The Channel logo

News

By | Kat Hall 20th January 2015 16:52

SAP’s cloudy future prompts a dip in profit forecast

Calm down, £5.3bn 2017 profit still coming

German software giant SAP has cut its profit margin forecast for 2017, as its cloud offering is set to take off and dent the company's (still-bulging) pockets.

According to its results today, Tuesday, by 2017 operating profit will be around €6.3bn-€7bn (£4.8bn-£5.3bn) on revenue of €21bn-€22bn (£16bn-£17bn).

This is down from the previous forecast of an operating profit of €7.7bn (£5.8bn) on revenue of €22bn (£17bn).

Overall operating profit fell by three per cent to €4.3bn (£3.3bn) for the full-year 2014, on revenue up four per cent to €17.6bn (£13.4bn) compared with the same period in 2013.

During that period, cloud-based income increased by 45 per cent to €1.1bn (£800m), it said. However, income from software and software-related services still contributed toward the lion's share of revenue, growing seven per cent to €14.9bn (£11.4bn).

Luka Mucic, chief financial officer at SAP, said the company has also built a pipeline of €3bn (£2.3bn) in cloud revenue for the year.

“We expect cloud subscriptions to exceed software license revenue in 2018. At that time SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion,” he said.

Duncan Jones, analyst at Forrester, said the downgrade in profit forecast was not surprising given the company's headway into the cloud space. Under its on-premise software model profits show up more quickly on the balance sheet due to up-front purchases, he said.

"It is a reflection on the shift to cloud, as revenue is deferred," he said. ®

comment icon Read 1 comment on this article or post a comment alert Send corrections

Opinion

Baby looks taken aback/shocked/affronted. Photo by Shutterstock

Kat Hall

Plans for 2 million FTTP connections in next four years 'not enough'
Microsoft CEO Satya Nadella
Stranded_ships

Chris Mellor

Thousands of layoffs announced as spinning rust enters its death spiral

Features

STRASBOURG, JUNE 29, 2016: The seat of the European Parliament. by Marco Aprile for shutterstock. EDITORIAL USE ONLY
Plan b, image via Shutterstock
EU workers, new markets: post-Brexit pressure on May & Co
Tough question, pic via Shutterstock
Honest mistake with your licensing? Audit police look at it on a 'case by case basis'