SAP Announces Q4 and FY 2023 Results
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Insights
Examining SAP's financial results reveals a robust performance in cloud revenue, a key indicator of the company's strategic shift towards cloud services. The reported 20% increase in cloud revenue, with an even higher rate at constant currencies, is indicative of strong demand for SAP's cloud offerings. This growth trajectory is further emphasized by the 25% expansion in the current cloud backlog, suggesting a healthy pipeline for future revenue. Additionally, the non-IFRS operating profit surpassing expectations by 9% showcases effective cost management and operational efficiency.
However, investors should note the 5% decline in IFRS operating profit, which may reflect costs not excluded under non-IFRS measures, such as restructuring or acquisition-related expenses. The planned transformation program, aimed at enhancing scalability and incorporating Business AI, signals a proactive approach to cost management and innovation. The anticipated incremental efficiency gains of approximately half a billion Euros could be a significant driver of profitability in the medium to long term.
The cloud market is increasingly competitive and SAP's substantial growth in cloud revenue and backlog positions the company well against competitors. The 2024 outlook for accelerating cloud revenue growth aligns with broader industry trends where cloud adoption is becoming ubiquitous across enterprises seeking digital transformation. SAP's focus on scalability and Business AI as part of its transformation program could enhance its competitive edge and customer value proposition.
Stakeholders should consider the long-term benefits of SAP's strategic investments in cloud and AI technologies, which are likely to drive market share and customer loyalty. However, the short-term impact of restructuring costs and changes in operational focus should be monitored for potential risks, such as execution challenges and customer retention during the transition period.
The update in SAP's 2025 non-IFRS operating profit and free cash flow ambition, considering the revised non-IFRS definition and efficiency gains, reflects the company's confidence in its financial trajectory and operational strategy. The pursuit of efficiency gains through a planned transformation program could result in a more streamlined and cost-effective operation, potentially leading to improved margins and shareholder value.
Investors should be aware of the macroeconomic implications of SAP's financial performance. Strong cloud revenue growth in a constant currency basis suggests resilience against currency fluctuations, which is particularly relevant in a volatile global economy. The company's forward-looking statements indicate a strategic foresight in adapting to market conditions and leveraging technological advancements for sustained growth.
in € millions, unless otherwise stated; based on SAP group results from continuing operations
- SAP exceeds non-IFRS operating profit and cash flow outlook for FY 2023
- Cloud revenue up
20% and up23% at constant currencies for FY 2023, underpinned by25% cloud revenue growth at constant currencies in the fourth quarter - Current cloud backlog of
€13.7 billion , up25% and up27% at constant currencies - IFRS cloud gross profit up
23% , non-IFRS cloud gross profit up23% and up27% at constant currencies in FY 2023 - IFRS operating profit down
5% , non-IFRS operating profit up9% and up13% at constant currencies in FY 2023 - 2024 outlook anticipates accelerating cloud revenue growth
- Planned transformation program including restructuring in 2024 reflects focus on scalability of operations and Business AI
- 2025 non-IFRS operating profit and free cash flow ambition updated to reflect updated non-IFRS definition as well as approximately half a billion Euro of incremental efficiency gains from the program
WALLDORF,
Christian Klein, CEO: "SAP has delivered: We met or exceeded our outlook for 2023 in all key metrics. Based on a stellar order entry, our current cloud backlog expanded by
Dominik Asam, CFO: "2023 was a year of inflection. We kept our promise and achieved double-digit non-IFRS operating profit growth despite an adverse macro environment. In 2024, we will focus on putting the right gradient of earnings growth in place to deliver on our raised ambition for 2025 and sustain growth and financial performance beyond."
All figures in this statement are based on SAP group results from continuing operations unless otherwise noted.
Financial Performance
Group results at a glance – Fourth quarter 2023
IFRS | Non-IFRS1 | |||||||
€ million, unless otherwise stated | Q4 2023 | Q4 2022 | ∆ in % | Q4 2023 | Q4 2022 | ∆ in % | ∆ in % | |
Cloud revenue | 3,699 | 3,078 | 20 | 3,699 | 3,078 | 20 | 25 | |
Thereof SAP S/4HANA Cloud revenue | 1,028 | 662 | 55 | 1,028 | 662 | 55 | 61 | |
Software licenses | 841 | 907 | –7 | 841 | 907 | –7 | –6 | |
Software support | 2,846 | 2,993 | –5 | 2,846 | 2,993 | –5 | –1 | |
Software licenses and support revenue | 3,687 | 3,900 | –5 | 3,687 | 3,900 | –5 | –2 | |
Cloud and software revenue | 7,386 | 6,978 | 6 | 7,386 | 6,978 | 6 | 10 | |
Total revenue | 8,468 | 8,064 | 5 | 8,468 | 8,064 | 5 | 9 | |
Share of more predictable revenue (in %) | 77 | 75 | 2pp | 77 | 75 | 2pp | ||
Operating profit (loss) | 1,900 | 2,002 | –5 | 2,510 | 2,560 | –2 | 2 | |
Profit (loss) after tax from continuing operations | 1,165 | 600 | 94 | 1,626 | 1,008 | 61 | ||
Profit (loss) after tax² | 1,165 | 326 | >100 | 1,626 | 1,023 | 59 | ||
Earnings per share - Basic (in €) from continuing operations | 1.02 | 0.63 | 60 | 1.41 | 0.98 | 44 | ||
Earnings per share - Diluted (in €) from continuing operations | 1.01 | 0.63 | 59 | |||||
Earnings per share - Basic (in €)² | 1.02 | 0.46 | >100 | 1.41 | 1.00 | 41 | ||
Earnings per share - Diluted (in €)² | 1.01 | 0.46 | >100 | |||||
Net cash flows from operating activities from continuing operations | 1,909 | 2,022 | –6 | |||||
Free cash flow | 1,660 | 1,726 | –4 | |||||
Number of employees (FTE, December 31) | 107,602 | 106,312 | 1 | |||||
1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. |
2 From continuing and discontinued operations |
Group results at a glance – Full year 2023
IFRS | Non-IFRS1 | |||||||
€ million, unless otherwise stated | Q1–Q4 2023 | Q1–Q4 2022 | ∆ in % | Q1–Q4 2023 | Q1–Q4 2022 | ∆ in % | ∆ in % | |
Cloud revenue | 13,664 | 11,426 | 20 | 13,664 | 11,426 | 20 | 23 | |
Thereof SAP S/4HANA Cloud revenue | 3,495 | 2,088 | 67 | 3,495 | 2,088 | 67 | 72 | |
Software licenses | 1,767 | 2,056 | –14 | 1,767 | 2,056 | –14 | –12 | |
Software support | 11,497 | 11,909 | –3 | 11,497 | 11,909 | –3 | –1 | |
Software licenses and support revenue | 13,264 | 13,965 | –5 | 13,264 | 13,965 | –5 | –3 | |
Cloud and software revenue | 26,928 | 25,391 | 6 | 26,928 | 25,391 | 6 | 9 | |
Total revenue | 31,207 | 29,520 | 6 | 31,207 | 29,520 | 6 | 9 | |
Share of more predictable revenue (in %) | 81 | 79 | 2pp | 81 | 79 | 2pp | ||
Operating profit (loss) | 5,785 | 6,090 | –5 | 8,721 | 7,989 | 9 | 13 | |
Profit (loss) after tax from continuing operations | 3,564 | 3,068 | 16 | 5,815 | 4,517 | 29 | ||
Profit (loss) after tax2 | 5,928 | 1,708 | >100 | 7,960 | 4,545 | 75 | ||
Earnings per share - Basic (in €) from continuing operations | 3.08 | 2.80 | 10 | 5.01 | 4.03 | 24 | ||
Earnings per share - Diluted (in €) from continuing operations | 3.05 | 2.79 | 9 | |||||
Earnings per share - Basic (in €)2 | 5.23 | 1.95 | >100 | 7.02 | 4.08 | 72 | ||
Earnings per share - Diluted (in €)2 | 5.17 | 1.94 | >100 | |||||
Net cash flows from operating activities from continuing operations | 6,193 | 5,675 | 9 | |||||
Free cash flow | 5,083 | 4,388 | 16 | |||||
Number of employees (FTE, December 31) | 107,602 | 106,312 | 1 | |||||
1 For a breakdown of the individual adjustments see table "Non-IFRS Adjustments by Functional Areas" in this Quarterly Statement. |
2 From continuing and discontinued operations |
Financial Highlights1
Fourth Quarter 2023
In the fourth quarter, SAP's cloud momentum further accelerated with sequential growth rate increases in both current cloud backlog and cloud revenue. Current cloud backlog was up
Supported by a particularly solid performance in
The share of more predictable revenue increased by 2 percentage points to
Cloud gross profit was up
IFRS operating profit decreased
IFRS earnings per share (basic) increased
Full Year 2023
SAP performed against its financial outlook as follows (continuing operations2):
Actual 2022 | 2023 Outlook | Revised 2023 Outlook | Actual 2023 | |
Cloud revenue (at constant currencies) | ||||
Cloud and software revenue (at constant currencies) | ||||
Operating profit (non-IFRS, at constant currencies) | ||||
Share of more predictable revenue | 79 % | approx. | approx. | 81 % |
Free cash flow | approx. 4.9 billion | approx. | ||
Effective tax rate (IFRS) | 32.0 % | 32.6 % | ||
Effective tax rate (non-IFRS) | 29.6 % | 29.3 % |
As of December 31, total cloud backlog – which is defined as the contractually committed cloud revenue we expect to recognize in future periods – was up
For the full year, cloud revenue was up
Software licenses revenue was down
The share of more predictable revenue increased by 2 percentage points year over year to
Cloud gross profit was up
IFRS operating profit was down
IFRS earnings per share (basic) increased
Free cash flow for the full year was up
Share Repurchase Program
On May 16, SAP announced a new share repurchase program with an aggregate volume of up to
Non-Financial Performance 2023
Customer net promoter score (NPS) increased 2 points year over year to 9 in 2023 within the outlook range.
SAP's employee engagement index remains stable at
Net carbon emissions were 0kt in 2023, meaning the Company is carbon neutral in its own operations.
Business Highlights
In the fourth quarter, customers around the globe continued to choose "RISE with SAP" to drive their end-to-end business transformations. These customers included: Amer Sports, AusNet, Boots,
AES Indiana, Allianz, ARAG, DAK-Gesundheit, Tropicana Brands Group, and Zurich Insurance Company went live on SAP S/4HANA Cloud in the fourth quarter.
Lowe Enterprises, Mangopay, Merida & Centurion Germany, Okuma Europe, Serrala Group, and Solidia Technologies chose "GROW with SAP", an offering helping midsize customers adopt cloud ERP with speed, predictability, and continuous innovation.
Key customer wins across SAP's solution portfolio included: Ahold Delhaize, Airservices Australia, Beiersdorf, Bosideng, Delivery Hero, Douglas, DZ BANK, Ericsson, MATSUMOTO PRECISION, Mercedes-Benz Group, NEOM, Robert Bosch, TechnipFMC, TE Connectivity, Volkswagen, and Wipro.
Axpo Holding, Campari Group, and Roca Sanitario, went live on SAP solutions.
In the fourth quarter, SAP's cloud revenue performance was particularly strong in APJ and EMEA and solid in the
For the full year,
On October 25, SAP announced, that Siemens Healthineers AG, a leading global medical technology company, had selected the RISE with SAP solution to support the company's digital transformation journey.
On November 2, SAP announced at the SAP TechEd event, a comprehensive series of generative AI capabilities and advancements aimed at empowering developers of all skill levels to supercharge their businesses in the age of AI.
On November 8, SAP announced, that it had completed the acquisition of LeanIX.
On November 21, SAP and the Mercedes-AMG PETRONAS F1 Team announced a multiyear partnership to join forces to drive efficiency on and off the racetrack.
On November 22, SAP announced that the Hilti Group, a global leader providing innovative hardware, software and services to the construction industry, is using the Circelligence solution to increase the circularity of its resources.
On December 13, SAP announced that it deepened its partnership with IBM on AI and Quantum. IBM also selected RISE with SAP across the enterprise, broadening its global reach, and continued to embrace the cloud through the use of SAP Fieldglass and SAP Learning Hub.
On January 9, 2024, SAP announced changes to its Executive Board to build on the company's success to enable customers to benefit from the cloud in the era of AI. Starting April 1, 2024, a new Board area will be created to accelerate cloud growth and adoption. This Board area, led by Thomas Saueressig, will be focused on ensuring customers' ability to embrace continuous innovation in the cloud. At the same time, Muhammad Alam will join the Executive Board, succeeding Thomas Saueressig and assuming responsibility for SAP's product engineering.
On January 17, SAP was named one of the 100 most sustainable companies in the world, joining the Corporate Knights Global 100 once again.
Segment Results at a Glance
SAP's reportable segment showed the following performance:
Applications, Technology & Services1 | Q4 2023 | ||
€ million, unless otherwise stated (Non-IFRS) | Actual Currency | ∆ in % | ∆ in % Constant Currency |
Cloud revenue – SaaS2 | 2,601 | 20 | 25 |
Cloud revenue – PaaS3 | 620 | 42 | 46 |
Cloud revenue – IaaS4 | 184 | –10 | –7 |
Cloud revenue | 3,405 | 21 | 26 |
Cloud gross profit – SaaS2 | 1,836 | 24 | 31 |
Cloud gross profit – PaaS3 | 533 | 49 | 53 |
Cloud gross profit – IaaS4 | 51 | –33 | –43 |
Cloud gross profit | 2,420 | 27 | 32 |
Segment revenue | 8,168 | 5 | 9 |
Segment profit (loss) | 2,686 | –2 | 2 |
Segment margin (in %) | 32.9 | –2.2pp | –2.2pp |
1 Segment information for comparative prior periods were restated to conform with the new segment composition. |
2 Software as a service: SaaS comprises all other offerings which are not shown as PaaS and IaaS. |
3 Platform as a service: PaaS primarily includes SAP Business Technology Platform and SAP Signavio. |
4 Infrastructure as a service: A major portion of IaaS comes from SAP HANA Enterprise Cloud |
In the fourth quarter, segment revenue in AT&S was up
Cloud Performance
Q4 2023 | Q1–Q4 2023 | ||||||
€ millions, unless otherwise stated (non-IFRS) | Actual Currency | ∆ in % | ∆ in % | Actual Currency | ∆ in % | ∆ in % | |
Current Cloud Backlog | |||||||
Total | 13,745 | 25 | 27 | 13,745 | 25 | 27 | |
Thereof SAP S/4HANA | 5,046 | 58 | 61 | 5,046 | 58 | 61 | |
Cloud Revenue | |||||||
SaaS1 | 2,894 | 19 | 24 | 10,734 | 19 | 23 | |
PaaS2 | 620 | 42 | 46 | 2,182 | 42 | 46 | |
IaaS3 | 184 | –10 | –7 | 748 | –18 | –16 | |
Total | 3,699 | 20 | 25 | 13,664 | 20 | 23 | |
Thereof SAP S/4HANA | 1,028 | 55 | 61 | 3,495 | 67 | 72 | |
Cloud Gross Profit | |||||||
SaaS1 | 2,109 | 22 | 29 | 7,809 | 21 | 25 | |
PaaS2 | 533 | 49 | 53 | 1,849 | 49 | 53 | |
IaaS3 | 51 | –33 | –43 | 257 | –20 | –22 | |
Total | 2,693 | 24 | 30 | 9,915 | 23 | 27 | |
Cloud Gross Margin (in %) | |||||||
SaaS1 (in %) | 72.9 | 1.9pp | 2.4pp | 72.7 | 0.7pp | 1.0pp | |
PaaS2 (in %) | 85.8 | 4.1pp | 3.8pp | 84.8 | 3.9pp | 3.9pp | |
IaaS3 (in %) | 27.9 | –9.7pp | –14.4pp | 34.3 | –0.9pp | –2.6pp | |
Total | 72.8 | 2.5pp | 2.7pp | 72.6 | 2.2pp | 2.4pp | |
1 Software as a service: SaaS comprises all other offerings which are not shown as PaaS and IaaS. |
2 Platform as a service: PaaS primarily includes SAP Business Technology Platform, SAP LeanIX and SAP Signavio. |
3 Infrastructure as a service: A major portion of IaaS comes from SAP HANA Enterprise Cloud. |
Business Outlook
SAP's business outlook, which includes the financial outlook 2024 as well as the financial ambition 2025, is based on SAP's updated non-IFRS definition of profit measures which, beginning in 2024, include share-based compensation expenses and exclude gains and losses from equity securities, net.
Furthermore, the 2024 outlook and 2025 ambition for free cash flow assume all payouts associated with the planned restructuring program will be completed in 2024.
Financial Outlook 2024
For 2024, SAP expects:
€17.0 – 17.3 billion cloud revenue at constant currencies (2023:€13.66 billion ), up24% to27% at constant currencies.€29.0 – 29.5 billion cloud and software revenue at constant currencies (2023:€26.93 billion ), up8% to10% at constant currencies.-
€7.6 – 7.9 billion non-IFRS operating profit at constant currencies (2023:€6.51 billion based on updated non-IFRS operating profit definition), up17% to21% at constant currencies. - Free cash flow of approximately
€3.5 billion (2023:€5.08 billion ). This includes a preliminary€2 billion estimate for payouts associated with the program, a€0.2 billion impact from a settlement earlier this year of pre-existing regulatory compliance matters accrued in 2023, as well as a€0.2 billion adverse impact due to the discontinuation of the SAP-triggered financing program. - An effective tax rate (non-IFRS) of approximately
32% (2023:30.3% based on updated tax rate definition (non-IFRS))3.
While SAP's 2024 financial outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below.
Currency Impact Assuming December 2023 Rates Apply for 2024
In percentage points | Q1 2024 | FY 2024 |
Cloud revenue growth | –2.5pp to –0.5pp | –2.0pp to 0.0pp |
Cloud and software revenue growth | –2.0pp to 0.0pp | –1.5pp to +0.5pp |
Operating profit growth (non-IFRS) | –3.0pp to –1.0pp | –2.0pp to 0.0pp |
Non-Financial Outlook 2024
In 2024, SAP now expects:
- A customer net promoter score of 9 to 13.
- The employee engagement index in the range of
76% to80% . - To steadily decrease carbon emissions across the relevant value chain, in line with our target of achieving Net Zero carbon emissions by 2030.
- To steadily increase the number of women in executive roles in line with our end of year 2027 target to archive
25% . At the end of 2023 SAP reached22.2% .
Ambition 2025
SAP is updating its financial ambition 2025. The update reflects the strong performance in the fourth quarter 2023, the updated non-IFRS definition of profit measures, as well as the anticipated benefits from the 2024 transformation program.
The update of the non-IFRS operating profit ambition includes a reduction by approximately
By 2025, SAP now expects:
- Non-IFRS cloud gross profit of approximately
€16.2 billion , now including share-based compensation expenses of approximately€0.1 billion (previously: approximately€16.3 billion , excluding share-based compensation expenses). - Non-IFRS operating profit of approximately
€10.0 billion , now including share-based compensation expenses of approximately€2 billion (previously: approximately€11.5 billion , excluding share-based compensation expenses). - Free cash flow of approximately
€8.0 billion (previously: approximately€7.5 billion ).
SAP continues to expect:
- Cloud revenue of more than
€21.5 billion . - Total revenue of more than
€37.5 billion . - A share of more predictable revenue of approximately
86% .
The 2025 ambition is based on an exchange rate of
In addition to our targets of achieving Net Zero carbon emissions across the value chain by 2030 and reaching
- Steadily increasing the employee engagement index.
- Steadily increasing the customer net promoter score.
2024 Transformation Program: Focus on scalability of operations and key strategic growth areas
In 2024, SAP will further increase its focus on key strategic growth areas, in particular Business AI. It also intends to transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth.
To this end, and to ensure that SAP's skill set and resources continue to meet future business needs, SAP plans to execute a company-wide restructuring program in 2024. The majority of the approximately 8,000 affected positions is expected to be covered by voluntary leave programs and internal re-skilling measures. Reflecting re-investments into strategic growth areas, SAP expects to exit 2024 at a headcount similar to current levels.
Restructuring expenses are preliminarily projected at around
Additional Information
This press release and all information therein is preliminary and unaudited. Due to rounding, numbers may not add up precisely. The full Q4 and FY 2023 Quarterly Statement can be downloaded from: https://www.sap.com/investors/sap-2023-q4-statement.
SAP Annual General Meeting of Shareholders
The Annual General Meeting of Shareholders will take place on May 15, 2024, as a physical event in the SAP Arena in Mannheim,
SAP Performance Measures
For more information about our key growth metrics and performance measures, their calculation, their usefulness, and their limitations, please refer to the following document on our Investor Relations website: https://www.sap.com/investors/performance-measures
Webcast
SAP senior management will host a financial analyst conference call on Wednesday, January 24th at 07:00 AM (CET) / 06:00 AM (GMT) / 1:00 AM (EST) / Tuesday, January 23rd 10:00 PM (PST), followed by a press conference at 10:00 AM (CET) / 9:00 AM (GMT) / 4:00 AM (Eastern) / 1:00 AM (PST). Both conferences will be webcast on the Company's website at https://www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the fourth quarter results can be found at https://www.sap.com/investor.
About SAP
SAP's strategy is to help every business run as an intelligent, sustainable enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: SAP customers generate
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This document contains forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially differ. Additional information regarding these risks and uncertainties may be found in our filings with the Securities and Exchange Commission, including but not limited to the risk factors section of SAP's 2022 Annual Report on Form 20-F.
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SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE in
1 The Q4 and full year 2023 results were also impacted by other effects. For details, please refer to the disclosures on page 31 of this document.
2 Full-year 2023 outlook updated for continuing operations as of April 21, 2023, to reflect the Qualtrics divestiture as reported in Q1 2023 quarterly statement.
3 The effective tax rate (non-IFRS) is a non-IFRS financial measure and is presented for supplemental informational purposes only. We do not provide an outlook for the effective tax rate (IFRS) due to the uncertainty and potential variability of gains and losses associated with equity investments, which are reconciling items between the two effective tax rates (non-IFRS and IFRS). These items cannot be provided without unreasonable efforts but could have a significant impact on our future effective tax rate (IFRS).
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FAQ
What are SAP's financial results for the fourth quarter and fiscal year ended December 31, 2023?
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