SAP announced a 13 percent increase in sales for the second quarter on Thursday, surpassing analysts’ expectations thanks to a boost from its cloud business. However, the German business software company lowered its profit prediction for the year due to the conflict in Ukraine.
SAP, which produces software for managing corporate operations, has transitioned from software licenses with upfront prices to subscription-based cloud services.
Christian Klein, CEO of SAP, stated in a statement, “Our move to the cloud is ahead of plan and we have surpassed top-line projections, with cloud revenue becoming SAP’s biggest revenue source.”
The company’s quarterly cloud sales increased by 34 percent to 3.06 billion euros ($3.12 billion). Current cloud backlog, a gauge of incoming business, increased by 34% to 10.40 billion euros.
However, the business has reduced its adjusted profit forecast for 2022 to a range between 7.6 billion euros and 7.9 billion euros, down from 7.8 billion euros to 8.25 billion euros.
SAP said that the situation in Ukraine and a probable drop in software licensing sales had an effect of 350 million euros in constant currency on their adjusted earnings.
Due to the conflict in Ukraine, the company’s withdrawal from Russia and Belarus resulted in around 120 million euros in severance payments to workers and asset losses.
“The departure is still taking place. We have informed our staff that they would be leaving the firm during 2022 “Klein stated on a call with reporters.
“There are also a number of workers who may work for us from other places, but by the end of the year, we will have completed the departure, and the amount will not exceed 350 million euros,” said the CEO.
Using constant currency, quarterly sales increased to 7.52 billion euros from 7.08 billion euros. According to a Refinitiv survey, analysts projected 7.32 billion euros.
Adjusted profits per share were 28 cents, which was below the consensus forecast of 44 cents, mostly owing to decreased contributions from investments in Sapphire Ventures.
The contribution from Sapphire Ventures decreased by around 1 billion euros from the previous year.