Quarterly growth reported by SAP, however, shares experience a decline
SAP's Quarterly Results: Time for a Turnaround? Let's Dive In
After the departure of Linde, SAP has ascended to the top spot in the German DAX, making it a stock worth a closer look. With the release of its Q4 2022 results, let's examine whether this tech titan is ready for a comeback.
Mixed Quarterly Report
At 7 am CET, SAP presented its Q4 2022 financial results. The company generated revenue of 8.44 billion euros, a modest increase of approximately 1%. However, cloud revenue experienced a significant growth of 22%. Operating profit grew by 2% to reach 2.581 billion euros at year-end, despite falling by 8% in Q3.
Though the outlook remained within expectations, SAP sounded a note of caution due to the current economic climate. Earnings before interest and taxes (EBIT) decreased by 7% to 8.03 billion euros in 2022, while net profit per share plummeted by 39% to 4.08 euros. These figures were impacted by the weaker financial result of Sapphire Ventures.
The SAP share showed a slight decline before trading began.
Job Cuts and Streamlining
Interestingly, investors might be more encouraged by SAP's plans to trim its workforce by 3,000 employees and initiate a cost-saving program. SAP's CEO Christian Klein expects these measures to significantly boost the profitability of the company.
SAP follows in the footsteps of several technology companies opting for job cuts as a response to the surge in staff during the pandemic, with SAP having around 20% more employees than before.
SAP Subsidiary for Sale
SAP is also considering selling its online market research subsidiary Quatrics as a means of consolidating its portfolio. The company has enlisted Morgan Stanley to advise on this potential sale. However, SAP maintains the right to abandon the sale depending on current market conditions.
Is SAP Worth the Investment?
The cloud growth and strategic planning, such as the proposed sale of Quatrics and upcoming job cuts, are certainly positive signs for the company, now trading around 106 euros. However, investors should be mindful of the fierce competition coming from US counterparts.
By the way, here's how Tesla performed in yesterday's Q4 earnings report.
Background Insights
Though the search results do not explicitly discuss the stock price reaction to SAP's Q4 2022 earnings, some key metrics offer context:
- Q1 2025 Growth: Operating profit increased by 58% YoY, cloud gross margin improved to 75% (+2.6 percentage points), and free cash flow rose by 36% to 3.6 billion euros[2], indicating ongoing operational strength.
- Valuation Trends: The trailing P/E ratio stood at 49.59 (year-end 2022, diluted EPS), reflecting investor confidence in the earnings sustainability[3].
- Macro Considerations: Job cuts and economic uncertainties create challenges, but SAP’s cloud transition (as evidenced by recent margin improvements) and stable equity ratio (57.62% in 2022, rising to 60.07% in 2024)[3] suggest resilience.
Takeaway: While a single quarter’s results may not reveal a direct stock rally, ongoing operational strength and cloud growth narrative seem to be driving investor sentiment[2][3]. Long-term cloud growth prospects, rather than a single quarter’s results, likely determine stock performance.
- After the departure of Linde, SAP, a behemoth in the German DAX, has become a stock worth a closer look, especially following the announcement of its Q4 2022 results.
- Despite generating revenue of 8.44 billion euros, a modest increase of approximately 1%, and a 7% decrease in EBIT, SAP's Q4 2022 report showed a significant growth of 22% in cloud revenue and an operating profit growth of 2%.
- In an effort to boost profitability, SAP plans to lay off 3,000 employees and initiate a cost-saving program, following a similar trend seen in several technology companies due to the surge in staff during the pandemic.
- SAP is considering selling its online market research subsidiary Quatrics as a means of consolidating its portfolio, potentially bringing in funds to reinvest in its business.
- As SAP navigates through this period of cost reduction and strategic adjustments, investors should weigh the potential benefits of the company's cloud growth and strategic moves against the fierce competition coming from US counterparts when considering investing in this technology business.
