Powered by the accelerating growth of its Cloud ERP Suite, SAP delivered excellent Q2 numbers across the board and sharply differentiated itself from other major enterprise-apps vendors that have cited slowdowns in customer demand.
With Q2 revenue for its Cloud ERP Suite up 33% to $3.72 billion, that core component of SAP’s business is now on a $15-billion annualized run rate. And that 33% figure becomes even more impressive when viewed next to SAP’s 31% jump in Q1 Cloud ERP Suite revenue, which means SAP is achieving a truly breakaway level of performance: even as the Cloud ERP Suite business is getting bigger, its growth rate is going up.
Another major factor behind the stellar Q2 results was SAP’s Business AI offerings. On the Q2 earnings call, CEO Christian Klein said that about 20% of the deals booked in Q2 included “premium AI use cases.”
On top of those achievements, SAP also demonstrated strong ongoing customer demand for its applications and platforms as its current cloud backlog jumped 28% to $16.1 billion. And again, SAP’s Q2 performance stands in stark contrast to the blunt commentary from competitors about softening customer demand.
“My main message to you in this call is that we continue to deliver,” Klein said on the Q2 earnings call.
“Despite the volatile environment in the software industry, our growth momentum remained strong in Q2. More and more customers are moving to the cloud and our portfolio is becoming increasingly attractive thanks to SAP’s Business AI capabilities.”
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That momentum has made SAP the world’s fastest-growing enterprise-apps vendor, which I broke out in a recent analysis headlined “SAP #1 Fastest-Growing Apps Vendor; Microsoft #2, Workday #3, Salesforce #4, Oracle #5.”
SAP’s breakthrough performance has been powered by a few key elements:
- Cloud ERP Suite: the modular and fully integrated set of applications is ideal for optimizing end-to-end processes, and also enables an unmatched source of data for SAP’s AI services;
- Business AI services built into those enterprise apps and the Joule copilot;
- RISE and GROW programs that guide customers into the cloud and offer “personalized” approaches to match a business’s particular needs;
- Business Technology Platform that has harmonized all of SAP’s apps as well as solutions created by the large and growing SAP ecosystem; and
- Datasphere, SAP’s business data fabric architecture.
Throughout the Q2 earnings call, Klein was bullish on the company’s momentum, with particular emphasis on the impact Business AI is already having as well as its enormous potential for the future.
Speaking about the company’s recent Sapphire event, Klein said, “Business AI has moved directly to the center and there’s no doubt that everyone now perceives SAP as a major AI player, given how well we’re positioned to embed AI into the operations of our customers.
“This perception manifested itself in our Q2 numbers because in every ERP and LOB deal we closed, our AI strategy played a key role. Also, AI had a direct impact on our bookings in the second quarter with almost 20% of all deals including our premium AI use cases,” Klein said.
“And this is just the beginning. Customers have clear plans to expand their AI consumption on their RISE and GROW transformation journeys.”
Final Thought
For the past couple of years, Klein has been absolutely unwavering in telling the world that customer demand for SAP technology has been strong and will continue to be so. Today, even as other Cloud Wars Top 10 apps vendors have described significant pullback in customer demand, Klein says SAP’s pipeline continues to grow, its 20,000 on-prem customers continue to express strong interest in converting to the cloud, and SAP’s ecosystem continues to help drive widespread customer adoption and innovation.
And in the first six months of 2024, Christian Klein is showing even more of the leadership, vision, and drive that inspired me last year to name him the Cloud Wars CEO of the Year for 2023.
Well done, SAP!
