SAP SE (SAP) reported earnings on Mon 26 Oct 20 (b/o)

 ** charts before earnings **

 

** charts after earnings **

 

SAP SE beats by 0.40, misses on revs; lowers FY20 outlook 

Reports Q3 (Sep) earnings of 1.70 per share, 0.40 better than the S&P Capital IQ Consensus of 1.30; revenues fell 3.9% year/year to 6.54 bln vs the 6.85 bln S&P Capital IQ Consensus.

Co issues downside guidance for FY20, sees FY20 revs of 27.2 -- 27.8 bln vs. 28.22 bln S&P Capital IQ Consensus, and below prior guidance of 27.8 -- 28.5 billion )

• Co sees 8.1 -- 8.5 billion operating profit compared to previously guidance of 8.1 -- 8.7 billion

Updated Mid-Term Ambition - SAP's previous mid-term ambition was issued on April 24th, 2019, before the COVID-19 crisis. The company is now updating its mid-term ambition to reflect the following factors

• The most recent currency exchange rates (October 2020) which translates to a negative 3 to 4 percent effect on revenue and operating profit since April 2019. 
• The COVID-19 pandemic which is expected to impact the demand environment, particularly in hard hit industries, through at least the first half of 2021 pushing out the achievement of key metrics such as non-IFRS cloud revenue, total revenue, and operating profit, by 1 to 2 years.
• The acceleration of customers' move to the cloud and subsequent business transformations which drive the new ambition's cloud revenue target of more than 22 billion by 2025. SAP expects this to negatively impact the 2023 operating margin by approximately 4 to 5 percentage points relative to the previous mid-term ambition.
• The accelerated harmonization of SAP cloud delivery which is expected to require an incremental investment in 2021 and 2022 and to drive the non-IFRS cloud gross margin to approximately 80% by 2025.

By 2025, this trajectory is expected to take SAP to:

• More than 22 billion non-IFRS cloud revenue
• More than 36 billion non-IFRS total revenue
• More than 11.5 billion non-IFRS operating profit
• A significant expansion of the Company's more predictable revenue share to approximately 85%