SAP Q3 revenue grows by 13%, surpasses €10 billion in a single quarter for the first time; cloud backlog rises 28% year-on-year | Earnings Report Highlights

SAP’s third quarter results exceeded expectations across the board, with accelerated growth in cloud business and higher AI tool penetration, allowing Europe’s largest software company to demonstrate its resilience in the face of disruption to the enterprise application market.

After the US stock market closed on October 21, software company SAP released its Q3 2026 financial report. Total revenue reached €10.27 billion, up 13% year-on-year (12% at constant currency), marking the first time quarterly revenue surpassed €10 billion. Non-IFRS operating profit reached €3.03 billion, up 18% year-on-year, also surpassing €3 billion for the first time in a single quarter.

Management emphasized that this reflects the expansion potential of SAP’s cloud transformation business model now being unleashed. In Q3, SAP’s cloud revenue was €6.668 billion, up 26% year-on-year (25% at constant currency), exceeding analysts' expectations compiled by Bloomberg of approximately €6.57 billion. Of this, Cloud ERP Suite revenue reached €5.924 billion, up 29% year-on-year (28% at constant currency), continuing to be SAP’s fastest growing and most significant business line.

The current cloud backlog, a measure of the visibility of future 12-month cloud revenue, reached €24.144 billion, up 28% year-on-year (26% at constant currency). This means that despite previous market concerns that AI could disrupt the traditional SaaS software model, at least among SAP’s core enterprise software client base, the demand for cloud migration and ERP modernization remains strong.

SAP also updated its full-year revenue guidance: The company expects 2026 cloud revenue to reach the upper end of the €25.8-26.2 billion guidance range, with cloud and software revenue also approaching the upper end of the €36.3-36.8 billion range. The company maintains its full-year expectations for non-IFRS operating profit of €11.8-12.2 billion and free cash flow of about €10 billion.

Boosted by the news, SAP’s US-listed stock price jumped as high as $250 in after-hours trading, before retreating to an approximately 2% gain at press time.

By IFRS standards, SAP’s third-quarter total revenue was €10.27 billion, up 13% year-on-year (12% at constant exchange rates).

Cloud revenue grew 26% year-on-year, with Cloud ERP Suite revenue standing out with 28% growth at constant currency, reaching €5.924 billion as the core growth engine. Software license revenue declined 9% to €147 million, continuing the trend of shrinking traditional licensing business during cloud migration.

In terms of profit, IFRS operating profit was €2.93 billion, up 18% year-on-year; non-IFRS operating profit was €3.03 billion, also up 18% year-on-year, with the non-IFRS operating margin rising 1.2 percentage points to 29.5%. Net profit after tax (IFRS) was €2.269 billion, and basic earnings per share were €1.96, up 14% year-on-year.

CFO Dominik Asam stated that quarterly total revenue surpassed €10 billion for the first time, and non-IFRS operating profit exceeded €3 billion in a single quarter, reflecting the scale effect and disciplined cost management of the company’s business model.

It’s worth noting that the Q3 cloud revenue growth benefited from several one-off factors, mainly including the catch-up revenue from clients previously in financial difficulty resuming their contracts.

In addition, the acquisitions of Reltio, Dremio, and Prior Labs contributed a total of €49 million in revenue, but dragged down IFRS and non-IFRS operating profit by €59 million and €39 million, respectively.

In Q3, SAP’s cloud revenue was €6.668 billion, up 26% year-on-year (25% at constant currency). This growth rate not only significantly surpassed overall company revenue growth but also exceeded market expectations, making it the most watched aspect of this quarter’s report.

From a structural perspective, SaaS/PaaS revenue was €6.612 billion, up 27% year-on-year (26% at constant currency); among which Cloud ERP Suite revenue accounted for €5.924 billion, up 29% year-on-year (28% at constant currency). This indicates that SAP’s cloud growth is not dependent on peripheral businesses but arises from the cloudification of its core ERP systems.

By contrast, Extension Suite revenue was €688 million, up 10% year-on-year (8% at constant currency); IaaS revenue was only €56 million, down 27% year-on-year. This further highlights that SAP’s current cloud business focus is not on infrastructure cloud, but on the cloudification of software around core enterprise processes, especially ERP, Finance, HR, Supply Chain, and other key business systems.

The proportion of cloud revenue to total revenue continues to rise as well. In Q3, cloud revenue accounted for approximately 65% of total revenue, up from about 58% in the same period last year. This means SAP’s revenue structure is further shifting from traditional licensing and support services to the more sustainable subscription-based cloud model.

SAP’s current cloud backlog reached €24.144 billion in Q3, up 28% year-on-year (26% at constant currency). This indicator is commonly seen as a leading indicator for cloud revenue over the next 12 months, making it especially important for assessing SAP’s cloud business sustainability.

Management stated the “Autonomous Enterprise” strategy is not only being recognized by customers but is also being adopted. CEO Christian Klein stated that clients are investing in cloud, data infrastructure, and Business AI, and believe that Joule Work makes the business case for enterprise transformation even more compelling.

However, SAP also noted that growth in the current cloud backlog for the full year is expected to slow slightly and that this outlook assumes a stable macro environment in Q4. In other words, current order performance is strong, but the company has not signaled “continuous acceleration,” instead favoring steady growth.

From client cases, this season saw more companies choosing “RISE with SAP,” including AstraZeneca, Infineon, Banco Bilbao, Aydem Enerji, NTN, etc.; A5X, Bitzer, Rittal, and others opted for “GROW with SAP.” This demonstrates that cloud migration for large enterprises and cloud ERP adoption for medium-sized companies are both progressing.

SAP has revised its 2026 full-year cloud revenue forecast to the top of the guidance range, projecting constant currency revenue at €25.8-26.2 billion (up 23%-25%), a significant increase from €21.02 billion in 2025. Cloud and software revenue is also revised up to €36.3-36.8 billion at the high end of the range (up 12%-13%).

Non-IFRS operating profit expectations remain unchanged at €11.8-12.2 billion (up 13%-17% at constant currency); the full-year free cash flow target of about €10 billion also remains unchanged.

SAP also cautioned about exchange rate risk: at the EUR/USD rate as of September 30, 2026 (1 EUR = 1.14 USD), full-year cloud revenue growth will be negatively impacted by about 1.5 percentage points, while non-IFRS operating profit growth will be dragged down by about 2 percentage points.

Looking to the medium-term, SAP expects total revenue growth in 2026 at constant currency to be in line with 2025 (10.6%) and to accelerate in 2027. The company also anticipates that with the accelerating pace of cloud migration, the decline in software support revenue will quicken further in the coming years.

Earlier this year, market fears that AI tools could replace traditional enterprise application software led to a massive sell-off of software stocks, an adjustment referred to as the “SaaSpocalypse,” putting pressure on SAP’s share price. Since the July 23 low, SAP’s stock price has rebounded more than 60% cumulatively.

On the buyback front, SAP announced in January 2026 a share repurchase plan of up to €10 billion, effective until December 31, 2027. As of September 30, 2026, the company had repurchased a cumulative 25,205,983 shares at an average price of €164.79 per share, totaling about €4.2 billion under this plan.

In Q3, SAP’s operating cash flow was €1.92 billion, up 28% year-on-year; free cash flow was €1.718 billion, up 36% year-on-year. For the first three quarters, operating cash flow was €8.586 billion, up 9% year-on-year; free cash flow was €7.968 billion, up 11% year-on-year.