logo
SAP reports cloud growth that falls short of expectations

SAP reports cloud growth that falls short of expectations

Business Times6 days ago
[BERLIN] SAP reported quarterly cloud and software sales that fell just short of estimates as tariff insecurities weighed on Europe's most valuable company.
Cloud and software revenue increased 11 per cent to 7.97 billion euros (S$912 billion) in the period ended Jun 30, the Walldorf, Germany-based company said on Tuesday (Jul 22). That missed analysts' average estimate of 7.99 billion euros, according to data compiled by Bloomberg.
While the company maintained its annual forecast for cloud revenue, it expects currency fluctuations to hurt that growth by 3.5 percentage points.
'As we move into the second half, we remain cautiously optimistic, keeping a close eye on geopolitical developments and public sector trends,' chief financial officer Dominik Asam said.
SAP sells software to companies to run business functions such as finances, human resources and procurement. Over the past few years, it has promoted artificial intelligence services to encourage clients to shift from legacy on-site servers to IT infrastructure in the cloud, where average spending per client is higher.
The company has shown resilient cloud growth in the face of geopolitical instability, as customers who decide to move to the cloud typically commit to complex, multiyear migration projects that cannot easily be dialled back. SAP's stock has soared 40 per cent over the past year, and the company has surpassed Dutch chip machine maker ASML Holding to become Europe's most valuable business.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
SAP's largest market is the US, which represents more than 30 per cent of its sales. The weakened US dollar led to currency pressures for the company.
Cloud revenue increase 24 per cent to 5.1 billion euros, excluding currency fluctuations, which was slightly below analysts' expectations.
SAP's cloud backlog, an indicator of future cloud sales, increased to 18.1 billion euros in the second quarter, missing analysts' expectations of 18.5 billion euros. The number measures how much cloud revenue SAP signed to come in over the next 12 months.
The company also said it 'continues to expect current cloud backlog growth at constant currencies to slightly decelerate in 2025'.
The company's American depositary receipts declined about 1.5 per cent in extended trading after the results. The receipts closed at US$306.29 in New York.
The bigger risk to SAP's stock from currency fluctuations will be the outlook for next year, said Rob Hales, a senior equity analyst at Morningstar. 'It could move the stock when we start getting indications from management on the potential impact of currency next year.'
Incentives SAP has promised to customers for their cloud migration are likely to have increased significantly, UBS Group analysts said in a note last week. This 'has boosted cash inflow in the first quarter', but will hurt it next year, when the payout is due. BLOOMBERG
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

US-China relations: Between confrontation and transaction
US-China relations: Between confrontation and transaction

Business Times

timean hour ago

  • Business Times

US-China relations: Between confrontation and transaction

THE return of Donald Trump to the White House in January has ushered in a new chapter of Sino-American relations marked by aggressive economic policies, strategic unpredictability and a pattern of escalation followed by tactical negotiations. Six months into his second presidency, Trump's approach to China has proved both more confrontational and more transactional than many observers anticipated. And there are now signs that his administration is starting to reassess its moves. Trump signalled a hard line on China with hawkish Cabinet picks, including Secretary of State Marco Rubio and National Security Advisor Michael Waltz. He also wasted little time in implementing his campaign promises on China trade policy. Within weeks of inauguration, the administration launched what many economists dub the most aggressive trade war in recent history. On Feb 1, Trump signed an executive order imposing an additional 10 per cent tariff on imports from China. Starting in April, Trump imposed a minimum 10 per cent tariff on nearly everything the US imports, although goods from China faced a higher tariff of 34 per cent. The administration's broader China strategy plans to fundamentally restructure economic ties between the two nations. Trump pledged to revoke China's preferential trade status and had threatened at least 60 per cent tariffs on Chinese imports during his campaign, signalling a departure from decades of economic engagement and the start of a process of decoupling. Beyond trade, the Trump administration is also expanding restrictions on Chinese ownership of American assets. The president has said he will pressure Chinese companies to sell holdings that threaten national security interests. This encompasses farm land, natural resources, technology companies and ports. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up These moves represent a broader shift towards viewing the trade relationship through national security lenses, promoted by the China hawks in office. Economic competition is being framed as a matter of strategic rivalry rather than mere trade disputes. Despite the aggressive opening moves, Trump's second term has also demonstrated his willingness to pull back from maximum pressure when it serves his interests. In mid-May, Washington reached an agreement with Beijing to lower tariffs dramatically and open some markets that both sides had closed off as tensions rose. Tariffs on Chinese imports fell to 35 per cent from 145 per cent – a historic level reached in April following retaliatory hikes. That dramatic reduction demonstrated Trump's transactional approach to international relations. The 90-day suspension of the heaviest tariffs has created space for ongoing negotiations, with both sides apparently recognising the economic costs of sustained pressure. US companies have faced particular challenges adapting to the volatile policy environment. The clash has also seen China retaliating through restrictions on critical minerals and magnets needed by US factories. Some sectors have received temporary relief, with the administration exempting certain technology products from the harshest tariffs, but many businesses report difficulties with long-term planning amid policy uncertainty. Trump's confrontational approach extended beyond China to traditional allies, potentially reshaping regional dynamics in Asia. By pressuring Canadian, Mexican and European partners, his administration has created opportunities for China to strengthen relations with countries seeking alternatives to US partnerships. The unpredictability of Trump's approach has forced some regional powers to recalculate their strategic positions, with some hedging their bets between the two superpowers rather than aligning clearly with the US. The rising costs of a growing confrontation with China has led to the reassessment of these policies in Washington. Most intriguingly, the Trump administration reversed its position on technology controls, notably allowing Nvidia to sell lower-level artificial intelligence chips, the H20, to China this month after banning such sales in April. Some suggest that this dramatic about-turn from the administration's initial hardline stance may reflect the eroding power of the China hawks in the administration, including personnel changes. Alex Wong, a known China hawk and former deputy national security advisor, has been reassigned to another role, and the State Department has shuttered the team involved in South China Sea security. These changes appear tied to Trump's broader diplomatic strategy. Some in Washington are speculating that he may be angling for a Chinese trip as he courts a more assertive China. But it is doubtful that the administration is planning to reset the relationship with China through direct engagement rather than continued confrontation. In a way, several patterns have emerged in Sino-American relationships under Trump. The administration appears committed to using economic pressure as its primary tool for reshaping the relationship, but remains willing to negotiate when faced with economic or political costs at home. The relationship is now defined by cycles of escalation followed by tactical compromises, reflecting Trump's preference for dramatic gestures and dealmaking. Still, neither side appears willing to accept a return to the pre-2016 status, suggesting that heightened tensions and economic competition will remain defining features of US-China relations.

Who buys the F-150s, and more Japan deal mysteries
Who buys the F-150s, and more Japan deal mysteries

Business Times

timean hour ago

  • Business Times

Who buys the F-150s, and more Japan deal mysteries

The long-awaited trade deal between the US and Japan has investors celebrating after months of uncertainty. But as the song goes, nagging questions always remain. Who is going to buy the 'cars, SUVs (sport utility vehicles) and trucks' that President Donald Trump has promised to sell? Who is going to purchase the 100 Boeing jets? And what possible structure could the US$550 billion fund, allegedly financed by Tokyo with 90 per cent of profits going to the US, actually take? Answers are sorely needed, not just because of an already growing comprehension gap between the countries over what was actually agreed, but to inform South Korea and other close US allies who are trying to wrap up similar deals before Aug 1. Let us start with autos, long the main source of Trump's dissatisfaction with Tokyo as well as the largest single cause of the trade deficit. The White House fact sheet (if indeed it can so be called) declared that 'longstanding restrictions on US cars and trucks will be lifted, granting US automakers access to the Japanese consumer market'. Of course, US carmakers have enjoyed unlimited access to the Japanese market for decades. As I noted in April, the problem is that US cars just are not good enough for the local consumer – and Detroit largely is not interested in trying to muscle its way into a hyper-competitive market dominated by domestic players. Tokyo can try making it a little easier to import US vehicles, such as simplifying inspection procedures, but it cannot rebuild cities to fit the bloated models US automakers favour. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Around 84 per cent of streets in Japan are municipal roads with an average width of just 3.7 m. Even if Tokyo gave everyone a Ford F-150 pickup, its 2.4 m width would prevent two from passing on narrow streets. Hence, cute minivans and kei cars – Japan's smallest expressway-legal 'light vehicles' – dominate while, as my colleague Liam Denning said this week, 'US automakers do not, in general, make an adorable little anything.' In any case, Japan's auto market has been shrinking for years, with new cars sold down about 20 per cent from a 1990s peak. Automakers constantly fret that young people are losing interest in learning to drive, while the growing numbers of elderly citizens are encouraged to return their licences. But more significant is what form the US$550 billion investment fund will take. Treasury Secretary Scott Bessent said the 'innovative financing mechanism' was key to Tokyo getting a deal at all. But neither side seems to agree on what it looks like. The idea first surfaced in May when the Financial Times reported that SoftBank founder Masayoshi Son had suggested a joint sovereign wealth fund. The White House calls it an 'investment vehicle' that will 'rebuild and expand core American industries'. Prime Minister Shigeru Ishiba, however, refers to a combination of equity, loans and guarantees that will be led by the Japan Bank for International Cooperation and guarantees by Nippon Export and Investment Insurance. That sounds more like overseas development aid than a wealth fund – though few could argue American infrastructure might actually benefit from that. Trump now promises Japan will 'give us 90 per cent of US$550 billion'. Tokyo is saying that applies to projects where 90 per cent of investment is from the US – in other words, profits are proportional. Does the figure include funding already pledged, such as SoftBank's promised US$100 billion? Who knows? Indeed, a leaked photo from the talks shows what looks like a proposal from Japan for a US$400 billion fund, crossed out with US$500 billion handwritten on top. That proposal also suggested a 50 per cent profit share. Is this just repackaged existing spending into a simple PowerPoint slide? After all, Japan already invested US$783 billion in the US in 2023, and Ishiba pledged in January to boost that to US$1 trillion in the future. The problem is that at some stage, this needs to be worked into actual policies. And this is where Ishiba's rush to agreement might come back to bite, especially if he is no longer in the job when the talks get down to details – something that, despite his denials , still seems all but certain after the drubbing his Liberal Democratic Party took in recent upper house elections. There are plenty of parts of the deal that do make sense. The 100 Boeings can find a home at the country's airlines, though Japan has admitted the number includes at least some already-planned purchases. With Japan as the world's largest buyer of liquefied natural gas, Tokyo's participation in the Alaska project always seemed logical. Even if the two sides do not seem to agree on what they decided on defence, Japan needs to spend more and the US is the logical seller. Above all, it is encouraging to see the White House, after all these months of tense relations, again describe its ally as the 'cornerstone of peace in the Indo-Pacific'. But with all these questions – and Washington continuing to hold the threat over Japan's head with a quarterly evaluation of its compliance with the deal – the market's sigh of relief might still be premature. BLOOMBERG

Trump weighs whether to allow Taiwan leader's transit through US
Trump weighs whether to allow Taiwan leader's transit through US

Straits Times

time2 hours ago

  • Straits Times

Trump weighs whether to allow Taiwan leader's transit through US

Find out what's new on ST website and app. Taiwanese President Lai Ching-te was planning to stop in New York on Aug 4 and then Dallas 10 days later. WASHINGTON – The Trump administration is debating whether to allow a planned US stopover by Taiwan's leader next week as concerns mount that it could derail trade talks with China and a potential summit with President Xi Jinping, according to people familiar with the matter. Taiwanese President Lai Ching-te was planning to stop in New York on Aug 4 and then Dallas 10 days later as part of a trip to diplomatic allies Paraguay, Guatemala and Belize, Bloomberg reported earlier in July. Planning for the trip was thrown into flux late last week when Taiwanese officials couldn't get their US counterparts to give the green light, the people said. The hesitation over allowing Mr Lai's trip has unnerved some officials in the US as well as in Taipei, who fear President Donald Trump may concede too much to China as he seeks a meeting with Mr Xi, the people said. Bloomberg reported earlier that Trump's administration was reaching out to CEOs to accompany him on a possible trip to Beijing later in 2025. The White House and US State Department didn't reply to requests for comment made outside normal working hours. 'Any such claims are pure speculation, based on incorrect information,' said Mr Lii Wen, a spokesman of the Presidential Office in Taipei. 'The Presidential Office announces relevant plans publicly after all arrangements have been confirmed.' Top stories Swipe. Select. Stay informed. Asia Thailand, Cambodia agree to 'immediate and unconditional ceasefire' to de-escalate border row Singapore Tanjong Katong sinkhole backfilled; road to be repaved after PUB tests Singapore Foreign workers who rescued woman from sinkhole given tokens of appreciation Asia Gunman kills 5 security guards near Bangkok's Chatuchak market before taking own life Singapore COE quota up 2.6% to 18,701 for August to October Singapore Ong Beng Seng set to plead guilty on Aug 4 in case linked to ex-transport minister Iswaran Singapore HPB looking for vaping, smoking counselling services for up to 175 secondary school students Singapore Jail for former pre-school teacher who tripped toddler repeatedly, causing child to bleed from nose The US has delayed such trips in the past, and could yet suggest an alternative timeframe and layover locations. In 2024, Mr Lai pushed back a planned transit through Hawaii and Guam by several months following a Biden administration request to wait until after the US election, according to a person familiar with the matter. Mr Lai's planned visit comes at a delicate diplomatic moment. US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng on July 28 are convening their trade teams in Stockholm to advance talks for a deal with ramifications for global markets. An extension of a trade truce reached between both sides is expected and would help pave the way for a Trump-Xi meeting. China, which views the democratically governed island as its own, has branded Mr Lai a 'separatist' and 'parasite', views Taiwan as the most sensitive issue in relations with other countries. It has increasingly opposed US interactions with Taiwanese leaders, in particular by staging large-scale military exercises surrounding the island following former US House Speaker Nancy Pelosi's visit to Taipei in 2022. Any hesitation from Mr Trump over transits by Taiwan's president will fan concerns that Washington's position on the self-ruled democracy, which Beijing considers a renegade province, could become a trade war bargaining chip. In an abrupt policy reversal, Mr Trump already put on the negotiating table some tech curbs imposed on China over national security concerns. While the US doesn't have official ties with Taiwan, it's legally obliged to provide weapons for the island's self-defence and is Taiwan's top supplier of military equipment. Embattled leader Mr Lai, who won 2024's presidential election with the lowest winning percentage since 2000, also risks looking weak at home and abroad. Last weekend, a failed attempt to unseat lawmakers handed the opposition more ammunition for its agenda, which includes forging closer ties with Beijing. Adding to the uncertainty, Taiwan's trade officials are currently in Washington for talks aimed at clinching a deal to avert a threatened 32 per cent tariff. All of Taiwan's sitting presidents since the 1990s have travelled to the US on stop overs en route to other destinations. While most visits passed without triggering heightened tensions, a trip by then-leader Lee Teng-hui to speak at Cornell University in 1995 sparked the so-called Third Strait Crisis, with China firing missiles into waters near the main island of Taiwan. Stopover requests, on occasion, have been used as a way for US leaders to signal displeasure with Taiwan's policy. The most prominent example of that came in 2006, when then-US President George W. Bush scuttled Mr Chen Shui-bian's request to transit to Paraguay via either New York or San Francisco. That snub was taken as a sign his unofficial relationship with Washington had suffered a serious blow, after Mr Chen upset the Bush administration with a series of pro-independence policies that risked provoking China. Mr Lai's New York and Dallas stops would mark his first to continental US soil since he became president in 2024 and Mr Trump took power in January. His transits in Hawaii and Guam last December were followed by what Taipei described as China's largest naval deployment in years along the first island chain, which also includes Japan and the Philippines. US State Department spokeswoman Tammy Bruce told reporters earlier in July that layovers by Taiwanese presidents are routine . 'Transits of the United States by high-level Taiwan officials, including presidents, are in line with past practice and fully consistent with our longstanding policy,' she said. BLOOMBERG

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store