SAP SE (SAP) Stock: Drops as Cloud ERP Revenue Soars 25% and Free Cash Flow Reaches €3 Billion

TLDR

• SAP stock falls despite strong Q2 cloud revenue and earnings growth.
• Cloud ERP revenue jumps 25% as cloud backlog reaches €22.9 billion.
• Free cash flow climbs 27% to €3 billion in the second quarter.
• Total revenue rises 9% as cloud business offsets software declines.
• SAP updates 2026 outlook after Dremio and Prior Labs acquisitions.

SAP SE (SAP) shares closed at $146.38, down 1.59%, before rising 1.79% to $149.00 in after-hours trading after second-quarter earnings. The software company reported stronger cloud growth, higher profit, and expanding free cash flow despite slower software license sales. The results also reflected continued demand for cloud enterprise products and AI-driven business software.

SAP SE, SAP

Cloud business drives revenue growth and backlog expansion

SAP reported current cloud backlog of €22.9 billion during the second quarter. The figure increased 27% year over year and 26% at constant currencies. Moreover, the company said cloud backlog benefited slightly from the Reltio acquisition.

Cloud revenue reached €6.28 billion during the quarter. That result increased 22% from the previous year and 24% at constant currencies. Cloud ERP Suite revenue climbed 25% and 27% at constant currencies.

Cloud and software revenue increased 11% to €8.85 billion.  Total revenue rose 9% to €9.88 billion and 11% at constant currencies. Services revenue declined 3% to €1.03 billion, while software license revenue dropped 32% to €131 million.

Software support revenue also declined 8% to €2.44 billion. Stronger cloud performance offset those declines across the broader business. Consequently, cloud products remained SAP’s primary growth driver during the quarter.

Profit rises as acquisitions influence outlook

SAP generated IFRS operating profit of €2.64 billion during the quarter. The result increased 8% from the previous year. Non-IFRS operating profit reached €2.74 billion, rising 7% and 9% at constant currencies.

Profit after tax increased 26% under IFRS to €2.21 billion. Basic earnings per share also climbed 30% to €1.89. Non-IFRS earnings per share increased 6% to €1.59.

Cloud gross profit reached €4.66 billion, increasing 22% year over year. The IFRS cloud gross margin declined slightly to 74.3% from 74.7%. Gross profit rose 9% to €7.23 billion despite modest margin pressure.

SAP updated its 2026 non-IFRS operating profit outlook after completing the Dremio and Prior Labs acquisitions. The company said those acquisitions created a dilutive effect on expected operating profit. It also noted sequential operating profit growth slowed because of increased research spending, stock-based compensation changes and acquisition impacts.

Cash flow strengthens as share repurchases continue

SAP generated €3.15 billion in operating cash flow during the quarter. Free cash flow reached €3.00 billion, representing a 27% increase from the previous year. Those gains reflected stronger operating performance despite continued investment spending.

For the first six months of 2026, total revenue reached €19.43 billion. Cloud revenue increased 21% to €12.24 billion during the period. Operating profit also advanced 12% under both IFRS and non-IFRS reporting.

Free cash flow for the first half reached €6.25 billion. Operating cash flow increased 5% to €6.67 billion. Basic IFRS earnings per share rose 19% to €3.55 over the six-month period.

SAP also continued its previously announced share repurchase program. The company repurchased more than 16.28 million shares by June 30. Those purchases totaled about €2.6 billion at an average price of €161.16 per share under the €10 billion program announced in January 2026.

SAP has continued shifting its business toward recurring cloud revenue over recent years. That strategy has reduced reliance on traditional software licensing while expanding subscription-based enterprise software. The latest quarterly results showed that cloud demand continued supporting revenue growth, profitability, and cash generation despite acquisition costs and ongoing investments in AI and research.

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