SAP's Cloud Backlog Takes Center Stage Amid AI Transition and Analyst Caution

As SAP SE prepares to release its first-quarter results, the market's focus has narrowed to a single, critical metric: the Current Cloud Backlog. This figure, representing contracted but not yet recognized cloud revenue, will be the primary litmus test for the company's ambitious transition and its ability to monetize artificial intelligence. The report comes at a pivotal moment, with the stock down roughly 25% since the start of the year, despite a recent six percent climb over the past week to around €151 that some observers interpret as tentative signs of a bottom.

Analyst sentiment reflects a cautious stance ahead of the numbers. Deutsche Bank's Johannes Schaller recently lowered his price target on SAP shares from €220 to €200, though he maintained a buy recommendation. He characterized the recent recovery in the software sector as deceptive calm, suggesting established giants like SAP must urgently reinvent themselves. This view is underscored by the stock's performance, which shows a loss of nearly 28% over the past twelve months.

The financial expectations for Thursday's report are clear. The market anticipates a strong revenue increase to approximately $11.2 billion, with earnings per share expected to rise to $1.91. For the cloud segment specifically, analysts are looking for revenue of about €5.9 billion, which would equate to year-on-year growth of 18%. SAP has a track record of exceeding estimates, having beaten expert forecasts in each of the last four quarters.

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

Beyond the quarterly figures, investors are scrutinizing SAP's strategic roadmap. The company is pushing forward with a corporate overhaul, including the planned acquisition of data specialist Reltio. Pending regulatory approvals, the deal is slated for completion this summer and is intended to better prepare customer enterprise data for AI applications. Further AI integrations for the SuccessFactors HR software are scheduled for mid-May.

While some critics fear new AI models could disrupt traditional software solutions, analysts from Barclays and Jefferies consider these worries overblown. They point to SAP's deep-rooted network of over 180,000 customers as a formidable moat that pure-play AI providers cannot easily breach in the short term.

The first-quarter results will provide the initial hard test for SAP's full-year guidance. Management continues to stand by its ambitious 2026 targets, which include cloud revenue of €25.8 to €26.2 billion, representing currency-adjusted growth of 23 to 25 percent, and an operating profit of €11.9 to €12.3 billion. With the stock trading at a historically low enterprise value to EBITDA multiple of around 13, some market watchers see a fundamental undervaluation—but only if SAP can substantiate its cloud ambitions on Thursday. A disappointment in the backlog could trigger a swift retest of recent lows.

Looking past the earnings, shareholders will soon turn their attention to the annual general meeting in early May, where a dividend of €2.50 per share is up for a vote. For the current fiscal year, analysts on average project total revenue of just over €40 billion. The company's ability to hit its targets hinges on proving that its cloud and AI strategy are concrete revenue drivers, making tomorrow's report a crucial milestone.

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