SAP cloud business revenue exceeds expectations; expiration of traditional software support drives customers to accelerate migration | Earnings report insights

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SAP SE’s cloud business revenue growth in the second quarter exceeded market expectations, as the deadline for ending support for traditional software approaches, clients are being forced to accelerate their migration to the cloud.

According to SAP’s second quarter 2026 financial report released on Thursday, cloud business revenue grew 24% year-over-year at constant exchange rates, reaching 6.28 billion euros (about $7.1 billion), slightly above the average analyst estimate compiled by Bloomberg of 6.26 billion euros. This result provides a certain support to market sentiment.

SAP previously projected full-year 2026 cloud business revenue between 25.8 billion and 26.2 billion euros. The quarterly data indicates the company remains on track to achieve its annual target.

However, ongoing geopolitical conflicts in the Middle East, uncertainty in the AI competitive landscape, and high costs for migrating traditional business to the cloud remain core risk factors for investors.

SAP’s share price has fallen 38% so far this year. After the earnings release, SAP shares rose 4.5% in after-hours trading.

Deadline Approaching, Client Motivation to Migrate Strengthens

Regular support for SAP’s traditional on-premise software will end in 2027, and clients wishing to continue maintenance services after that will have to pay higher fees. This time pressure is pushing more companies to accelerate their system migration, which is an important background for this quarter’s better-than-expected cloud business growth.

The migration process is usually lengthy and costly. Bloomberg Intelligence analyst Josh Christensen pointed out before the financial report that conflicts in the Middle East have plunged supply chains in the oil and gas industry and other industries deeply integrated with SAP into chaos, lengthening negotiation cycles for relevant deals.

Christensen also pointed out that over 40% of SAP’s revenue comes from Europe, the Middle East, and Africa, making SAP’s exposure to the region relatively concentrated among large enterprise software vendors, thus making it more susceptible to regional disturbances.

AI Products Have Not Yet Made Substantial Contributions

CEO Christian Klein has invested heavily in artificial intelligence this year: he announced two rounds of organizational restructuring and personally led AI business development in order to establish a competitive advantage in this emerging technology field.

However, these initiatives have not yet translated into substantial business growth. According to Bloomberg, TD Cowen analysts including Derrick Wood pointed out in a research report before the earnings release that a large client reported SAP’s AI products contributed “negligibly” to its contract signing volume.

Analysts believe that continued investment in AI has not yet brought in incremental revenue, and investor concerns that AI could undermine the traditional software business model persist.

Klein stated in January this year that geopolitical uncertainty is slowing down negotiations for cloud business contracts, corroborating the current impact of external environment on SAP’s business rhythm.

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