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SAP reassures market: Cloud is sustainable, just don't look at our wheezing bookings

Q3 profits and revenues up but execs grilled over cloudy future

By Rebecca Hill

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Enterprise giant SAP has reported an increase in both revenues and operating profits for the latest quarter – but execs were forced to explain a slowdown in cloud bookings.

The results for the quarter ended September 30, released today (PDF), showed total revenues of €5.59bn – up 4 per cent year-on-year – and an operating profit of €1.31bn, representing a 19 per cent boost.

Software revenues made up the bulk of SAP's income, €3.7bn, although this represented just a 1 per cent year-on-year increase. Cloud subscriptions and support brought in €937m, a 22 per cent increase.

But new cloud bookings only increased 19 per cent in this quarter, compared with Q3 in 2016, which is a smaller rise than in previous quarters.

New cloud bookings grew by 33 per cent in Q2 2017, and 49 per cent in Q1 2017 – and such changes risk being interpreted by investors as a sign of volatility.

Indeed, Seeking Alpha reported a fall in shares of 1.27 per cent, and analysts on today's earnings call grilled execs on the change.

In response, CEO Bill McDermott said SAP had "unwavering confidence" when it came to bookings for Q4, arguing that customers with large-scale transformations have a tendency to close in Q4.

He said the team "couldn't come up with a low [number]" for bookings, adding that the lowest was "in the 30s" and that he had "confidence with an exclamation point".

McDermott also added that the firm was "not moving or changing off" its 2020 vision of a 30 per cent growth in cloud.

Elsewhere, SAP trumpeted what it described as increasing interest in the integrated business suite S/4HANA. There was a 70 per cent year-on-year increase in customers this quarter to 6,900, which includes 600 net new customers signed up in Q3.

However, as TechMarketView analyst Angela Eager pointed out, the proportion of cloud to on-premises implementations isn't clear.

"As software licence revenue held steady at €1.03bn, this suggests on-premises and hybrid deployments," she said.

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