SAP’s Profit After Tax Increased by Nine Percent to 762 Million Euros

The largest European software manufacturer, SAP, reported on Wednesday a solid profit growth in the first quarter, with particularly good results in the ‘cloud’ segment, and confirmed the valid estimates for the entire year.

The German company reported that its profit after tax in the first quarter of this year increased by nine percent to 763 million euros. Operating profit rose by five percent to 1.1 billion euros. The same percentage growth was recorded in revenue, which reached 4.73 billion euros, with solid results across all regions.

Revenue in the ‘cloud’ and software segment also increased by five percent to 3.85 billion euros, while subscription revenues from ‘cloud’ services and support surged by as much as 35 percent to 677 million euros.

– SAP’s strong growth in the ‘cloud’ segment was at the upper end of the set range for 2016 and better than we would have hoped for in the medium-term perspective. Our gross margin in the ‘cloud’ has increased year-on-year, which – together with a successful business transformation – raised operating profit by five percent despite an unexpectedly low result in the licensing segment, said CFO Luka Mučić.

Revenue from software licenses and support services increased modestly by one percent to 3.17 billion euros. In the first three months, subscription revenues from the ‘cloud’ and support services accounted for 69 percent of total revenues, the company reported.

Among individual regions, SAP recorded a weaker start to the new year in North America after a very strong end to 2015 than expected. In Latin America, particularly in Brazil, their results were pressured by ongoing political and macroeconomic instability. This month, SAP also announced that their results in the first quarter would be weaker than expected due to lower sales of software licenses to corporate clients, especially in Brazil and the United States.

On Wednesday, they confirmed that they expect operating profit excluding one-off items to be between 6.4 and 6.7 billion euros this year, excluding currency fluctuations. This would mean that it would remain at last year’s level. They also estimate a favorable impact of currency exchange rates on revenue and profit growth in the second quarter of two percentage points, provided that they remain at March levels. For the entire year, the German company expects a positive impact of currency exchange rates in the range of one to three percentage points.