SAP Stocks Rise Following Favorable Fourth Quarter Results and Updated 2025 Financial Goals

SAP, the German software giant, witnessed its shares surge on a recent Wednesday trading session after it surpassed quarterly financial expectations and adjusted its goals for the year 2025 to incorporate recent changes in accounting practices and the anticipated impact of a newly announced restructuring plan.

Impressive Fourth Quarter Performance

SAP revealed that its fourth quarter revenue increased to 8.47 billion euros, up from 8.06 billion euros in the same period the previous year. The company particularly highlighted the growth of its cloud business, where revenue rose to 3.70 billion euros, a significant jump from 3.08 billion euros. On the other hand, the revenue generated from software licenses saw a slight decrease, dropping to 841 million euros from 907 million euros.

Despite higher revenues, SAP's operating profit experienced a marginal dip from 2.56 billion euros to 2.51 billion euros due to operating margins decreasing to 29.6% from the former 31.7%. This was in contrast to analyst predictions which forecasted revenue and margins slightly lower than the actual results SAP reported.

Restructuring to Propel Future Growth

In the face of these results, SAP plans to begin a restructuring initiative that will affect roughly 8,000 jobs, aligning the company's resources with a stronger focus on artificial intelligence. The estimated cost for this restructuring is around 2 billion euros and is expected to be accounted for mostly in the first half of the year. Though this restructuring is likely to introduce only a small cost benefit in the current year, it is planned as a strategic move for future growth.

The company has consequently revised some of its 2025 financial targets, which now include the effects of the restructuring as well as an updated definition of non-IFRS profit measures. The adjusted expectations set the 2025 non-IFRS operating profit at approximately 10 billion euros, which includes share-based compensation expenses projected to be around 2 billion euros. Additionally, the forecast for free cash flow was boosted to an estimated 8 billion euros from the previously stated 7.5 billion euros.

SAP, stocks, restructuring