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SAP rolls out early Q2 numbers, says 18% decline in licensing revenue is an 'improvement'

CEO reckons team 'navigated a very challenging environment'

Typically when businesses release financial results ahead of schedule it means one of two things: that the numbers were far worse than forecast or better. In the case of SAP it is the latter - not that all that glitters is gold.

Amid a lack of commitment from customers to sign off ERP upgrade projects in a pandemic, and with SAP revising its full year guidance revenue downward after a slower-than-expected March, things look to be gradually improving.

According to preliminary calendar Q2 figures, SAP revenues went up 2 per cent year-on-year to €6.74bn. For context, arch rival Oracle recently reported a 6 per cent drop in sales for its Q4 fiscal '20.

The team "navigated the very challenging environment to deliver a better than anticipated quarter," said Christian Klein, SAP CEO, whose partner in crime, co-chief exec Jennifer Morgan resigned in April when the company determined one head at the top was better than two for the purposes of decision making.

Software licence revenue fell 18 per cent to €770m from the same quarter last year, although it could also be described, and was, as a "strong sequential improvement" on the 31 per cent decline SAP reported in the prior quarter. The question on analysts' lips is whether this is a more lasting trend or something that will dissipate once the current crisis abates.

SAP said "business activity gradually improved over the course of the second quarter following the global emergence of the COVID-19 crisis primarily in the last month of the first quarter". It added that while software licensing was "still below normal levels" they had "recovered more than expected".

Another major pillar for SAP, cloud revenue, was up 21 per cent to €2.04bn, but this was slower than the 40 per cent jump posted a year ago or the 29 per cent spike in the prior quarter.

SAP said: “Cloud revenue in the second quarter was impacted by lower pay-as-you-go transactional revenue”. The outbreak of the virus and its consequences were blamed for this.

Operating profit for Q2 jumped 55 per cent to €1.28bn, according to the preliminary figures.

SAP reaffirmed that it expects annual turnover to be between €27.8bn and €28.5bn, unchanged since the initial forecast of €29.2bn to €29.7bn was downgraded by 5 per cent in April. The company is banking on Q3 and Q4 showing improvements. ®

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