Thursday, November 9, 2017

Key Takeaways From SAP's Q3

Read full article here "In continuation with a strong first half of the year, software giant SAP continued its impressive performance in Q3. Third quarter revenues grew 4% over the prior year period to $6.6 billion and were in line with the market expectations. Aided by a phenomenal increase in new cloud bookings, revenues from cloud business continued to be the primary growth driver. The cloud and software gross margins saw a marginal decline, but a substantial improvement in the services gross margin led to a slight improvement in overall margins. We expect cloud margins to continue declining in the near term, as the company faces tough competition from software behemoths like Microsoft, Oracle and Salesforce. Operating profit and EPS grew by 19% and 35% year-over-year respectively, due to lower share-based compensation, acquisition-related charges and restructuring costs. While the revenue growth was seen across all business segments, SAP’s Cloud business, aided by a phenomenal increase in new bookings, was the standout performer. The company continued its dominance in the Enterprise Resource Planning software market, with more than 600 customers adopting its S/4HANA platform in the quarter, taking the overall count to over 6,900 customers. This should assuage some investor concerns about the long term value of this platform, the sheer power of which is reflected in its cost. Moreover, with 80% of its customers still using the earlier platform and expected to shift to the newer one in the near future, there is tremendous potential which the company expects to tap."