SAP’s €2.6 Billion Buyback and AI-Fueled Acquisitions Put Margins Under the Microscope
Published on 07/28/2026 at 12:51 | Redaktion boerse-global.de
The rally in SAP’s shares has been nothing short of dramatic. After touching a 52-week low of €127.50 on July 23, just ahead of its quarterly earnings release, the stock has surged roughly 19% in a matter of days. By Tuesday’s close, it stood at €154.22, up 2.31% on the day, and now sits 20.94% above that recent trough. Yet even as the recovery gathers pace, a fresh dose of skepticism has arrived from the analyst community.
Barclays cut its price target on SAP Tuesday, citing uncertainty around near-term cost trends despite the company’s undeniably strong cloud momentum. The move underscores a tension that has defined the stock since the second-quarter numbers landed: can the cloud engine generate enough profit growth to absorb the rising integration costs from a string of recent acquisitions?
A Cloud Story That Still Impresses
The headline numbers from SAP’s July 23 report were robust by almost any measure. Cloud revenue climbed 22% to €6.3 billion, while the current cloud backlog — a key forward-looking metric — swelled 27% to €22.9 billion. Adjusted earnings per share rose from €1.46 to €1.89 year-over-year. On the surface, the business is firing on all cylinders.
But the operating picture was more nuanced. Non-IFRS operating profit grew just 7% (9% currency-adjusted), and management responded by trimming its full-year guidance for currency-adjusted operating profit to a range of €11.8 billion to €12.2 billion, down from a previous ceiling of €12.3 billion. The culprit, according to SAP: dilution from the recently completed takeovers of data lakehouse specialist Dremio and AI firm Prior Labs.
Should investors sell immediately? Or is it worth buying SAP?
The Dremio deal closed in early July, with Prior Labs following on July 17. SAP has pledged to invest more than €1 billion over the next four years to build out a frontier AI lab — a strategic bet that explains the near-term profit squeeze without undermining the long-term logic. The company also noted that the Tschira founding family had increased its voting stake, and welcomed a European Commission decision on maintenance and support guidelines for on-premise solutions.
Analysts Split on Whether the Pain Is Temporary
The market’s initial reaction was emphatically positive. On Monday, the stock rocketed 7.29% to close at €150.74, extending a recovery that had already delivered roughly 11% over seven trading sessions. Yet from its all-time high of €258.60 reached in late July last year, the shares remain more than 41% lower — a reminder that the current bounce is more a stabilization than a return to glory days.
Analyst reactions have been mixed but generally constructive. Goldman Sachs trimmed its price target from €230 to €215 while maintaining a “Buy” rating, with analyst Mohammed Moawalla pointing to the robust cloud backlog as evidence of operational strength. Berenberg cut its target from €215 to €205 but kept “Buy,” noting that rising AI costs explain the guidance cut SAP itself flagged. UBS held at “Buy” with a €164 target, highlighting the acceleration in short-term cloud contracts. Jefferies stuck with “Buy” and a €210 target, calling the backlog the quarter’s standout feature.
JPMorgan struck a more cautious tone with a “Neutral” rating and €175 target, describing the margin decline in the second quarter as a negative surprise. Barclays’ Tuesday price target cut reinforces that concern.
The Buyback Adds a Floor, But Not a Narrative
On Monday, SAP launched the second tranche of its massive share buyback program, committing up to €2.6 billion to repurchases through January 27, 2027. The program is part of a €10 billion buyback announced in January. Such a commitment provides structural support for the stock, but it does not address the fundamental question: is the margin compression from the Dremio and Prior Labs deals a temporary integration headache, or a structural trade-off where SAP swaps short-term profitability for long-term platform strength?
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The technical picture adds to the uncertainty. The stock’s 30-day volatility stands at 47.66%, signaling pronounced nervousness in trading. Year-to-date, SAP is down 26.39%, and over 12 months the decline is 36.80% — levels that leave the current recovery vulnerable to any fresh disappointment on the cost front.
What Comes Next
For the bull case to hold, the cloud backlog must maintain its double-digit growth trajectory, and the integration costs from the recent acquisitions need to prove transitory. Jefferies and other optimists argue that the shift toward public cloud — with 78% of SAP partners now focused on that direction, per a Fraunhofer IML study — will eventually turn today’s investment into scale advantages. The stock still trades roughly 12.29% below its 200-day moving average, leaving room for further upside if the narrative shifts.
The bear case, articulated by JPMorgan and now Barclays, warns that if cost pressures persist or intensify, the guidance cut from July 23 could be just the first of several. The next concrete test arrives on October 21, 2026, when SAP reports third-quarter results. Until then, every piece of news on the cost side is likely to carry more weight than even the most impressive cloud booking numbers.
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