SAP is enjoying a steady increase in cloud subscriptions, but customer preference for low-end cloud services has caused profits to take a hit.
German software maker SAP reported on Wednesday Q2 2015 operating profit of €701 million with earnings of €0.39 per share, up approximately one percent year-over-year at constant currencies, an increase from 698 million euros in the year-ago period (statement) .
Profit after tax was pinned at €469 million euros. Non-IFRS earnings were €0.80 a share on an operating profit of €1.39 billion.
Reuters poll analysts expected non-IFRS earnings to range from 1.39 billion to 1.45 billion euros, revealing SAP's results to be at the lower-end of expectations.
IFRS total revenue was reported to be 4.97 billion euros in Q2 2015, up 20 percent from Q2 2014.
The financial results, ending June 30 2015, revealed strong growth in SAP's cloud sector. SAP reported IFRS cloud subscriptions and support revenue of €552 million, an increase of 129 percent based on Q2 2014's €241 million. Non-IFRS cloud subscriptions and support revenue was €555 million.
IFRS software licenses revenue was €979 million, a small, two percent jump -- or seven percent decrease at constant currencies -- based on Q2 2014's €957 million.
Overall, IFRS-based cloud and software revenue was €4.06 billion, an increase of 21 percent from 2014. Non-IFRS results reported for cloud and software revenue was €4.06 billion an increase of 21 percent -- or nine percent at constant currencies -- from Q2 2014, in which SAP reported results of €3.36 billion.
SAP Hana customers continue to join the fold, reaching 7,200 in comparison with 3,600 at the same time last year.
Growth was solid in the EMEA region, with a non-IFRS increase of 10 percent in cloud and software revenue. The Americas saw non-IFRS growth in the same areas grow by 36 percent, but the largest increase came from the APJ region, which grew by 138 percent, driving non-IFRS cloud and software revenue up 19 percent.
The German software and cloud provider reiterated its outlook for the full business year, which remains unchanged. SAP expects full-year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 -- €2.05 billion at constant currencies, rising from €1.10 billion in 2014 and representing a growth rate of 86 percent.
SAP expects 2015 non-IFRS software and cloud-related service revenue to increase by eight to ten percent, and non-IFRS operating profit to be in the range of €5.6 billion -- €5.9 billion, a jump from last year's reported €5.64 billion.
However, SAP has warned that currency exchange rate changes have the potential to alter these predictions.
SAP CEO Bill McDermott said in prepared remarks:
"When I speak with CEOs, they are looking for a road map to digitize their business and to create new business models. Our business is thriving because we have the most complete vision for how to make this transition to digital business a simple one. I am confident that our strategy to deliver a platform, applications and business networks is exactly what customers need from SAP."