SAP Announces Strong Q1 and Cloud ERP Private Launch

SAP has announced another strong financial performance in the first quarter of 2025 despite what the company described as a “highly volatile environment.” Current cloud backlog, the contractually committed cloud revenue expected to be recognised over the next 12 months, increased 28% from the same period in 2024 to €18.2 billion, while cloud revenue increased 27% to almost €5 billion for the quarter. Although cloud revenue continues to grow strongly, total revenue for the quarter grew at a more modest 12% to €9 billion.

One metric that SAP emphasised again this quarter is the share more predictable revenue is of total revenue. This is the proportion of revenue that comes from more predictable sources such as subscriptions and maintenance fees. A large portion of this is what SAP classifies as cloud revenue. With the changes that the company has made over the last five years, this revenue now accounts for 86% of total revenue, providing what CEO Christian Klein described as “resilience in uncertain times.”

With this overall shift toward cloud and more predictable revenue, software license revenue again decreased by 10% this quarter to just €0.18 billion. This is an expected decrease as SAP continues to transition away from selling more traditional software licenses and focuses on offerings such as RISE with SAP, GROW with SAP, SAP Business Technology Platform (BTP), and SAP Business Data Cloud (BDC).

Although the current economic environment has increased levels of uncertainty, SAP continues to expect that they will meet their 2025 financial outlook for the full year. This includes a 26-28% increase in cloud revenue, an 11-13% increase in cloud and software revenue, and a 26-30% growth in non-IFRS operating profit for the full year.

The Launch of SAP Cloud ERP Private

In conjunction with the quarterly results, the company also announced a new commercial package called SAP Cloud ERP Private. Although the initial focus of SAP Business Suite is that of public cloud, SAP Cloud ERP Private is a package within SAP Business Suite that includes SAP S/4HANA Cloud Private Edition. The package includes business applications, transformation tools and services, and cloud optimisation and extensibility services to help organisations complete their transformation to the cloud.

Although SAP did not initially specify which business applications are included in the new package, there was a discussion of “modern cloud business applications.” This will likely include the same finance management, spend management, supply chain management, human capital management, and customer experience business applications that are part of SAP Business Suite. SAP did state that organisations would “gain financial agility” across the supply chain with SAP Business Network Supplier Portal for SAP Cloud ERP Private and the SAP Enterprise Management and SAP Taulia solutions.

From a transformation tools and services perspective SAP called out SAP LeanIX and SAP Signavio which are intended to help customers gain a deeper understanding of their current landscape. Having this insight will make it easier for organisations to transition to cloud ERP. Embedded services from SAP will also include expert support as well as onboarding and kick-off of the transformation project. Workshops that will help align technology and business goals are also part of the package.

SAP Cloud ERP Private will also include SAP Build which will allow customers to implement on-stack and side-by-side extensions to SAP S/4HANA Cloud Private Edition. With some of the journeys that SAP is mapping intended to eventually transition organisations to the public cloud, the focus on clean core and extensibility will be an important focus of the package.

What This Means for Mastering SAP Insiders

There will be no shift from SAP’s continued focus on cloud revenue. Even with the economic volatility that has marked much of the first quarter, SAP has continued to deliver strongly on their promise of cloud revenue, cloud backlog, and a continued shift to more predictable revenue—subscriptions and cloud contracts. The company has also stated that their financial goals for 2025 will remain unchanged. Increased volatility in the second quarter may change that in the future, but for now SAPinsiders should expect more of the same when it comes to the push from their SAP account executives; RISE with SAP or GROW with SAP, SAP BTP, SAP BDC, and SAP Business Suite.

SAP has created a way for customers running SAP S/4HANA Cloud Private Edition to embrace SAP Business Suite. Although it was not initially clear, the focus of SAP Business Suite is that of moving to public cloud. With SAP BTP, SAP BDC, and software-as-a-service solutions like SAP SuccessFactors, SAP Concur, and SAP Ariba, the central ERP system was SAP S/4HANA Cloud Public Edition. However, most of those planning on moving to SAP S/4HANA Cloud are using or planning to use single tenant private cloud and not multi-tenant public cloud. Until the release of SAP Cloud ERP Private, there was no path for these customers to experience the other benefits of SAP Business Suite. With the launch of this new commercial package, the journey of those running in the private cloud to fully embrace SAP Business Suite seems to be opening.

Expect a greater emphasis on these offerings in coming weeks. With Sapphire 2025 just a few weeks away, SAP will be honing their messaging for the upcoming event. This is sure to include SAP Business Data Cloud and SAP Business Suite given their recent announcements. But it will also include topics like Joule for Developers and an increased focus on AI agents as well as SAP’s participation in Google’s Agent2Agent protocol for connecting AI agents. The exact focus of SAP’s messaging in the coming weeks will dictate their plans for the remainder of the year and help SAPinsiders understand what they should expect from account executives and other SAP interactions, something that will always be covered at SAPinsider.