SAP’s Cloud Engine Fires Up, but the Profit Question Lingers
Published on 07/28/2026 at 19:43 | Redaktion boerse-global.de
The past three sessions have brought a sharp reversal of fortune for SAP shareholders. On Tuesday, the stock climbed 4.83 percent to €158.02, extending a rally that began after the company’s quarterly report on July 24. That day, the shares had touched a 52-week low of €127.52 before rebounding. The catalyst: cloud numbers that blew past expectations, momentarily silencing fears of a slowdown in the segment that investors have been watching most closely.
But the big question is whether this bounce marks a genuine turning point or merely a technical snap-back after a brutal twelve-month stretch. Even after the recent gains, SAP’s stock is still down 24.57 percent since the start of the year, and it remains more than 10 percent below its 200-day moving average of €175.84 — a level that professional traders treat as the dividing line between a bull and bear trend.
Cloud Orders Surge, But Profit Guidance Takes a Hit
The numbers that sparked the rally are hard to argue with. SAP reported cloud revenue of €6.3 billion, while the cloud order backlog jumped 26 percent to €22.93 billion — both figures comfortably ahead of what analysts had penciled in. Jefferies analyst Charles Brennan called the backlog the “clear highlight” of the quarter, and Goldman Sachs reiterated its “Buy” rating on Monday, trimming its price target only modestly from €230 to €215.
Yet the same report contained a less encouraging signal. SAP lowered its full-year profit guidance from a range of 14 to 18 percent growth to 13 to 17 percent. The reason: the costly transformation toward an AI-centric platform. The company is investing heavily in hundreds of so-called AI agents designed to autonomously manage business processes, and it has been on an acquisition spree, snapping up Dremio and Prior Labs. Those deals bring integration risks and near-term margin pressure that the market is still trying to price in.
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The tension between booming cloud demand and rising costs was laid bare in the second-quarter numbers. Operating profit fell 11 percent to €2.6 billion, weighed down by restructuring charges, even as total revenue rose 9 percent to €9.88 billion and cloud revenue climbed 22 percent to €6.28 billion. That divergence is the central fault line running through the SAP story.
The Bull Case: AI as the Next Growth Engine
Optimists argue that the cloud backlog — a forward-looking measure of contracted but not yet recognized revenue — is the metric that matters most. A 26 percent increase at a company of SAP’s scale signals that customers are locking into long-term cloud commitments despite the broader economic uncertainty. The company is also betting that its AI agents will eventually unlock a new wave of value-based pricing that goes beyond traditional subscription models.
SAP has strengthened its AI credentials by co-founding the “Open Secure AI Alliance” with Nvidia and Microsoft, a move that underscores its relevance in the fast-evolving enterprise AI ecosystem. Analysts at Metzler and Jefferies see the second-quarter numbers as a potential turning point that could force short-sellers to rethink their positions. If the backlog growth stays near 26 percent, the pressure on bears will only intensify.
There is also a tactical tailwind: SAP launched the second tranche of its share buyback program on Monday, with a volume of up to €2.6 billion. The move reads as a vote of confidence from management in the company’s own valuation.
The Bear Case: Margins Under the Microscope
Skeptics have a different view. JPMorgan analyst Toby Ogg described the margin development in the second quarter as a “negative surprise” and kept SAP at “Neutral” with a €175 price target. The DZ Bank went further, slashing its fair value estimate to €120 — well below the current share price — and maintaining a sell recommendation.
The bearish argument rests on the possibility that the integration of Dremio and Prior Labs will weigh on margins for longer than management expects. If that happens, the profit guidance — already trimmed once — could come under renewed pressure. The stock’s annualized volatility of nearly 50 percent reflects how skittish the market has become; in such an environment, any disappointing detail on costs could send the shares tumbling back toward their recent lows.
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Technically, the rally is already showing signs of strain. The relative strength index sits at 66.6, creeping toward the overbought zone. And while the stock has climbed above its 100-day moving average, the 200-day line at €175.84 remains a formidable barrier — one that must be breached convincingly before the long-term trend can be considered bullish.
What Comes Next
In the near term, SAP will try to consolidate above the €160 mark. The next major catalyst is the margin trajectory in the third quarter, with earnings due on October 21. If the company can demonstrate that the integration costs are temporary and that margins will start recovering by 2027, the rally could have legs — especially with the buyback providing a floor and most analysts maintaining price targets between €164 and €215.
But if margins deteriorate again, the market is likely to dismiss the current bounce as a dead-cat bounce and send the stock back toward its previous trading range. For now, the cloud backlog is the star of the show, but the profit question is the one that will ultimately determine whether this recovery is real or fleeting.
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