The world of enterprise AI is dominated by American names. microsoft to sales forceHowever, there are major companies in Europe that are focusing on this area. SAP.
In an exclusive interview with CNBC’s “Europe Early Edition,” SAP CEO Christian Klein said AI is the “biggest reason” customers sign with the company.
“After coming out of the fourth quarter, we’re actually already 80 to 85 percent of next year’s revenue done. So we have (a) a good pipeline going into the fourth quarter, so as we close out this year, our customers and investors can expect a very positive outcome as well,” he said.
SAP’s cloud order backlog rose 23% to 18.8 billion in the third quarter, the company said in an earnings call late Wednesday.
“We were pretty optimistic last night and we’re still optimistic because the pipeline looks good,” Klein said. “In fact, we’re in our biggest quarter right now.”
Revenue rose 7% to 9.08 billion euros ($10.53 billion), slightly below expectations of 9.15 billion euros, according to consensus figures compiled by LSEG. However, cloud revenue was up 22%, and Klein cited growing market share in AI and data cloud as the reason for the jump in revenue.
Deutsche Bank said the company remains a “front-runner” in Europe’s technology and global software sectors, but noted that SAP is now guiding towards the lower end of this year’s cloud revenue forecast of 21.6 billion to 21.9 billion euros.
“Despite an environment of longer transaction cycles and pushouts, SAP continues to perform very well in our view, even though transaction closing delays are expected to limit the company’s cloud revenue growth in FY25,” Deutsche Bank analysts said in a note led by Johannes Schaller.
SAP stock initially rose 2% at the start of trading on Thursday, but has since pared back the gains and traded down 2.5%. The stock price has fallen 3% since the beginning of the year.
European AI Handbook
SAP briefly became Europe’s most valuable company in March, riding the tailwind of the enthusiasm and rally in the German stock market.
The European Union has faced criticism for its legislative approach to AI, with some companies calling for deregulation to keep up with the global AI race. Klein said it was unclear whether the bloc was adopting the right strategy compared to the U.S. approach of “give us the AI, let us test it, improve it, and let us optimize it over time.”
The CEO said the company is focused on creating value, explaining that it is “100%” what customers are looking for. This echoes the message from other European AI companies and investors, given that the training of large-scale language models, the infrastructure needed for AI, is currently dominated by the US and China. But the general feeling is that Europe has an opportunity to be the leader in taking advantage of it.
Klein said large-scale language models for training are now a “commodity,” adding that applying AI will increasingly become a priority for businesses and expects SAP’s bet on this to be reflected in its stock price in the future.
“It’s really important that we actually get adoption and not just hype it up,” Klein said.
Klein noted that due to geopolitical tensions, SAP has some exposure to China through partnerships that allow it to work “in China and for China.” He said the country’s speed of AI development, low regulation and talent pool are hard to ignore.
The company provides cloud solutions, expense, and supply chain management and analytics to businesses. In 2024, it undergoes a major restructuring and pivots to AI services, which are now used in areas such as finance and supplier sourcing.
