SAP confirmed its Q2 prelims and is looking good for the full year as take up of software, and particularly its new offerings, accelerates performance. For a company who only a few years ago was being castigated for having lost its innovative edge, it has performed quite a turnaround.
With double-digit growth in all regions, the business looks to be well balanced which should help smooth future performance. Delivering 26% growth (19% constant currency), software revenue broke the €1bn to come in at €1.06bn and at the upper end of Q2 outlook. Software and services revenue grew 21% to €3.12bn. Total revenue was up 18% to €3.9bn. As we noted in SAP software flew out the doors in Q2, operating profit was up +7% to €0.92bn but the operating margin declined 2.4 percentage points to 23.6% due to acquisition costs and redundancy payments for SuccessFactors staff while headcount increased elsewhere.
During Q2 HANA brought in €85m and SAP says it is on track to bring in €320m this year. It is demonstrating high growth - in its first full year HANA was targeted (and did) reach €100m revenue. Mobile contributed €54m and Cloud (primarily SuccessFactors subscriptions) generated €69m. Even taken together they represent a tiny fraction of SAP’s overall revenue but are significant because it is these new technologies that will provide the backbone for growth once core product growth starts its decline.
Against these results it is not surprising that SAP reiterated its full year performance: non-IFRS software and software-related service revenue to increase in a range of 10% - 12% (cc), which would include a contribution of up to 2 percentage points from SuccessFactors. Non-IFRS operating profit is expected to be in the €5.05bn - €5.25bn (cc) range.