When SAP releases its Q2 numbers next week, I’ll be paying particular attention to five key issues that will tell us a great deal about just how strong SAP’s cloud resurgence has become under the forceful leadership of CEO Christian Klein.
As with most companies’ quarterly reports, SAP always delivers a rich range of financial detail. And while each of those numbers has some particular significance to somebody, the five that I believe best reveal what matters most — the hearts and minds of customers — are these:
- Cloud-revenue growth for the quarter. Last quarter, it was 24%, which is excellent but not quite up to the levels SAP posted throughout 2022. For Q2, I’m betting SAP is able to push this vital metric up a notch to 25%. (For more details on SAP’s strong Q1, please see SAP Q1 Cloud ERP Revenue Soars 77%, Total Cloud Growth 24%.)
- S/4HANA Cloud growth rate. Customer uptake of SAP’s cloud ERP suite is incredibly vital on not only a quarterly basis but also for the company’s long-term health as a big chunk of this number represents on-prem customers sticking with SAP as they move to the cloud. There’s also a strong pull-through effect as cloud ERP deals frequently also lead to HCM and/or CX deals. Last quarter, S/4HANA Cloud revenue grew 77% to $788 million. This quarter, I expect that growth rate to be 75%.
- S/4HANA Cloud current backlog. This number represents customer commitments for cloud deals that have not yet been recognized as revenue but are likely to achieve that status in the near future. So, it represents an excellent glimpse at how aggressively customers are choosing S/4HANA Cloud over the next few years, with all of the above pull-through dynamics in place as well. Last quarter, this current backlog figure for cloud ERP was $3.76 billion, up 78%. For Q2, I’m looking for that growth rate to move up to 80%.
- PaaS growth rate. Made up of SAP’s Business Technology Platform and SAP Signavio, PaaS offerings have been a huge factor in SAP’s cloud surge because they facilitate the movement and management of data, synchronize applications, map out optimal business processes, enable customers to extend existing apps and build new ones, and tie in industry-specific solutions from partners. Last quarter, BTP grew at 47%, and for Q2 I’m looking for SAP to come in at that same rate.
- RISE commentary from Klein. SAP does not typically reveal financial details about or specific growth rates for RISE, but Klein’s comments about this “business transformation as a service” offering yields high-value insight into how ambitiously on-prem customers are making big commitments to SAP in the cloud. Klein has called the 30-month-old RISE program one of the most strategically important launches in SAP’s 51-year history, and you can get more insights in this recent Cloud Wars Minute video.
Final Thought
SAP will release its Q2 results on July 20.
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