Cloud momentum sees SAP start the year strong

Cloud momentum sees SAP start the year strong

Software giant started the financial year with strong cloud revenue, but it recognised that exiting the Russian market will impact its bottom line.

Credit: Dreamstime

SAP has reported first-quarter revenue growth of 11 per cent for 2022, driven in large part by the vendor's expanding cloud business.

The company’s cloud revenue climbed 31 per cent to €2.8 billion (US$3.02 billion) in the first quarter of 2022, while revenue for its S/4HANA cloud software was €400 million, up 78 per cent year-on-year. Total revenue for the quarter rose to €7.1 billion from €6.4 billion in 2021, which was also above analyst expectations of €6.9 billion.

However, SAP’s recent exit from Russia will see the company take an expected revenue hit of around €300 million.

Impact of the war in Ukraine

In early March, SAP publicly announced it was suspending operations in Russia after Ukrainian vice prime minister Mykhailo Fedorov publicly appealed for it to do so.

Last week, the company released another statement, saying it was taking further steps toward an orderly exit from the country, having already halted all sales in both Russia and Belarus and begun the process of shutting down all cloud operations in Russia.

Despite the impact on its Russian business, SAP confirmed its 2022 forecast for cloud revenue is expected to be between €11.5 billion and €11.9 billion.

On an earnings call with analysts, SAP CEO Christian Klein said that despite the challenging political and macroeconomic environment, the first quarter had been strong, before acknowledging that the decision to exit the Russian market will have “a financial impact, both on the top and bottom line.”

On the same call, SAP’s CFO Luka Mucic told analysts the company was taking steps to absorb the expected impact of approximately €300 million on its revenues. 

“This is possible because of our increased cloud momentum, the initiation of disciplined expense management measures and the benefits associated with the streamlining of our portfolio that we expect to execute in the coming months as we continue to focus on strategic growth drivers,” Mucic said.

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