(Bloomberg) -- SAP SE raised its outlook for the year, citing an accelerating cloud business in the second quarter as the German software giant benefited from increased spending on its business products.
SAP generated sales of 6.01 billion euros ($7 billion), beating the 5.88 billion euro average estimate by analysts in a Bloomberg survey. New cloud bookings, a keenly watched metric because it indicates future sales growth, grew 29 percent at constant currencies, faster than in the previous three-month period, the Walldorf, Germany-based company said Thursday.
SAP is increasingly betting on its cloud subscription business, which it expects to account for about 29 percent of total revenue by 2020, up from around 16 percent in 2017. The company this year made its biggest acquisition in more than three years when it bought Callidus Software Inc. for about $2.4 billion, gaining access to new sales analytics and customer engagement tools. SAP’s push into customer relationship management may aid the company’s cloud business and pits it against Salesforce.com Inc.
SAP’s cloud business is “thriving,” Chief Executive Officer Bill McDermott said on a call with reporters. “SAP’s growth strategy continues to win the market.”
SAP raised its outlook for the year, saying it now expects non-IFRS cloud subscriptions and support revenue of as much as 5.2 billion euros, from a previous maximum expectation of 5.15 billion euros.
Strong Momentum
It also hiked slightly the lower end of its sales and operating profit guidance, and raised its 2020 ambition for cloud subscriptions and support revenue by 200 million euros to as much as 8.7 billion euros.
“This update reflects the strong momentum in SAP’s cloud business, the acquisition of Callidus Software as well as a more challenging currency environment compared to 2017,” the company said.
SAP’s flagship S/4 Hana software added about 600 customers in the second quarter to reach more than 8,900 users, a bigger intake than in the previous three-month period. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.
To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net
To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Iain Rogers
©2018 Bloomberg L.P.
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