German software giant SAP fell as much as 16% on Thursday after reporting weaker-than-expected fourth-quarter cloud contract balance growth.
It’s the largest single-day decline since October 2020, when the company’s stock fell 22% following disappointing third-quarter results. Stock prices also closed at their lowest since mid-2024.
SAP’s current cloud order backlog increased by 16% in the fourth quarter to €21.1 billion ($25.3 billion). Analysts at UBS said on Thursday that the increase in cloud backlogs would be “disappointing” based on previous expectations of 26% growth.
“A large transformative transaction with significant cloud revenue accretion at the end of the year and a legally required termination clause for convenience had a negative impact of approximately 1 percentage point on constant currency current cloud backlog growth in the fourth quarter,” SAP said in its earnings call.
Chief Executive Officer Christian Klein said the current cloud backlog in the final quarter of this year has laid a “solid foundation” for accelerating revenue growth through 2027.
However, the German company said it expects cloud order backlog growth to “decelerate slightly” in 2026.
SAP also reported that total revenue rose to 9.7 billion euros in the fourth quarter, up slightly from 9.4 billion euros in the year-ago period. Operating profit increased from 2 billion euros to 2.6 billion euros.
SAP has shifted its focus from selling on-premises software licenses to cloud services in recent years, but the AI boom has raised concerns from investors about legacy software providers.
“What’s clear is that one of the killer applications of AI is to completely change the way companies develop code, software,” Chief Financial Officer Dominic Assam said Thursday on CNBC’s “Squawk Box Europe.” “Then the question is, won’t customers be able to do everything themselves? That means the pie will shrink.”
“So it’s all about whether we, as SAP, can actually incorporate these technologies into our R&D portfolio in order to maintain relative economies of scale,” he added. “We’re working on that day in and day out, and we’re really aiming to be at the forefront of AI adoption among our 35,000 developers.”
