightly down by 3% to €2.79 billion.

Services Revenue

Services revenue for Q3 2024 slightly decreased by 2% to €1.04 billion compared to €1.07 billion in Q3 2023. This revenue category includes consulting and implementation services.

Overall Financial Performance

For the first nine months of 2024, SAP reported total revenue of €24.80 billion, up 9% from €22.74 billion in the same period of 2023. The total revenue includes:

• Cloud Revenue: €12.43 billion (up 25%)
• Software Licenses: €716 million (down 23%)
• Software Support: €8.41 billion (down 3%)
• Services Revenue: €3.24 billion (up 1%)

Profitability Metrics

In Q3 2024, SAP achieved an IFRS operating profit of €2.21 billion, up 29% from €1.72 billion in Q3 2023. The operating margin improved to 10.8% from 22.2% year-over-year, reflecting the impact of restructuring costs.

Cash Flow and Liquidity

Free cash flow for Q3 2024 increased by 44% to €1.25 billion, compared to €865 million in Q3 2023. The company’s cash and cash equivalents totaled €10.01 billion at the end of Q3 2024.

Strategic Focus and Future Growth

SAP's 2024 transformation program aims to enhance operational scalability and focus on strategic growth areas, particularly in business AI. The company anticipates continued growth in cloud revenue and operational efficiency.

Article updated on 8 Nov 2024

Resources:

• SAP SE (SAP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SAP SE (SAP)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View SAP SE (SAP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.