SAP cuts 2020 sales outlook citing Covid-19 impact on demand

The pandemic will delay SAP’s goals for cloud revenue, overall sales and operating profit by one or two years, especially in hard-hit industries, the German software company said in a statement on Sunday.

Chief Executive Officer Christian Klein, who became sole CEO in April, has been trying to navigate spending freezes from business customers trying to ride out the Covid-19 lockdowns this year. The warning came hours after governments in Spain and Italy unveiled further measures to try to rein in the virus’s spread.

The previous outlook “assumed economies would reopen and population lockdowns would ease, leading to a gradually improving demand environment in the third and fourth quarters,” SAP said in the statement. “Lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected.”

The company now expects adjusted revenue of 27.2 billion euros to 27.8 billion euros ($32.2 billion to $32.9 billion) at constant currencies in 2020, lower than the earlier guidance of 27.8 billion euros to 28.5 billion euros. SAP also said it no longer sees a boost from business-travel related revenue this year in its Concur business.

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New Outlook

• Adjusted cloud revenue is expected to be 8 billion euros to 8.2 billion euros in 2020, down from a previous estimate of 8.3 billion euros to 8.7 billion euros.
• Operating profit will be 8.1 billion euros to 8.5 billion euros this year, down from expectations of as much as 8.7 billion euros.
• SAP updated its mid-term ambition for total revenue to more than 36 billion euros in 2025 compared to its previous estimate of 35 billion euros in 2023.
• The company sees more than 22 billion euros in cloud revenue and over 11.5 billion euros in operating profit by 2025.

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Third Quarter

• Third quarter non-IFRS operating profit decreased by 12% year over year to 2.07 billion euros. That compared to the 2.15 billion-euro average estimate from analysts in a Bloomberg survey.
• Revenue in the period declined 4% to 6.54 billion euros compared to analysts’ average 6.89 billion euro estimate.

Market Reaction

• SAP shares have gained 3.8% this year through Friday compared with a 5.5% decline in Germany’s DAX index.

By Yueqi Yang and Amy Thomson