SAP’s Cloud Strength Offers Little Shield as Shares Shed Half Their Value

Software giant SAP has seen its stock battered by a triple blow of sector-wide AI jitters, rising interest rates and fears that its own technology might undermine its licensing model. At €134.68, the shares are down roughly 33% year-to-date and more than 47% below their level twelve months ago — a brutal reversal for a company that continues to post record cloud numbers.

The sell-off accelerated after Oracle’s latest quarterly report revealed capital expenditure plans of up to $95 billion for fiscal 2027. Investors dumped European software stocks on worries that surging AI infrastructure costs would compress margins across the sector. SAP, which is far less exposed to capital-intensive data center build-out than its US peer, still lost about 4% in a single session, becoming the weakest performer in the DAX. An Accenture revenue warning soon after deepened the rout. “Collateral damage, not a company-specific problem,” analysts at the secondary source described it.

Compounding the headwinds, Federal Reserve Chair Kevin Warsh has signaled that rate hikes are more likely than cuts, and Goldman Sachs now expects no loosening until 2027. That structural pressure on growth stocks makes it harder for SAP’s valuation to recover, even as its operational metrics improve.

Should investors sell immediately? Or is it worth buying SAP?

The market’s AI anxiety also has a paradoxical twist for SAP. While the company pitches its “Autonomous Enterprise” strategy — moving from per-user licensing to value-based AI services — some investors fear that AI agents and automated workflows will reduce the number of user licenses altogether. To counter that narrative, SAP launched its first Joule assistants for procurement and HR in June, aiming to monetise automation rather than be cannibalised by it. The company is also expanding European cloud capacity through a new partnership with FPT, which will deploy over 1,600 certified consultants to help utility giants E.ON and RWE migrate to S/4HANA and the Business Technology Platform.

Despite the weak stock price, analysts remain broadly bullish. The consensus price target stands at €208, implying roughly 50% upside from current levels. Jefferies reiterates a buy with a €210 target, while UBS’s Michael Briest sees €205 and Berenberg’s Nay Soe Naing puts the fair value at €215 — arguing that the sector is at a historically low valuation. Goldman Sachs trimmed its gross margin forecast for the second half of 2026 but kept its buy rating untouched. J.P. Morgan is more cautious, sticking with a “hold” recommendation and a €175 target.

SAP’s first-quarter results, published on April 23, paint a far healthier picture: cloud revenue jumped 27% to nearly €6 billion, the cloud backlog hit a record €21.9 billion (up 25%), and earnings per share rose to €1.66 from €1.52 a year earlier. The company is also deploying its €10 billion share buyback program aggressively, having repurchased about 16.3 million shares since January at an average price of €161.16 — a €2.6 billion commitment that provides some support.

All eyes are now on July 23, when SAP will release its half-year results. With the quiet period in effect, management is barred from issuing guidance, so investors will focus on two key metrics: the cloud backlog and the cloud gross margin. Those numbers will reveal whether SAP’s AI strategy is translating into profitable revenue growth — or whether rising costs are eating into progress. From August, the EU’s AI Act will impose new compliance requirements for high-risk applications, potentially delaying product launches just as AI features are becoming SAP’s main sales argument.

Ad

SAP Stock: New Analysis - 30 June

Fresh SAP information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated SAP analysis...

en | DE0007164600 | SAP’S | boerse | 69660815 |