SAP started the year in good form with a rise in Q1 revenue but a slight decline in operating margin, repeating the pattern seen in Q4 (see here). However, it is significantly outperforming Oracle over a similar three-month period (see here) indicating that its more coherent message and portfolio are resonating with the market.
Revenue was up 7% to €3.5bn and operating profit nudged up 2% to €646m but the operating margin fell 0.9ppto 17.9%, presumably the effect of ongoing go-to-market costs and the shift to the cloud. Cloud revenue is still growing from its low base and made it to €137m, which is not much in terms of SAP’s overall revenue but represents a 373% improvement from €29m and the annual cloud revenue run rate is approaching €900m. Another of its key growth areas, HANA, looks good in terms of growth but again brings relatively little in actual revenue. HANA revenue tripled yoy but was just €86m. Recent moves to bring lower cost offerings to market are presumably no coincidence. The traditional business is still in positive territory but software growth was just 3%, taking revenue to €657m.
Overall it is another solid performance from the German company that has done so much to reorient itself over the last few years. Concerns over the revenue generated by new initiatives such as cloud, HANA (and mobile whose numbers were not split out this time around) persist and will be more pressing if the rate of decline in traditional area accelerates.