By SAP, the German business-software company, is set to announce its fourth quarter results on Wednesday. The stock has shown significant growth over the past year, rising from approximately EUR105.00 in January 2023 to EUR149.66 on Monday.
Revenue Forecast
According to a consensus provided by the company, SAP is expected to report non-IFRS total revenue of 8.32 billion euros ($9.07 billion) for the quarter, reflecting a 3% growth compared to the previous year. Non-IFRS cloud revenue is projected to reach EUR3.72 billion, showing a substantial increase of 21%. Analysts from Citi believe that the company’s revenue growth will be at the upper end of its 2023 guidance, mainly driven by large license deals. However, they anticipate that cloud revenue growth will be at the lower end of the guidance.
Operating Profit Forecast
Analysts predict a 3% decrease in SAP’s non-IFRS operating profit for the quarter, amounting to EUR2.47 billion, with a non-IFRS operating margin of 29.9%. Nonetheless, Citi analysts still expect SAP’s operating profit to be in line with the upper end of its 2023 guidance.
Key Points to Watch
Guidance: Along with its fourth-quarter results, SAP is expected to provide guidance for 2024. Recent changes to the company’s financial reporting practices will be taken into account. Starting from January 1st, share-based compensation expenses will be included in SAP’s non-IFRS results. While the 2023 figures won’t reflect this change, the guidance for the new year will. Analysts are closely watching SAP’s non-IFRS figures, which had previously excluded share-based compensation. UBS’s Michael Briest anticipates a cloud-revenue growth guidance of 23% to 26% for 2024. Citi analysts expect SAP management to guide for cloud revenue growth of 24% to 26%, as well as a low double-digit to mid-teens percentage growth in non-IFRS operating profit. They also anticipate free cash flow of EUR5.8 billion to EUR6 billion. Accounting changes could potentially lead to updates in SAP’s 2025 targets, such as a lower non-IFRS operating profit.
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