SAP 'firing on all cylinders' with higher 2018 targets

Tech October 18, 2018 14:48

By Agence France-Presse

German software giant SAP lifted its full-year forecast Thursday, as executives said swelling growth in cloud computing business helped it to a strong third quarter.

Net profits at the group were down 2.0 percent year-on-year between July and September, at 974 million euros ($1.19 billion).

Operating, or underlying profit shrank 6.0 percent to 1.24 billion euros, emerging stronger than predicted by analysts surveyed by Factset, who had forecast 1.09 billion.

Meanwhile revenues grew 8.0 percent, to 6.0 billion euros.

"Our growth drivers are firing on all cylinders," chief executive Bill McDermott said in a statement, promising "a stronger than ever fourth-quarter pipeline" justifying the more positive outlook.

In SAP's top growth area, the past three months brought a 39-percent increase in revenue from subscriptions to its cloud computing products -- which allow customers to store and process data on the company's servers -- to 1.3 billion euros.

The Walldorf-based group, a major competitor to US-based Oracle, has focused on the cloud for the past three years.

It has shunned acquisitions and pared profit margins to invest in the technology, which brings in steady streams of subscription revenue rather than traditional software's one-off license sales.

And the firm sees the bet paying off, with "cloud eclipsing software even faster than expected" this quarter.

"Due to the strong cloud and overall business momentum, the company is raising its outlook," it added.

Revenues should come out as much as 200 million euros higher than previously expected at up to 25.5 billion euros, compared with 23.46 billion in 2017.

Meanwhile, operating profit is expected to reach up to 7.525 billion euros, compared with 2017's 6.77 billion.