Why German Software Giant SAP Shares Are Rocketing Premarket Wednesday?

SAP SE (NYSE: SAP) shares are rising by around 5% after the company reported fourth-quarter FY23 financial results.

SAP reported revenue growth of 5% Y/Y to €8.468 billion. Total revenue was up 9% Y/Y in constant currencies (CC).

Cloud revenue increased 20% Y/Y (+25% Y/Y in CC) to €3.699 billion. Software licenses and support revenue declined 5% Y/Y (-2% Y/Y in CC) to €3.687 billion. 

Cloud and software revenue grew 6% Y/Y (+10% Y/Y in CC) to €7.386 billion. Current Cloud backlog was up 25% Y/Y (+27% Y/Y in CC) to €13.75 billion. 

Non-IFRS cloud gross margin was up 2.7 percentage points to 72.8% at CC.

Non-IFRS operating profit fell 2% Y/Y (+2% Y/Y in CC) to €2.51 billion, owing to accelerated amortization of capitalized sales commissions related to the on-premise business and higher bonus accruals associated with the strong financial performance.

Non-IFRS EPS (basic) from continuing operations rose 44% Y/Y to €1.41.

As of December 31, SAP had repurchased about €949 million shares.

FY24 Outlook: SAP plans to implement a company-wide transformation program this year, focusing on business AI.

Also Read: SAP’s Partnership Potential With Hyperscalers Like Microsoft And Google: Analyst Weighs In

The company aims to execute a company-wide restructuring program, affecting approximately 8,000 positions. 

With this, SAP projects exiting 2024 at a headcount similar to current levels.

SAP anticipates restructuring expenses of around €2 billion, the majority of which is expected to be recognized in the first half of 2024 and will impact IFRS operating profit. 

Excluding restructuring expenses, the program is expected to provide only a minor cost benefit in 2024. 

Ambition 2025: SAP updated its FY25 targets, reflecting strong performance in Q4 2023, the updated non-IFRS definition of profit measures, and the projected benefits from the 2024 transformation program.

SAP now projects a non-IFRS cloud gross profit of around €16.2 billion (vs. prior: about €16.3 billion, excluding share-based compensation expenses), non-IFRS operating profit of around €10.0 billion (vs. about €11.5 billion, excluding share-based compensation expenses prior), now including share-based compensation expenses of roughly €2 billion.

Meanwhile, the company continues to project total revenue of over €37.5 billion, with cloud revenue of more than €21.5 billion in FY25.

Also Read: SAP’s ~$220M Cleanup: German Software Giant Settles Foreign Bribery Charges

Price Action: SAP shares are up 5.88% at $172.99 premarket on the last check Wednesday.