In today’s Cloud Wars Minute, I take a closer look at SAP’s Q2 cloud performance — 24% revenue growth and a 22% rise in current cloud backlog — slower than past quarters, but still dramatically outpacing rivals.
Highlights
00:13 — One of the leaders in the Cloud Wars Top 10, SAP, has been the fastest-growing enterprise apps company for several straight quarters, far outperforming all of its competitors, which include Oracle, Workday, Salesforce, and Microsoft Dynamics 365. And SAP reported recently a very strong Q2. But there were a couple wrinkles.
01:02 — The cloud revenue was up 24% to $6 billion. But in Q1, the growth rate was 25%, so a slight dip in the growth rate in Q2. Current cloud backlog in Q2 was 22%; that 22% is well down from Q1’s 28%. It expected the backlog growth to moderate through the rest of the year. But this is a pretty big drop. It saw a re-emergence of uncertainty in the market in the second quarter.
02:08 — He noted in the U.S., in the public sector, the DOGE impact has slowed things down a little. On the flip side, Klein said, Now, we’ve got some mega deals that are out there. He said, I don’t think they’re going to disappear, but they have been postponed . . . There’s a little more rigor in getting approvals for those. But he said, I think that will come through.
03:22 — I would also say that at the size that SAP is at now, it’s a $24 billion run rate, 24% growth is quite good. And this current backlog growth of 22% in itself is also very strong. But a couple of quarters ago, its backlog grew 32%, then 25%, now 22%. So it’s fair to say, is a trend.
04:10 — Overall, it is an interesting time now for buyers, I think more broadly, since some of this uncertainty that Klein referred to around tariffs. I think a lot of that uncertainty is going away. We just heard this announcement of the U.S. and Japan in a $550 billion deal. I think this is going to alleviate some of the concern that SAP customers expressed and that Klein referred to.
