SAP Wins Bank of America's Top Software Pick as Cloud Orders and AI Rollout Collide With Integration Costs
Published on 09/24/2026 at 15:10 | Editorial boerse-global.de
Bank of America has named SAP its preferred large-cap software play for the year, slapping a buy rating on the Walldorf group with a price target of EUR 226. The endorsement landed as the stock changed hands at EUR 183.00 on Thursday, down 1.1% on the session.
The bullish call rests on a product roadmap that increasingly revolves around artificial intelligence. SAP is expanding its Joule family beyond Joule Work to include specialized Joule Assistants and the Joule Studio developer toolset. Corporate customers, however, are still largely in the testing phase, meaning direct monetization of these features has only just begun.
Even so, appetite for the technology is building. A Bank of America survey of 325 IT executives points to growing willingness to adopt modern software. A further structural driver: 60% of SAP's ERP customers still run on-premise systems, and the real peak of the migration to the S/4 platform is not expected until 2027. That delayed modernization wave represents a substantial opportunity, since companies will eventually have to replace their existing installations — a process likely to underpin steady baseline demand for years while pushing customers to fold cloud and automation tools into core processes.
Cloud Backlog and Industrial Wins Underpin the Growth Case
The operating picture lends weight to the optimistic thesis. Bank of America projects cloud backlog growth of 24.7% for the third quarter and an operating profit increase of 14%, following a 9% gain in the prior quarter.
Should investors sell immediately? Or is it worth buying SAP?
The order book already tells a story of its own. In the second quarter, cloud backlog climbed 27% to EUR 22.9 billion, evidence that customers are signing long-term contracts and that recurring revenue provides a dependable base for coming quarters. Cloud segment revenue rose 22% in the same period, while the Cloud ERP Suite posted 25% growth and group revenue expanded by just under a tenth. The steady migration of legacy customers onto newer cloud architectures remains a reliable expansion engine.
Prestige contracts are reinforcing that momentum. On September 8, US defense giant Lockheed Martin selected SAP SuccessFactors to drive its workforce transformation. Days earlier, on September 2, technology firm Harting accelerated its move to the cloud through the RISE with SAP program. Such deals demonstrate that global corporations are prepared to shift mission-critical processes onto SAP's modern cloud stack.
On the product front, SAP made its TabPFN-3.5 Plus model available in SAP AI Core on September 15, a tool built specifically for business forecasting and data analysis. For market participants, the launch marks a milestone: after a phase of expensive acquisitions, management now faces the task of weaving acquired technology seamlessly into the existing product landscape and making it monetizable for enterprise customers.
Margins Are the Metric That Matters
Valuation of the software group now hinges on one number above all: non-IFRS operating profit. Management has guided full-year operating profit to a range of EUR 11.8 billion to EUR 12.2 billion at constant currencies, which would represent double-digit percentage growth over the prior year but demands strict cost discipline.
Investors are therefore focused on how quickly the realignment bears fruit. Cloud revenue growth is robust, yet margins must prove that platform scale effects are kicking in. Should SAP hit its profit targets despite spending on personnel, product integration and computing capacity, investor confidence would be durably strengthened. Any hint of margin erosion, by contrast, would hit the valuation hard.
The counterweight is tangible. Recent strategic acquisitions are taking their toll, with integration costs feeding directly into profitability. Management has also announced investments of more than EUR 1 billion in tabular foundation models over the coming years. If those outlays are not offset by rapid efficiency gains, margin pressure looms — and without quick synergies, operating profit could land at the lower end of the target range.
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Technical Markers and the Next Catalyst
Near-term positioning will depend on clear signals. As long as the shares defend their 200-day moving average of EUR 167.08 and cloud backlog delivers double-digit growth rates, the broader foundation of the stock remains intact, giving investors little reason to call an end to the medium-term recovery. A slide in profitability that leaves operating profit short of the EUR 11.8 billion floor, however, would invite a re-rating and a retreat into lower price territory. A marked drop in enterprise software demand or sustained dilution would accelerate that negative scenario.
Sentiment elsewhere is supportive. Oddo maintains an outperform rating and raised its price target from EUR 200 to EUR 230. Reclaiming the 52-week high of EUR 242.00 will require the stock to make up considerable ground — a task made harder by a pre-market quote of EUR 185.10, well below that peak, as market participants weigh whether cloud momentum is strong enough to offset the burdens of the ongoing restructuring.
The next directional cue arrives with the upcoming quarterly report. Investors should watch margin development in the cloud segment and the concrete contributions of acquired technologies. Those figures will determine whether the realignment delivers the earnings value hoped for across the full year.
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