SAP NYSE: SAP reported third-quarter 2026 results marked by double-digit cloud revenue and operating-profit growth, as the enterprise software company said demand for artificial intelligence capabilities, cloud migrations and its Business Data Cloud continued to support bookings.
Chief Executive Officer Christian Klein called the period an “outstanding quarter,” saying current cloud backlog reached €24.1 billion, up 26% year over year at constant currencies. Cloud revenue rose 25% to €6.7 billion, while total revenue increased 12% to €10.3 billion, surpassing €10 billion in quarterly revenue for the first time in SAP’s history.
Non-IFRS operating profit rose 18% to more than €3 billion. SAP said nine of its 50 largest deals during the quarter included AI and Business Data Cloud offerings.
Cloud ERP and AI Drive Growth
Chief Financial Officer Dominik Asam said cloud ERP suite revenue grew 28% and represented 89% of total cloud revenue. Software licenses revenue declined 9%, while services revenue fell 5% at constant currencies. Despite the services decline, Asam said total revenue growth was “a remarkable result” given the changing mix of the business.
SAP reported particularly strong cloud revenue performance in Asia-Pacific Japan and Europe, the Middle East and Africa, with solid performance in the Americas. Brazil, France, Germany, Italy, India, South Korea and Spain delivered outstanding performance, according to Asam, while Switzerland, the U.K. and the U.S. were particularly strong.
Klein said AI has become a major factor in customers’ decisions to migrate to SAP’s RISE and GROW cloud offerings. He said customers are using AI tools to accelerate transformations and migrations, while Business Data Cloud is being adopted as a data foundation for enterprise AI.
The company cited customer wins and deployments across industries, including BBVA, FirstBank of Canada, Infineon, Fraunhofer-Gesellschaft, NTN Corporation, AstraZeneca, Decathlon, Salling Group and Hengli. Klein also said companies including Mondelez, Panasonic, Roche and Infosys went live with RISE during the quarter.
Joule Work and Data Platform Strategy
SAP emphasized its Joule Work offering, which Klein described as a workbench for the “autonomous enterprise.” The platform allows users to interact with SAP systems through natural-language conversations, view data through Joule Spaces and develop or tailor AI agents through Joule Studio.
Klein said SAP provides access to more than 70 frontier and open-weight AI models and does not intend to commit customers to a single preferred model. He said the company evaluates models based on performance, price and outcomes for individual AI-agent use cases.
According to Klein, SAP’s Business Data Cloud and knowledge graph map more than 7 million fields and 500,000 tables, along with 400 data products and process knowledge. He said the company’s acquisitions of Reltio and LeanIX expand the context layer beyond SAP data, while SAP’s intended acquisition of TechWolf would extend its capabilities into skills and workforce intelligence.
Klein also stressed SAP’s governance approach, stating that customer data and process intellectual property are not uploaded to large language models for training, model improvement or other purposes. SAP’s AI Agent Hub in LeanIX is intended to provide an inventory for managing SAP and non-SAP agents, he said.
Margins, Cash Flow and Internal Efficiency
SAP’s IFRS cloud gross margin was 73.9%, while non-IFRS cloud gross margin was 74.3%, down 0.7 percentage points from a year earlier. IFRS operating profit increased 18% to €2.9 billion.
Free cash flow totaled €1.7 billion in the quarter. IFRS earnings per share rose 14% to €1.96, while non-IFRS earnings per share increased 19% to €1.89.
The company said it continues to invest in AI development and product enhancements while seeking to manage expenses in line with revenue growth. Klein said Joule Work Desktop is live for more than 110,000 SAP employees, with the company seeing productivity gains of 20% across central functions including finance, human resources and procurement.
He added that SAP expects up to €3 billion in efficiency gains over the next two years through AI applications across engineering, sales, finance, HR and cloud operations. Asam said the company aims to contain total operating-expense growth, including cost of goods sold, to roughly 80% to 90% of top-line growth.
Outlook Retained Amid Cautious Fourth-Quarter View
SAP now expects to finish toward the upper end of its previously issued 2026 outlook for cloud revenue and cloud and software revenue. The company reaffirmed its guidance for current cloud backlog, operating profit and free cash flow.
Asam said SAP still expects a slight deceleration in constant-currency current cloud backlog growth during 2026, citing macroeconomic and political uncertainty as well as a larger revenue base. He noted that the fourth quarter represents roughly 50% of SAP’s annual bookings volume.
The CFO said SAP continues to plan for an acceleration in total revenue growth in 2027, though he cautioned that fourth-quarter booking trends, macroeconomic conditions and the company’s strategy of using services to drive cloud and AI adoption could make that trajectory more challenging.
“We will put our full focus on the decisive fourth quarter bookings required to maintain our growth acceleration,” Asam said.
About SAP (NYSE:SAP)
SAP SE is a global enterprise software company headquartered in Walldorf, Germany. Founded in 1972 by five former IBM employees, SAP originally developed software to help businesses integrate accounting and operational data. The company has since become a major provider of cloud-based business applications and enterprise technology.
SAP's portfolio includes enterprise resource planning software, including SAP S/4HANA Cloud, along with solutions for finance, procurement, supply chain management, human resources, customer experience and business analytics.
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