SAP Reports 34 Percent Cloud Sales Growth In Q1, Continued S/4HANA Momentum

SAP's momentum in its cloud software sales continued into the first quarter of 2017 with the company reporting 49 percent growth in new cloud bookings and 34 percent growth in cloud revenue, the company said Tuesday.

SAP reported that total revenue in the first quarter ended March 31 was 5.29 billion Euro (U.S. $5.76 billion), up 12 percent from 4.73 billion Euro (U.S. $5.15 billion) in last year's first quarter.

Despite the double-digit revenue growth, a report on the Seeking Alpha website said revenue was 230 million Euro (U.S. $250.5 million) less than financial analysts' consensus expectations.

[Related: SAP Readies Apple iOS SDK For Release, Anticipates Wave Of Innovation From Channel Partners]

While new cloud service bookings were up 49 percent in the quarter, cloud subscription and support revenue in the first quarter was 905 million Euro (U.S. $985.5 million), up 34 percent from 677 million Euro (U.S. $737.2 million) one year ago.

Software licenses and support revenue grew 8 percent in the first quarter to 3.42 billion Euro (U.S. $3.73 billion) from 3.17 billion Euro (U.S. $3.45 billion) one year earlier. Cloud and software revenue combined was 4.33 billion Euro (U.S. $4.71 billion), up 12 percent from 3.85 billion Euro (U.S. $4.19 billion) one year ago

"The facts show that we are executing our winning strategy at scale," said CEO Bill McDermott in a call with financial analysts. "Our customers are endorsing the unique breadth and depth of SAP core cloud networks and all come with soaring adoption for our new innovation on a global basis. We believe SAP is the only company in the business software industry to deliver soaring cloud growth and double-digit license growth."

SAP, based in Waldorf, Germany, also reported continued sales momentum for SAP S/4HANA, the company's flagship line of business applications, in the quarter. The company added 400 customers for the software suite, about half of which are net new SAP customers, bringing the S/4HANA customer base to 5,800

SAP's profitability took a hit in the quarter, however. Operating profit of 673 million Euro (U.S. $733.2 million) marked a 17 percent decline from the same quarter one year earlier. Profit after tax, 530 million Euro (U.S. $577.5 million), was down 7 percent year over year from 570 million Euro (U.S. $621.1 million) one year ago.

Earnings per share were 0.43 Euro, down 9 percent from 0.48 Euro in last year's first quarter and missing analysts' expectations by 0.05 Euro.

Company executives said the company's investments in cloud computing and other new products that have spurred sales growth would ultimately pay off in bottom-line earnings.

CFO Luka Mucic pointed to the cloud bookings increase, which he said "further validates our investment decisions to drive future growth. We're off to a good start to reach our full-year targets and we are confident that we will grow our profitability in 2018 and beyond."

SAP also announced changes to its Executive Board, the company's top governing body. Most notable is the departure of Steve Singh, president of SAP's Business Networks and Applications operations, who will leave the company as of April 30.

The responsibilities of board member Robert Enslin will be expanded and he will head up a new Cloud Business Group. SAP also said the duties of board member Bernd Leukert, who as head of Products & Innovation oversees the company's software development operations, will also be expanded to include business analytics.

Joining the Executive Board are Adaire Fox-Martin and Jennifer Morgan who will be co-presidents of Global Customer Operations.

The changes come less than three weeks before Sapphire Now, SAP's customer and partner conference in Orlando the week of May 15.