SAP Q1 2021: Cloud gains momentum while operating profit takes a hit

SAP's RISE program continues to prove popular but restructuring has its drawbacks.

SAP has reported first-quarter earnings results showing continued strength in the cloud sector and the adoption of S/4HANA "RISE with SAP." 

SAP's Q1 2021 earnings (statement) (.PDF) reveal revenues of €6.35 billion IFRS, down 3% year-over-year (or up 2% non-IFRS and at constant currencies) with basic earnings per share (EPS) of €0.88 (€1.40 non-IFRS).

In Q4 2020, SAP reported €7.54 billion IFRS revenue with basic EPS of €1.62.

SAP reported an operating profit of €0.96 billion IFRS, down 21% year-over-year, up 17% to €1.74 billion non-IFRS and up 24% non-IFRS at constant currencies. Operating cash flow for Q1 2021 reached €3.09 billion.

The vendor says that the plunge in operating profit is mainly due to "higher share-based compensation expenses (primarily related to Qualtrics IPO awards) and restructuring."

Cloud revenue grew by 7% year-over-year, to €2.14 billion (IFRS), up 7% non-IFRS and up 13% non-IFRS at constant currencies. 

Software license revenue increased by 7% year-over-year to €0.48 billion (IFRS and non-IFRS) and up 11% (non-IFRS at constant currencies).

Overall cloud and software license revenue increased by 1% year-over-year to €5.43 billion (IFRS) and up 6% non-IFRS at constant currencies.

SAP S/4HANA added an additional 400 customers to the roster in Q1 2021, up 16% year-over-year. SAP S/4HANA now accounts for over 16,400 customers, of which roughly 9,600 are now live.

A current cloud backlog of €7.63 billion has been recorded. Current cloud backlog revenue was up 39% to €1.04 billion and up 43% (at constant currencies). S/4HANA cloud revenue was up 36% to €227 million (IFRS and non-IFRS) and up 43% (at constant currencies).

SAP reports on three main business segments, "Applications, Technology & Services," "Qualtrics" and "Services."

Applications, Technology & Services revenue decreased by 1% to €5.31 billion year-over-year, up 4% at constant currencies.  

Qualtrics revenue was €202 million, an increase of 25% year-over-year, or 37% at constant currencies. 

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The Services segment, including digital transformation and the Intelligence team, reported revenue of €800 million, down 12% year-over-year (IFRS and non-IFRS), and down 8% (non-IFRS at constant currencies).

SAP's full-year revenue outlook, revealed ahead of Q1 earnings, includes non-IFRS cloud revenue of between €9.2 billion and €9.5 billion, up 14% to 18%. Revenue from software licenses is expected to decline due to the migration of customers to the RISE subscription program.

"We are seeing very strong order entry growth across our applications portfolio and we are just getting started," commented Christian Klein, SAP CEO. "Our new offering 'RISE with SAP' is rapidly becoming a massive accelerator to our customers' business transformations with our platform at the center. Together with our unique ecosystem of more than 22,000 partners and with a strong innovation pipeline for the year, we are well on track with our strategy to deliver robust cloud growth."

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