SAP Reports 33 Percent Q1 Cloud Revenue Growth

SAP's transformation to a cloud software company continues to accelerate, with the company reporting 33 percent growth in cloud subscriptions and support revenue in its first quarter.

The Walldorf, Germany-based company also reported Wednesday that steady customer adoption of its flagship SAP S/4HANA suite of applications, adding more than 500 customers during the quarter -- 30 percent of which were new SAP customers. Altogether, some 3,200 customers have adopted S/4HANA since its launch a little more than one year ago.

For the quarter ended March 31, SAP reported total revenue of just under 4.73 billion euro ($5.36 billion), up 5 percent from 4.50 billion euro ($5.10 billion) in the same period last year. After-tax profit soared 38 percent, to 570 million euro ($645.8 million) from 413 million euro ($467.8 million) one year earlier.

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"SAP's strong cloud growth was at the high end of our guidance range for 2016 and ahead of our midterm aspirations," said CFO Luka Mucic during an earnings teleconference Wednesday.

Cloud subscription and support revenue reached 677 million euros ($766.9 million), up 35 percent year over year. New cloud bookings accounted for 145 million euro ($164.3 million) of that number. Sales growth was particularly robust for SAP's cloud-based human capital management, customer engagement and commerce applications, the company said.

SAP is forecasting up to 33 percent growth in cloud subscription and support revenue for all of 2016.

The accelerated sales growth of cloud services helped offset the slow sales growth of traditional software licenses and related support, which increased just 1 percent year over year to 3.17 billion euro ($3.59 billion).

"Our cloud gross margin expanded year over year, which -- along with the successful business transformation -- drove operating profit up 5 percent even with a lower-than-expected license performance," Mucic said.

SAP also revealed that as of April 1, it has combined its products for small and midsize customers, including SAP Anywhere, SAP Business One and SAP Business ByDesign, into a single organization under the leadership of executive board member Steve Singh. Those products, especially the Business One applications for small businesses, are popular among SAP's channel partners.

SAP said that given the strong momentum in its cloud business, it expects revenue from cloud subscriptions and support to reach between 2.95 billion euro ($3.34 billion) and 3.05 billion euro ($3.46 billion) for all of 2016. The higher end of that range would represent a gain of more than 30 percent from 2.30 billion euro ($2.61 billion) in 2015.

The company is forecasting operating profit for the year to be in the range of 6.4 billion to 6.7 billion euro ($7.24 billion to $7.58 billion), up from 6.35 billion euro ($7.18 billion) in 2015.