SAP SE, Europe’s biggest software company, forecast operating profit for the year that was ahead of analysts’ estimates after it announced job cuts and plans to refocus the company on its faster-growing cloud business.
(Bloomberg) — SAP SE, Europe’s biggest software company, forecast operating profit for the year that was ahead of analysts’ estimates after it announced job cuts and plans to refocus the company on its faster-growing cloud business.
Operating profit will be €8.6 billion to €8.9 billion ($9.4 billion to $9.8 billion) for the year, the Walldorf, Germany-based technology company said in a statement on Friday. That’s ahead of analysts’ €8.49 billion estimate, according to the average in a Bloomberg survey.
Sales at SAP’s cloud business, its largest, rose to €3.18 billion in the period, compared to analysts’ €3.22 billion average estimate. Chief Executive Officer Christian Klein is refocusing the 50-year-old enterprise software company around the technology, selling assets and cutting jobs that aren’t related to the faster-growing business.
Read More: SAP Gains as CEO Sees Double-Digit Growth in 2024: Street Wrap
SAP shares jumped 5.6% to €122.02 in Frankfurt trading at 4:02 p.m. on Friday, the biggest intraday gain since November. The stock has risen about 21% this year.
“Our cloud momentum continues at a fast pace which is contributing to our strong revenue,” Klein said in the statement. Klein said in a call with reporters on Friday that SAP finished the vast majority of its restructuring in the first quarter and doesn’t plan more this year.
Klein also said that he’s confident that the company would reach double-digit revenue growth starting next year because of SAP’s “high recurring revenue stream.” Revenue rose 9.9% to €7.44 billion in the first quarter from a year earlier. That compared to the average €7.36 billion estimate from analysts in a Bloomberg survey.
In January, SAP said it would cut about 3,000 jobs this year and announced plans to sell its remaining stake in Qualtrics International Inc. SAP said at the time that the restructuring will cost the company €250 million to €300 million, with most of that recognized in the first quarter.
SAP said Friday that its stake in Qualtrics will be acquired for approximately $7.7 billion.
A group of investors including Silver Lake and the Canada Pension Plan Investment Board agreed to buy Qualtrics last month in a deal that values the entire business at $12.5 billion. While the sale isn’t yet completed, SAP has stopped including the business’s contributions in its results.
(Updates with shares and CEO comment from fourth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.