SAP’s €2.6 Billion Buyback Looks Premature as Shares Sink 45% from Peak

The disconnect between SAP’s operational performance and its stock market reception has rarely been starker. While the Walldorf-based software giant posted solid first-quarter results and plans to reward shareholders with a higher dividend, its shares have tumbled roughly 27% since the start of the year, trading at €147.08 — a far cry from the €271.60 52-week high.

That gap is particularly awkward for the company’s recently completed share buyback programme. SAP spent €2.6 billion to repurchase around 16.3 million shares in the first tranche, at an average price of nearly €161. With the stock now languishing below €148, those purchases look poorly timed. The buyback was executed well above current levels, raising questions about capital allocation discipline.

Cloud Momentum Remains the Bright Spot

Operationally, the picture is far more encouraging. First-quarter revenue rose 6% to roughly €9.5 billion, driven by a 27% currency-adjusted surge in cloud sales. Operating profit climbed 17%, while earnings per share improved 9% to €1.66. For the full year, analysts expect EPS of around €7.20.

The cloud business continues to gain traction, with implementation times shrinking dramatically. One mid-sized industrial customer cut its quote-to-order cycle by 60% after migrating to SAP’s platform, while reporting consolidation costs fell by nearly half. Such measurable wins are accelerating the shift to cloud-based deployments.

Should investors sell immediately? Or is it worth buying SAP?

Legal Settlement and Cash Flow Hit

A costly one-off item weighed on cash generation. SAP paid €408 million in March to settle its legal dispute with Teradata out of court, dragging free cash flow down 9% to just over €3.2 billion. The settlement removed a legal overhang but came at a price.

Dividend and AI Efficiency Drive

Shareholders have a date with the annual general meeting on May 8, where the board will propose a €2.50 dividend for the past financial year. If approved, the payout will flow to investors as planned.

Behind the scenes, SAP is embedding artificial intelligence across its operations. The company is automating support queries and equipping its software development teams with productivity-enhancing tools. Partners are rolling out AI-powered services to reduce management overhead for clients. These efficiency gains are expected to support margin expansion over time.

Outlook and Analyst Caution

Management has reaffirmed its full-year guidance, conditional on certain factors including the planned acquisition of data management specialist Reltio. That deal, designed to bolster SAP’s data cloud capabilities, still requires regulatory approval. The company targets cloud revenue of at least €25.8 billion for the year, with operating profit around €12 billion.

SAP at a turning point? This analysis reveals what investors need to know now.

JP Morgan maintains a “Neutral” rating on the stock, praising the strong cloud order book but cautioning that growth is unlikely to accelerate further this year. Market observers view the recent share price decline less as a fundamental deterioration and more as a brutal normalisation after years of extreme valuation multiples. The stock now sits well below its 200-day moving average, a technical signal that suggests further consolidation ahead.

Key Dates Ahead

SAP will showcase technological innovations for the utility sector at an online event on April 29. The next major fundamental catalyst comes on July 23, when the company publishes detailed second-quarter results. Until then, investors must weigh a strong operational narrative against a share price that has lost nearly half its value from the peak.

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