Europe's market value king SAP (SAP.US) financial report encounters a cold reception: cloud revenue growth slows down, with a weak US dollar being the main reason.

The largest technology company in Europe, SAP SE (SAP.US), released its latest financial report on Tuesday, with operating profit (non-IFRS) rising to 2.568 billion euros, and free cash flow showing significant improvement, reaching 2.357 billion euros, an 83% year-on-year increase. Earnings per share also showed strong growth, with basic earnings per share (IFRS) increasing by 91% to 1.45 euros, and diluted earnings per share increasing by 92% to 1.44 euros. The results showed that its cloud computing and software business growth was slightly lower than market expectations. The software giant, headquartered in Walldorf, Germany, saw cloud computing and software revenue increase by 11% year-on-year to 7.97 billion euros (approximately 9.4 billion US dollars) in the fiscal year ending June 30, with a difference of 20 million euros from the aggregated analyst forecast of 7.99 billion euros. Despite maintaining full-year cloud computing revenue growth expectations, the company specifically noted that exchange rate fluctuations would have a negative impact of 3.5 percentage points on related business. CFO Dominic Asam emphasized in a statement that the current political environment and public sector demand trends need close attention. As a global enterprise software core supplier, SAP is driving customers to migrate from traditional on-premise servers to the cloud through AI services, with this strategy achieving significant results. Cloud customers spend more on average than traditional models, and migration projects typically involve complex multi-year implementations with strong business stickiness. Despite facing exchange rate pressure, SAP's stock price has risen by 40% in the past year and recently surpassed Dutch chip maker ASML Holding NV ADR (ASML.US) to become the highest market value listed company in Europe. It is worth noting that the US market contributes over 30% of SAP's sales, and the weakening US dollar poses a significant challenge to its financial performance. Calculated at fixed exchange rates, cloud computing revenue for the quarter grew by 24% to 5.13 billion euros, slightly below market expectations. The backlog indicator reflecting the future potential of cloud business increased to 18.1 billion euros, but there was a 400 million euro gap compared to the analyst forecast of 18.5 billion euros. The company also warned that the growth rate of cloud business backlog orders in 2025 may see a slight slowdown. After the financial report was released, SAP's American Depositary Receipts fell by about 1.5% in after-hours trading on the New York Stock Exchange, closing at $306.29. Asam explained in a conference call that about half of the revenue and over half of the operating profit are denominated in dollars, and under the euro reporting system, dollar depreciation directly leads to a shrink in the euro translation of revenue and profit. According to their calculation, for every 1 percentage point depreciation of the dollar, the company's growth index will lose about 0.5 percentage points, "this year, the impact of exchange rate headwinds on the income statement is particularly significant". Rob Hales, Senior Stock Analyst at Morningstar, pointed out that investors will focus on the continuing impact of exchange rate fluctuations on next year's performance, and the management's statement on the 2025 exchange rate assumption may trigger market volatility. A recent report from UBS Group AG suggested that while the incentives provided by SAP to accelerate customer cloud migration have improved cash flow in the short term, the pressure of related payments may become apparent next year.