Shares of SAP SE increased 7% to achieve a new record high after the German software company projected increased growth in cloud revenue. The firm also disclosed plans to restructure 8,000 positions, signaling a commitment to focus on expanding into artificial intelligence (AI)-driven business areas.
SAP is earmarking €2 billion ($3.3 billion) for a comprehensive program to either retrain employees with AI skills or facilitate voluntary redundancy. As the company anticipates maintaining its headcount at current levels by the close of 2024, it has actively adopted OpenAI’s ChatGPT since the early stages of the technology’s popularity. The German firm anticipates a transformative impact from GenAI, pledging over $1.5 billion to support AI-driven startups through its investment arm, Sapphire Ventures.
Investment strategist Jürgen Molnar at brokerage RoboMarkets views the restructuring as strategic, emphasizing that HR policy is not just a cost issue but also presents numerous strategic opportunities. Recent layoffs by major tech players like Google and Microsoft show the ongoing industry trend toward AI software and automation.
While SAP predicts double-digit percentage growth in revenue from its crucial cloud business and overall operating profit for the current year, the company is set to navigate a changing landscape. Cloud revenue, projected to rise between 24% and 27% in 2024, follows a 23% growth, adjusted for currency effects, in 2023. The operating profit saw a currency-adjusted 13% increase last year, beating analyst predictions of a 9% rise.
For 2024, SAP anticipates the operating profit to grow between 17% and 21%. SAP’s Chief Financial Officer, Dominik Asam, expressed satisfaction with achieving double-digit non-IFRS active profit growth in 2023 despite a challenging macro environment. Asam is determined to increase profitability further in the current year.
Additionally, SAP adjusted its medium-term outlook to accommodate changes in accounting practices, revising its 2025 operating profit target to €10 billion from the previously stated €11.5 billion. These strategic moves underscore SAP’s commitment to adapt and thrive in the evolving landscape of AI and cloud technologies.
