SAP SE (SAP) FY2025 20-F and Q2 FY2026 6-K Summary

Business

Source: Annual Report on Form 20-F for fiscal year 2025 (year ended December 31, 2025), accession 0001104659-26-020058.

SAP sells enterprise application software that runs companies' core operations, including finance, procurement and spend, supply chain, human resources and customer experience, to organizations ranging from the world's largest enterprises to smaller, fast-scaling businesses. Most of its revenue now comes from subscription fees for its cloud solutions; licenses for on-premise software, the recurring support fees paid by its large on-premise installed base, and consulting, premium support and training services make up the rest. In 2025, total revenue was $41.56 billion. Cloud revenue was $23.74 billion, software support $11.89 billion, software licenses $1.12 billion and services $4.81 billion. Cloud and software revenue together were 88% of the total.

The center of the portfolio is SAP Business Suite, which SAP describes as integrated applications, data and AI working as one. Within cloud revenue, the company tracks a Cloud ERP Suite metric covering most of its strategic cloud solutions. It reached $20.46 billion in 2025, or 86% of cloud revenue. The remaining cloud offerings sit in an Extension Suite ($2.89 billion), and there is a shrinking infrastructure-as-a-service line ($389.61 million) that SAP is de-emphasizing in favor of software and platform services. The main product pillars are:

• SAP Cloud ERP, which covers finance, risk, project management, procurement, manufacturing, supply chain, asset management and R&D, and includes the SAP HANA in-memory database.
• Line-of-business suites. Financial management; spend management (SAP Ariba and Concur travel and expense); supply chain management; human capital management (SAP SuccessFactors, extended in September 2025 by the SmartRecruiters talent-acquisition platform); and customer experience (marketing, commerce, sales and service).
• SAP Business Technology Platform (BTP), the development, integration and extension layer underneath the suite, which includes SAP Build and Integration Suite.
• SAP Business Data Cloud, a managed data platform that unifies SAP data and connects third-party data. It includes zero-copy data sharing with Databricks, Google and Snowflake.
• SAP Business AI, which centers on Joule, the AI user interface, and Joule Agents. SAP released 30 Joule Agents in 2025.
• Business transformation tools. These are SAP Signavio for process analysis, SAP LeanIX for IT-landscape management and WalkMe for digital adoption.

SAP's stated strategy is "AI-First, Suite-First": embed AI in every application and process, and deliver a consistent suite experience on top of BTP. It sells through two journeys. RISE with SAP moves installed-base customers off legacy ERP onto SAP Business Suite, and SAP GROW targets new Business Suite customers. A global partner ecosystem resells, implements and extends SAP's products, and SAP offers sovereign-cloud versions for governments and regulated industries. SAP also invests in startups through Sapphire Ventures, which manages more than $11 billion.

SAP reports two operating segments:

• Applications, Technology & Support (ATS) holds the product portfolio: cloud subscriptions, software licenses and support, plus the training business. In 2025 it had $37.09 billion of segment revenue and $15.07 billion of segment profit.
• Core Services covers professional consulting and premium support services that help customers adopt SAP's products. Its 2025 segment profit was $487.86 million.

By region, EMEA generated 46% of 2025 revenue ($19.23 billion, of which Germany contributed 34%), the Americas 39% ($16.37 billion, of which the United States was $13.03 billion) and Asia Pacific Japan 14% ($5.96 billion). About 67% of revenue comes from non-euro transactions, so currency movements matter. Exchange rates reduced reported 2025 revenue by $1.13 billion.

SAP was founded in 1972 and is headquartered in Walldorf, Germany. At December 31, 2025 the group comprised 216 companies and employed more than 110,000 people. Its ordinary shares trade on the Frankfurt Stock Exchange, and its ADSs, each representing one ordinary share, trade on the NYSE. SAP's material acquisition in 2025 was SmartRecruiters, which closed on September 11, 2025 for consideration of $878 million.

Risk factors

Source: Form 20-F for fiscal year 2025, Item 3 "Risk Factors", accession 0001104659-26-020058; first-half 2026 update from the Half-Year Report, Exhibit 99.2 to 6-K accession 0001104659-26-087251.

SAP groups its risk factors into economic and regulatory, compliance, operational and strategic risks. The substantive ones:

Economic, political and regulatory

• Macro and geopolitical shocks. Recessions, credit-market stress, swings in currencies, interest rates and commodity prices, and conflicts (the filing cites Russia's war against Ukraine, the Israel-Hamas conflict and China-Taiwan tensions) can delay or shrink customer IT spending.
• Conflicting international rules. As a German company listed in Germany and the United States and active in most countries, SAP faces changing tax regimes (including new taxes aimed at digital business models), sanctions, embargoes, export controls, country-specific software certification rules and antitrust regimes. Compliance can force product or business-practice changes, and breaches can bring penalties.
• Litigation and intellectual property. SAP expects continued IP-infringement claims, including from non-practicing entities. It also expects antitrust claims, often from competitors seeking broad access to SAP data or alleging lock-in. Its reliance on third-party and open-source technology is a further exposure. Outcomes are inherently uncertain and can differ from the provisions management has booked.
• Data protection. GDPR cross-border transfer rules, data-localization laws (China, Saudi Arabia, Türkiye) and rules on AI and online tracking can restrict cloud adoption. Breaches by SAP or its subprocessors can lead to fines, damages claims and lost customers.

Compliance

• Ethical behavior. Bribery, corruption, fraud or policy violations by employees, partners or other third parties, especially in public-sector deals in high-risk territories, can bring criminal or civil charges and reputational damage.

Operational

• Sales and implementation. Projects can fail because of incomplete customer information, mismanaged scope or expectations, weak customer commitment, or services sold that cannot be delivered. Statements about future functionality can also be mistaken for commitments.
• Partner ecosystem. Growth depends on partners selling, implementing and building on SAP's platforms. Partners that fail to keep pace with SAP's cloud transition, or fail to comply with the law, would slow adoption.
• Cloud operations. SAP depends on its own data centers and on hyperscalers. Capacity shortages, outages, data loss, data-sovereignty-driven relocations and rising infrastructure costs can threaten service-level commitments and cloud margins.
• Cybersecurity. SAP is an attractive target because breaching it can expose its customers. Threats include AI-assisted attacks, zero-day vulnerabilities, unpatched customer systems and nation-state activity. SAP says it has had incidents, though none it considers material.
• Product quality. Defects, security vulnerabilities, immature new releases and AI algorithms that adapt poorly to changing circumstances could undermine customer trust in business-critical software.

Strategic

• Competition and the cloud transition. SAP competes with traditional vendors, new entrants and hyperscalers. It must win renewals and upsell in the cloud, and moving customers from on-premise licenses to subscriptions reduces near-term support and services revenue. Price pressure, or customers who are slow to migrate, could keep it from reaching its planned margin expansion.
• Mergers and acquisitions. Acquisitions bring due-diligence errors, integration and internal-control failures, unexpected cash needs and goodwill impairment. Divestitures can disrupt the retained business.
• Innovation and AI. SAP must keep its portfolio ahead of technological change, and customers could use AI to build their own solutions. The AI embedded in its products carries specific risks: flawed models or biased data, harmful outputs, unsettled copyright and privacy law, liability for third-party AI, and reputational harm from controversial uses.

First-half 2026 update. SAP said at June 30, 2026 that it saw no material change to its 2025 risk assessment. It flagged the Middle East conflict, which has raised energy prices and disrupted supply chains. If the conflict is prolonged or expands, particularly beyond 2026, it could hurt pipeline and bookings, which currently assume a near-term de-escalation. Among the legal matters, Celonis is seeking about $70 million in damages in its US antitrust case against SAP. Trial is set for September 2027, and the court allowed Celonis to add trade-secret claims in June 2026.

Management's discussion: fiscal 2025

Source: Form 20-F for fiscal year 2025, Item 5, accession 0001104659-26-020058.

2025 was the year SAP's cloud transition began to show up in profits. Revenue grew 12.4% in US dollar terms to $41.56 billion (up 8% in euros and 11% at constant currencies). Operating profit more than doubled to $10.86 billion, and the operating margin widened 12.5 percentage points to 26.1%. The comparison is flattered by 2024, which carried the cost of a company-wide restructuring.

Revenue mix. Cloud revenue grew 28.0% in US dollar terms to $23.74 billion (up 23% in euros). The driver was Cloud ERP Suite, which grew 33.5% to $20.46 billion (up 28% in euros) as customers accelerated their move to the cloud. Extension Suite cloud revenue grew only 9.6% to $2.89 billion (up 5% in euros), and infrastructure-as-a-service revenue fell 36% in euros, in line with SAP's focus on software and platform services. The legacy lines declined. Software licenses fell 26.1% to $1.12 billion (down 29% in euros), and software support fell 2.7% to $11.89 billion (down 7% in euros) as support customers converted to cloud subscriptions. Services revenue was $4.81 billion (down 2% in euros), mainly because of lower training revenue.

Backlog. Current cloud backlog, meaning contracted cloud revenue SAP expects to recognize within 12 months, was $24.73 billion at year end. That was up 16% in euros and 25% at constant currencies, a sharper slowdown than SAP had anticipated. The company attributed about one point of the slowdown to large transformational deals whose cloud revenue ramps up in later years and to legally required termination-for-convenience clauses. Total cloud backlog was $90.82 billion (up 30% at constant currencies), partly because of those same back-loaded deals. More than two-thirds of fourth-quarter cloud order entry included SAP Business AI.

Profitability drivers. The main swing was restructuring expense, which fell from $3.40 billion in 2024 to almost nothing ($3.39 million) in 2025 as the program announced in January 2024 concluded in early 2025. Share-based payment expense fell to $1.91 billion from $2.58 billion because the share price declined and the grant volume was lower. Several items worked against the margin:

• a $454.72 million provision (converted at the year-end rate) recorded at year end for the Teradata litigation (the case was later settled in February 2026);
• termination benefits outside restructuring plans of $268.77 million, including $215.70 million for a workforce transformation announced at the end of July 2025;
• $110.67 million of additional other taxes after a change in case law.

The cloud gross margin improved 1.1 points to 73.9% on scalable infrastructure. The software license and support margin slipped 1.5 points to 88.6%. License revenue fell 29% in euros while the costs of this line rose 4%, partly because of Teradata-related expenses. Research and development expense was 18.0% of revenue (19.1% in 2024), and sales and marketing expense fell to 24.1% of revenue. Non-IFRS operating profit was $11.77 billion. At constant currencies it grew 31%, coming in above the company's revised guidance range.

Segments. ATS segment profit rose 23.8% in US dollar terms to $15.07 billion (up 19% in euros). Core Services segment profit rose to $487.86 million (up 53% in euros) as the 2024 restructuring improved the delivery mix.

Below operating profit. Financial income, net, was $603.05 million, helped by fair-value gains on Sapphire Ventures and other equity investments. The effective tax rate fell to 28.7% from 33.9%, mainly because of changes in withholding taxes.

Cash flow and capital. Operating cash flow rose 83.5% in US dollar terms to $10.34 billion (up 76% in euros). The increase came from higher profitability, better collections, and much lower restructuring payments ($903.44 million against $2.71 billion in 2024) and share-based payments. Free cash flow roughly doubled to $9.30 billion (up 95% in euros). SAP paid $3.10 billion in dividends and repurchased $2.15 billion of shares in 2025, and it repaid the bridge loan for the WalkMe acquisition along with maturing bonds and credit lines. At year end, financial debt was $7.23 billion, all in euros and about 74% at variable rates. SAP is rated A+ by S&P and A1 by Moody's, both with stable outlooks, and it has an undrawn $3.52 billion committed revolving credit facility running to March 2030. On January 29, 2026 SAP announced a new share repurchase program running to the end of 2027.

2026 outlook as first set. In the 20-F, SAP guided to cloud revenue of $29.15 billion to $29.61 billion and cloud and software revenue of $41.02 billion to $41.58 billion. It also guided to non-IFRS operating profit of $13.45 billion to $13.90 billion, all at constant currencies, and to free cash flow of about $11.3 billion. Total revenue growth was expected to accelerate through 2027.

Current period: second quarter and first half of 2026

Sources: Quarterly Statement Q2 2026 (Exhibit 99.1) and Half-Year Report 2026 (Exhibit 99.2) to Form 6-K, accession 0001104659-26-087251, filed July 28, 2026, for the period ended June 30, 2026. The Half-Year Report is unaudited and unreviewed. SAP's first-quarter 6-K, accession 0001104659-26-049650, is cited for the April guidance change.

The quarter in brief. Cloud growth stayed strong in the second quarter, but profit growth slowed. Total revenue was $11.49 billion, up 12.2% in US dollar terms (up 9% in euros, 11% at constant currencies). Cloud revenue was $7.31 billion, up 25.6% (up 22% in euros, 24% at constant currencies). The engine was again Cloud ERP Suite, at $6.43 billion, up 28.1% (up 25% in euros, 27% at constant currencies). Extension Suite cloud revenue was $804.92 million (up 11% in euros). The on-premise lines kept shrinking: software licenses fell to $152.38 million (down 32% in euros), and software support fell to $2.84 billion (down 8% in euros, 7% at constant currencies). Services revenue was $1.19 billion (down 3% in euros). In the first half, cloud and software revenue made up 90% of total revenue, and Cloud ERP Suite made up 88% of cloud revenue.

Current cloud backlog was $26.18 billion at June 30, up 26% at constant currencies. Reltio, acquired in May, contributed less than one point of that growth.

Why profit growth slowed. IFRS operating profit was $3.07 billion, up 10.4% in US dollar terms (up 8% in euros), and the operating margin narrowed 0.5 points to 26.8%. Non-IFRS operating profit was $3.19 billion (up 7% in euros, 9% at constant currencies). SAP attributed the sequential slowdown in operating profit growth to four factors:

• slower cloud and total revenue growth;
• an unusually low share-based compensation expense in the first quarter, which flattered that quarter;
• accelerated R&D investment, with R&D expense up 16.9% to $2.14 billion (up 14% in euros);
• the dilutive effect of Reltio, which added about $29.08 million of revenue and an operating loss of about $15.12 million in the quarter.

The cloud gross margin dipped 0.5 points to 74.3%. By region, cloud revenue growth at constant currencies was strongest in Asia Pacific Japan (28%) and EMEA (27%), with the Americas at 21%. Total revenue in the United States rose 10% at constant currencies but only 7% in euros, and Japan's revenue fell 2% in euros while rising 10% at constant currencies.

Earnings and cash. Profit after tax rose 29.5% to $2.57 billion (up 26% in euros), and basic earnings per share rose to $2.20 from $1.64 (up 30% in euros). Most of the gap between profit growth and operating-profit growth came from below the operating line. Financial income, net, rose to $468.76 million from $55.57 million, reflecting $538.55 million of net gains on equity securities, which SAP excludes from its non-IFRS figures. On that non-IFRS basis, profit after tax rose only 5% in euros. The IFRS effective tax rate was 26.5% (non-IFRS: 30.8%). Operating cash flow for the quarter was $3.67 billion and free cash flow $3.49 billion, up 27% in euros.

First half. Revenue was $22.67 billion (up 8% in euros, 11% at constant currencies). Operating profit was $6.28 billion (up 12% in euros), and the operating margin improved 1.2 points to 27.7%. Lower share-based payment expense helped: it fell to $878.46 million from $1.04 billion as SAP's share price dropped by about $87.50 in the half. Higher cloud contribution also helped, partly offset by the R&D push. Free cash flow was $7.29 billion, up only 5% in euros, because higher profitability was largely offset by $542.47 million more in income tax payments.

Balance sheet and capital returns. At June 30, cash was $12 billion and group liquidity $13.02 billion. Financial debt had risen to $9.76 billion after a May bond issue, so net liquidity fell to $3.26 billion from $3.97 billion at the end of 2025. In the half, free cash flow was more than absorbed by three outflows: the dividend of $2.93 per share approved at the May 5 annual meeting ($3.36 billion in total), share repurchases of $3.03 billion, and $1.16 billion spent on acquisitions net of cash acquired. Goodwill rose to $34.72 billion, mainly from Reltio and currency revaluation, and total equity was $51.66 billion.

Strategy. At its Sapphire conference in May 2026, SAP recast its strategy as the Autonomous Enterprise, which has three layers:

• Joule as the engagement layer;
• SAP Autonomous Suite, with AI agents running processes end to end across five domains: finance, spend, supply chain, human capital management and customer experience;
• SAP Business AI Platform as the foundation, combining BTP, AI Foundation, Business Data Cloud, HANA Cloud and the Business Transformation Management portfolio.

SAP expects to deploy more than 400 AI agents by the end of 2026. Its 2026 acquisitions all support the data layer. Reltio adds master data management, Dremio adds an open lakehouse for non-SAP data, and Prior Labs adds tabular foundation models. Alongside the strategy, SAP announced partnerships with Anthropic, Amazon Web Services, n8n, NVIDIA, Parloa, Palantir and Accenture, and earlier with Google Cloud. The first-half macro backdrop was the Middle East war. SAP says its focus for the rest of 2026 is converting delayed pipeline opportunities.

People. Full-time-equivalent headcount was 112,019 at June 30 (108,929 a year earlier), and employee turnover fell to 5.6% from 8.2% after the 2025 restructuring and workforce programs. In the April survey, the Employee Engagement Index was 73%, below the full-year target range of 74% to 78%, and the Business Health Culture Index was 79%, below its 80% to 82% range. SAP still expects both to finish the year within range. In March 2026 SAP said product and engineering board member Muhammad Alam will not renew his contract, which runs into 2027. From April 1 it combined customer success and delivery into a new Customer Value Group under Thomas Saueressig.

Outlook (as of July 23, 2026). SAP cut its 2026 non-IFRS operating profit outlook to $13.33 billion to $13.79 billion at constant currencies (up 13% to 17%), from $13.45 billion to $13.90 billion. The cut reflects more than $113 million of dilution from the Dremio and Prior Labs acquisitions. Its other guidance is unchanged:

• cloud revenue of $29.15 billion to $29.61 billion (up 23% to 25% at constant currencies);
• cloud and software revenue of $41.02 billion to $41.58 billion (up 12% to 13%);
• free cash flow of about $11.3 billion;
• a non-IFRS effective tax rate of about 29%;
• current cloud backlog growth at constant currencies decelerating slightly.

The revenue trajectory has already softened once. With its first-quarter results in April, SAP replaced its expectation that total revenue growth would accelerate through 2027 with one that 2026 constant-currency growth will stay at about the 2025 level (10.6%) and accelerate in 2027. For 2027 it expects total operating expenses to grow at 80% to 90% of the rate of revenue growth, helped by internal use of its own AI. It also expects the decline in software support revenue to speed up as customers move to the cloud. The guidance assumes a near-term de-escalation of the Middle East conflict. At June 30 exchange rates, currency would cut full-year reported cloud revenue growth by about 1.5 points and non-IFRS operating profit growth by about 2 points.

Subsequent events

Source: Half-Year Report 2026, Note (G.3) "Events After the Reporting Period", Note (G.1) and the management report, Exhibit 99.2 to 6-K accession 0001104659-26-087251. The statements were approved by the Executive Board on July 22, 2026.

The following material events occurred after June 30, 2026:

• Dremio acquisition closed July 6, 2026. SAP bought 100% of Dremio Corporation, an open, high-performance data lakehouse platform, to combine SAP and non-SAP data for analytical and AI workloads. Cash consideration was about $0.57 billion, the main part of the total. The initial purchase accounting, including final consideration, intangibles and goodwill, was incomplete when SAP issued the report.
• Prior Labs acquisition closed July 16, 2026. SAP bought 100% of Prior Labs GmbH, a developer of tabular foundation models, and committed to scale it into a frontier AI lab for structured data. Cash consideration was about $0.46 billion, the majority of the total, and the purchase accounting is likewise incomplete. SAP's July outlook cut is attributed to the dilution from these two deals.
• European Commission case closed July 9, 2026. The Commission adopted a decision making SAP's commitments on its on-premise maintenance and support practices legally binding. That concluded the competition investigation opened in September 2025, which did not concern SAP's cloud offerings. SAP must implement the commitments within three months of the decision.
• Product leadership reorganized July 1, 2026. SAP moved operational responsibility for parts of its Product & Engineering organization from Muhammad Alam to CEO Christian Klein on an interim basis. It also created two teams reporting directly to Klein: SAP Business AI Platform & CTO, and SAP Autonomous Suite.