APJ is SAP’s fastest growing region for cloud revenue in Q1

Published: 23/April/2024

Reading time: 3 mins

Key Takeaways

⇨ Cloud revenue growth in Asia-Pacific and Japan was A$864m, up 35 percent year over year

⇨ SAP spent A$3.63 billion in restructuring costs

⇨ Software licenses revenue take 26% hit while services revenue was flat

SAP reported strong growth in its cloud revenue for Asia-Pacific and Japan, with strong financial performance from India, South Korea and Japan.

In its first quarter 2024 financial results, SAP reported APJ cloud revenue of A$864 million (€524 million), a 35 percent year-over-year increase.

The results also highlighted several customer updates, including those from APJ. New Zealand’s Foodstuffs South Island and Havells India both went live on SAP S/4HANA Cloud during the period, while Korea Chamber of Commerce and Industry went live on SAP solutions.

Japan’s Sumitomo Heavy Industries was highlighted as a RISE with SAP customer, while Australia’s MaxiTRANS adopted GROW with SAP.

Compared to APJ, SAP’s EMEA cloud revenue reported a 31 percent increase to A$2.57 billion (€1.56 billion) during the period, while Americas reported a 19 percent bump to A$3 billion (€1.85 billion). Overall cloud revenue was A$6.49 billion (€3.93 billion), a 24 percent increase year-over-year.

SAP said cloud revenue was mainly driven by growth in its Cloud ERP Suite, which saw a 31 percent year-over-year bump.

The company also revealed it has spent A$3.63 billion (€2.2 billion) in restructuring costs, related to its company-wide restructure announced in January this year. SAP said the number covers incremental expenses “driven by the impact of the first quarter’s share price increase” on share-based compensation of some departed staff, as well as the popular take-up of the voluntary early retirement program for some of its US staff.

The restructuring was related to its business AI push.

SAP’s APJ region also saw a slight increase in headcount from 29,295 in March 2023 to 30,036 this year, but the cloud and software unit increased its staff count from 3,743 to 4,458.

“In the first quarter we successfully kicked off the implementation of our transformation program thereby allowing us to focus our investments on the Business AI opportunity while decoupling expense from revenue growth,” SAP CFO Dominik Asam said.

“We are also very pleased by the unabated growth momentum of the Cloud ERP Suite, reflecting the market’s secular shift towards integrated cloud solutions.”

SAP reported cloud backlog – or contractually committed cloud revenue SAP expects to recognise over the next 12 months – of A$23.4 billion (€14.18 billion), which was up 27 percent. SAP said this was the fastest growth on record for the metric.

Software licences revenue meanwhile declined 26 percent to $335 million (€203 million), while services revenue was flat at A$1.78 billion (€1.08 billion). Cloud and software revenue increased 9 percent to A$11.5 billion (€6.96 billion).

Total revenue clocked in at A$13.28 billion (€8.04 billion) for the period, up 8 percent year over year.

“We’re off to a great start in 2024 and we’re confident we’ll achieve our goals for the year. Looking ahead, we have powerful growth drivers in place – Business AI, cross-selling across our cloud portfolio, and winning new customers particularly in the midmarket,” SAP CEO Christian Klein said.

“The strength of our current cloud backlog reaching a record growth rate is a testament to that momentum. Our transformation program is also well on track and will help us to capture this growth and increase efficiency.”

Looking ahead, SAP is expecting to report between A$28 billion to $28.5 billion (€17 billion to 17.3 billion) in cloud revenue for the 2024 full year, which is up 24 percent from 2023.

The company also expects to report between A$47.88 billion to $48.7 billion (€29 billion to 29.5 billion) in cloud and software revenue for 2024, up 8 percent year-over-year.

Foodstuffs South Island will be attending Mastering SAP Collaborate in May at Melbourne, with Head of Data & Analytics Peter George sharing the company’s ongoing implementation of Google Cloud Platform, SAP Datasphere and SAP Analytics Cloud, as well the establishment of an Analytics Community of Practice (CoP).

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