Cloud Progress Under Spotlight in SAP's Second-Quarter Report
Business software company SAP (SAP) - Get Report is set to report second-quarter results tomorrow and analysts expects to see year-on-year revenue and profit growth amid the company's shift of focus to cloud-based services.
For the second quarter, analysts are expecting earnings per share of €0.87 on revenue of €5.2 billion ($5.7 billion). A year earlier, SAP booked EPS of €0.80 on revenue of €4.97 billion.
In first quarter, the Walldorf, Germany company saw revenue rise 5% for its cloud and software division. First-quarter sales jumped 33% in its cloud subscription and support division, but dropped 12.5% for software licences as it shifted its focus to the cloud.
"Cloud growth remains strong, and cloud margins continue to progress, meaning mid-term margins should improve, although remaining broadly flat for this year," JPMorgan Cazenove analysts noted. ''"Brexit-driven uncertainty could cause delays in large capex projects (in the UK and possibly Europe), so we now believe results/guidance will be inline rather than above expectations."
The company faces relentless competition from rivals, who face the same industry changes.
"Fierce competition from companies such as Microsoft, Salesforce.com, Oracle and IBM, as well as uncertainty around the transition to the cloud, could pose risks to SAP," Pacific Crest Securities noted. "Additionally, deterioration in macroeconomic conditions, or sharp changes in FX rates, could adversely affect SAP."