SAP Shares Plunge To New Low As Cloud Revenue Outlook Disappoints

SAP SE shares (ETR: SAP) suffered their steepest one-day decline since October 2020, plummeting 17.07% to €162.66after the German software giant delivered fiscal 2025 earnings that, while beating on headline numbers, failed to convince markets that its cloud growth trajectory would meet elevated expectations.

The SAP share price is making multi year lows, touching an intraday low of €162.12, wiping billions off the company's market capitalisation in a matter of hours.

The selloff came despite SAP reporting fourth quarter earnings per share of €1.62, up from €1.40 in the prior year period, and quarterly revenue of €9.68 billion versus €9.38 billion year-on-year. Cloud revenue climbed 27% while the cloud backlog expanded 32% to €18.08 billion, with total cloud backlog reaching a record €77 billion following 30% growth. The company also delivered operating profit and free cash flow ahead of its own expectations for the period, demonstrating what management described as focused execution and financial discipline.

However, markets zeroed in on SAP's fiscal 2026 cloud revenue guidance, which analysts at JPMorgan flagged as falling short of projections. The disconnect between strong historical performance and more cautious forward-looking statements triggered the sharp repricing. SAP projected fiscal 2025 operating profit between €10.3 billion and €10.6 billion, free cash flow of €8 billion, and an effective tax rate of 32%, but notably maintained its full-year outlook citing elevated levels of uncertainty and reduced visibility in the operating environment.

The company pointed to specific headwinds affecting client confidence and spending patterns. Public sector clients in the United States have shown increased caution, while manufacturing firms grappling with higher tariff costs have pulled back on cloud infrastructure investments. These macro uncertainties appear to be weighing on SAP's ability to convert its substantial cloud backlog into near-term revenue at the pace markets had anticipated.

SAP attempted to strike an optimistic tone in its commentary, stating that it closed 2025 on a high note and emphasising the continued trust customers place in the company as the North Star for digital transformation. Management highlighted that SAP Business AI has emerged as a key growth driver, featuring in two thirds of fourth quarter cloud order entry, combined with strong artificial intelligence adoption across the ERP suite. The significant current cloud backlog growth in the fourth quarter was positioned as laying a strong foundation for accelerating total revenue growth through 2027.

The company expressed confidence that its strategy and operational discipline would continue driving long-term value creation, pointing to SaaS and PaaS growth well ahead of market rates and the ability to convert that expansion into bottom-line results and free cash flow. Yet this longer-term optimism did little to offset immediate concerns about the pace of monetisation in 2026.

The market reaction underscores the challenge facing enterprise software providers operating in an environment where strong execution on current metrics is no longer sufficient if forward guidance suggests decelerating momentum. SAP's substantial cloud backlog theoretically provides revenue visibility, but the timing and conversion rate of that backlog into recognised revenue has become the critical variable for valuation.

The double digit decline today, and 39.15% drop on a 1 year basis suggests markets had priced in a more aggressive ramp in cloud revenue for the coming year, and the guidance reset those expectations sharply lower.