By Leo Marchandon and Danilo Masoni
Jan 29 – German software company SAP’s 2026 cloud revenue forecast failed to meet market expectations on Thursday and the company’s shares fell by 15%, marking their steepest one-day decline since October 2020.
JPMorgan noted SAP’s cloud backlog and 2026 revenue guidance fell short of projections, sparking a selloff despite its full-year performance aligning with analysts’ forecasts.
SAP briefly became Europe’s largest company by market capitalisation last March, but gave up the European crown later in the year due to concerns about artificial intelligence’s potential disruptive effects on its sector.
“SAP needed an all-round acceleration to fight the trough sector sentiment, and with puts and takes in the update we see shares underperforming,” Citi analyst Balajee Tirupati said.
2026 FORECAST FALLS SHORT
SAP expects cloud revenue to grow between 23% and 25% in 2026. More critically, current cloud backlog growth will slightly decelerate in 2026 after posting 25% growth in 2025, though SAP expects total revenue growth to accelerate through 2027 as more customers migrate to cloud-based solutions.
SAP’s CFO Dominik Asam said in an analyst call this represents a bigger-than-anticipated slowdown.
Asam pinned the slowdown on customers shifting to larger projects that take longer to ramp up, as well as increased demand for sovereign cloud driven by geopolitical tensions. He said these government and defense deals have longer sales cycles and often don’t show up in backlog due to termination clauses.
JPMorgan noted that “cloud backlog and cloud revenue growth is ultimately what investors are zoomed in”, adding a negative market reaction could be expected.
The disappointment comes as software stocks face broader sector headwinds.
Oddo BHF analyst Nicolas David said the sharp decline reflects “overall distrust of the market regarding software names” as investors rotate capital into semiconductors. “In the current context you can’t miss by even the slightest portion,” he said.
YEARLY RESULTS IN LINE
For the full year, cloud revenue surged 26% at constant currencies to 21 billion euros, while total cloud backlog climbed 30% to 77.3 billion euros. CEO Christian Klein said SAP Business AI has become a growth driver, included in two thirds of Q4 cloud order entry.
SAP also announced a two-year buyback program worth up to 10 billion euros.
The Walldorf-based company has spent the past year moving legacy database customers to the cloud while executing a 3.2-billion restructuring program. Major Q4 customer wins included Dexco, Lockheed Martin and Rolls-Royce.
($1 = 0.8341 euros)
(Reporting by Leo Marchandon and Danilo Masoni; Additional report by Tristan Veyet in Gdansk, additional reporting from Danilo Masoni in London; Editing by Matt Scuffham)
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