- About
- SAP sells enterprise resource planning (ERP) software. Companies use this software to run finance, supply chain, and other core operations. SAP used to sell this software as a one-time license. SAP now sells most of it as a cloud subscription. Cloud revenue was 57% of total revenue in 2025 and 63% in the first half of 2026. SAP prices its main cloud ERP product by a weighted count of users, priced per usercalled Full Use Equivalents. The main cloud product is S/4HANA Cloud, sold as RISE to existing customers and GROW to new customers.
- Thesis
- Investors fear that AI agents will let companies cut the paid user seatsusers SAP's cloud software is priced around, and that AI tools will take work away from classic business software. This fear droveA miss in the cloud backlog on January 29, 2026 started a sharp SAP selloff in early, and this fear kept the price down for most of the first half of 2026. That happened even as SAP's answered in April 2026 with a new API policy pushed outside AI agents toward SAP's own Business Data Cloud or Joule. The policy discourages those agents from runningdoes not let outside AI systems plan and run their own sequences of calls against SAP data, except through tools SAP supplies, such as Joule and Business Data Cloud. The gap can close if SAP keeps posting strong cloud growth without leaning only on seat countuser counts. In the second quarter of 2026, cloud revenue grew 24% at constant currency and the current cloud backlog grew 26% at constant currency. That is evidence growth had not yet slowed the way the seatuser-count fear implies. The new API policy still faces pushback from DSAG, the largestGerman-speaking SAP user group, overcriticized the API policy for unclear terms. So the routing strategypolicy is not yet proven, and it could draw more customer or regulatory pushback instead of new revenue. InMainstream maintenance for SAP ECC ends on December 31, 2027, so many legacy on-premises customers must decide whether to move to the new cloud product. That decision will show whether the lock-in argument holds up. The next check comes at Q3 2026 earnings on October 21, 2026. A fuller picture is likely over the next two to four quarters, as the API policy and the 2027 upgrade cycle play out.
- Risks
- SAP prices its main cloud ERP product per userby a weighted count of users. If AI agents cut a customer's headcount, SAP's revenue from that customer can fall at renewal.
In 2027Mainstream maintenance for SAP ECC ends on December 31, many2027. Many older customers must decide whether to upgrade to the new cloud product, pay for extended maintenance to 2030, or leave. This can bring more revenue, or push some customers to a competitor or to third-party support instead.
SAP's April 2026 API policy has drawn public criticism from DSAG, the largest independentGerman-speaking SAP user group, over unclear terms and unclear coverage. Analysts warn it can raise customer lock-in and integration cost. If the backlash grows, it could slow adoption of Joule or invite regulatory scrutiny, which would weaken the case that the policy strengthens SAP's moat.
SAP does not publish user-count data. This makes it hard to confirm whether the risk above is already happening.
Germany withholds 26.375% of SAP pays a German's dividend withholding. A US holder can claim back part of it under the US-German tax treaty, down to 15%. OnlyIn a non-registeredtaxable account gets, the 15% is usually a full tax credit for thisagainst US tax. OtherIn a tax-deferred account types lose part of the dividend tosuch as an IRA, that tax is lost.
- Balance sheet
- Cash: €11.4B
Debt: €8.6B
Net cash: €2.9B
Interest cover: 38×
Debt due within 12 months: €1.5B
Ratings: Moody's A1 (stable outlook), S&P A+ (stable outlook)
SAP reports in euros and has more cash than debt. Its debt is almost all Eurobonds (nominal €8.05 billion), plus €500 million of commercial paper, and SAP has no bank loans. Cash is group liquidity, debt is at nominal value (€8.2 billion at carrying value), and debt does not include leases of €1.7 billion. In the first half of 2026, SAP repaid €1.1 billion of bonds. In May, it issued €3.5 billion of new Eurobonds with tenors of two to seven years. It also drew and repaid €1.0 billion from a €2.0 billion bridge facility. Interest cover uses net interest paid of only €141 million against IFRS operating profit of €5.4 billion in the first half of 2026. Free cash flow was €6.25 billion, helped by customers who pay cloud contracts in advance. The ratings are as stated by SAP in May 2026. Goodwill of €30.4 billion is the largest asset. Net liquidity fell from €3.4 billion at the end of 2025. SAP spent €2.6 billion on buybacks, €2.9 billion on dividends and €1.0 billion on acquisitions. In July 2026, it paid about €0.59 billion more in cash for Dremio and Prior Labs. The balance sheet gives room to continue the €10 billion buyback program to the end of 2027. It also gives room for more small AI acquisitions without much new debt.
As of 2026-06-30.
- Recent events
- 2026-10-06: SAP agreed to buy TechWolf, an AI company that maps the skills and work of large workforces. TechWolf will become a core part of SAP SuccessFactors. SAP did not disclose the price and expects the deal to close in Q4 2026, after regulatory approval.
2026-10-06: At SAP Connect, SAP started the customer rollout of Joule Work, an AI interface that works across SAP and outside data. SAP also launched SAP Pay, a payments service inside SAP Cloud ERP, now available in the US and the UK.
2026-08-26: UBS lowered its rating on SAP from Buy to Neutral and raised its price target to €201. The stock had risen almost 50% in about four weeks after its July low.
2026-07-23: SAP reported Q2 2026 results. Cloud revenue was €6.281 billion, up 24% at constant currency, and the current cloud backlog reached €22.929 billion, up 26% at constant currency. Non-IFRS operating profit missed estimates, and SAP trimmedcut its full2026 non-yearIFRS operating profit outlook to reflect€11.8 to €12.2 billion because of the dilutive cost of its Dremio and Prior Labs acquisitions, while keeping. It kept its cloud revenue, cloud and totalsoftware revenue guidance unchanged, and free cash flow outlook. On the same day, before the results, the stock fell to about €127.5, the lowest price since November 2023. It rose about 9% the next day.
2026-07-16: SAP completed the purchase of Prior Labs, an AI company for tabular data, for about €0.4 billion in cash. On July 6, it completed the purchase of Dremio, a data lakehouse company, for about €0.5 billion in cash.
2026-05-0112: At its Sapphire conference, SAP and Anthropic announced thatplans to expand its partnership with Anthropic. Claude now powersbecomes a primary reasoning and agent model inside Joule, SAP's AI assistant, as part ofand connects to the new SAP Business AI Platform. SAP continues to use more than one AI model.
2026-04-29: DSAG, the German-speaking SAP published auser group, publicly criticized SAP's new API policy. It blocksThe policy does not let outside AI agents from planning and runningsystems plan, select or run their own sequencesequences of API calls against SAP data. Agents must now go, except through tools SAP's own Business Data Cloud or Joule instead supplies. The user group DSAG publicly criticizedsaid the policy for unclear terms and an unclear list of covered APIs, the fair-use rules and the contract terms are unclear, and that customers have too little time to adapt.
2026-02-0104: SAP stock fell to €162.10, the lowest price since February 2024. Software stocks fell broadly across this period.
2026-01-29: SAP stock fell about 15% in one day, its worst day since October 2020. The market reacted to weakcurrent cloud growth guidancebacklog for 2026.
Q4 2025-07-01: SAP began to bundle AI usage missed expectations, called AI Units, into itsand SAP gave a cautious cloud contractsoutlook for 2026. This isOn the same day, SAP announced a new wayshare buyback of up to price AI agent work, separate from€10 billion that runs to the per-user priceend of 2027.