Q2 2025 SAP SE Earnings Call

Conference call.

Throughout today's recorded presentation, all participants will be in a listen only mode. The.

The presentation will be followed by a question and answer session.

Christian Klein: And with that, over to you, Christian.

If you would like to ask a question you May press star followed by one on your Touchtone telephone.

Christian Klein: Thank you, Alexandra, and a warm welcome to everyone on the line. Q2 was another very good quarter, with our SAFIRE conference as the main highlight.

Speaker Change: I would now like to turn the conference over to Alexandra Steiger Global head of Investor Relations. Please go ahead.

Christian Klein: Let me start with two key messages. First, we are looking at a very solid set of Q2 numbers today. SAP was performing very well across all key financial indicators. Second, uncertainty in global markets from earlier this year remains, but SAP has an excellent pipeline for half year two in almost all markets and regions. In a few individual industries impacted by uncertainty, we are seeing extended approval workflows on the customer side, for example, in the U.S. public sector and among manufacturers affected by tariffs. Whatever the market environment may bring, SAP is really well prepared. We are taking big steps in product innovation and rapidly increasing our productivity with business AI.

Alexandra Steiger: Good evening, everyone and welcome. Thank you for joining US with me today are CEO Christian Klein and CFO Domenic Hassan on this call. We will discuss <unk> second quarter 2025 results you can find the deck supplementing this call as well as our quarterly statement on our Investor Relations website.

Ladies and gentlemen, thank you for standing by.

Welcome, and thank you for joining the sap Q2 and half-year 2025 Financial results conference call.

Alexandra Steiger: During this call we will make forward looking statements, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to differ maturity additional information regarding these risks and uncertainties maybe found in our filings with the SEC.

Throughout today's recorded presentation, all participants will be in a listen-only mode.

The presentation will be followed by a question and answer session.

If you would like to ask a question, you may press star followed by 1 on your touchtone telephone.

Alexandra Steiger: Including but not limited to the risk factors section of our annual report on form 20-F for 2024, unless otherwise stated all numbers on this call are non IRS and growth rates and percentage point changes are non <unk> year on year at constant currencies. The non <unk> financial measures, we provide should not be considered as a sub.

Speaker Change: I would now like to turn the conference over to Alexandra, stiger Global head of investor relations. Please go ahead.

Christian Klein: Before I go deeper into these topics, let's have a look at the Q2 numbers and customer highlights. In Q2, cloud revenue rose 28%, marking an increase of two percentage points compared with Q1. The cloud ERP suite once again drove this momentum. For 14 quarters in a row, it has been consistently expanding at a rate of over 30%. Total revenue growth also continued to accelerate and reached 12%. Our current cloud backlog grew by 28% in Q2. Despite the currency headwind, it came in at 18 billion euros. Finally, our Q2 bottom line is a real highlight. Operating profit surged 35%.

Speaker Change: Surtout for most superior to the measures of financial performance prepared in accordance with IRS.

Alexandra Stiger: Good evening, everyone. And welcome. Thank you for joining us with me today. Our CEO Christian Klein and CFO Dominic Asam on this call. We will discuss saps, second quarter, 2025 results, you can find the deck supplementing this call as well as our quarterly statement on our investor relations website.

Speaker Change: And with that over to you <unk>. Thank you Alexandra and a warm welcome to everyone. On the line Q2 was another very good quarter with our Sapphire conference as the main highlight.

Speaker Change: Let me start with two key messages first we are looking at a very solid set of Q2 numbers today F C.

Speaker Change: He was performing well across all key financial indicators.

Speaker Change: Second.

Speaker Change: Uncertainty in global markets from earlier this year remains Bob FEP has an excellent pipeline for half year, two in almost all markets and regions in the few individual industries impacted by uncertainty we are seeing extended approval workflows on the customer side for example in the U S.

Christian Klein: This is a testament to the strength of SAP's business module and the lasting improvements we achieved in our cost base with our transformation program, which includes the internal adoption of business AI.

Alexandra Stiger: During this call, we will make forward-looking statements which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risk analytics, that could cause actual results and outcomes to defer my charity, additional information regarding these risk and uncertainties may be found in our findings with the SEC including but not limited to the risk factor section of our annual report on form. 20 f for 2024, unless otherwise stated all numbers on this call are non-ifrs and growth rates and percentage. Point changes are non IFRS year and year at constant currencies the non-irs financial measures. We provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with i4s.

Speaker Change: Click sector and among manufacturers affected by terrorists.

Christian Klein: The customer stories from Q2 add some nice color to the picture. They reflect the whole spectrum of what SAP has to offer, from Cloud ERP for our installed base and net new customs, to leading data and LLB solutions, to our Sofrenti cloud offering, and much more.

Speaker Change: However, the market environment may bring S&P is really well prepared we are taking big steps in product innovation and rapidly increasing our productivity with business AI.

Speaker Change: And with that over to you, your question. Yeah, thank you, Alexandra. And the warm welcome to everyone on the line Q2 was another very good quarter with our Sapphire conference as the main highlight.

Speaker Change: Before I go deeper into these topics, let's have a look at the Q2 numbers and customer highlights in Q2 cloud revenue was 28%, marking an increase of two percentage points compared with Q1.

Speaker Change: Let me start with 2 key messages. First, we are looking at a very solid set of Q2 numbers today. Sap was performing very well, across all key financial indicators.

Christian Klein: Let's start with our installed base on the WISE journey. In Q2, Alibaba entered into a strategic partnership with SAP with a focus on two key areas. First, we will roll out the SAP Business Suite at Alibaba end-to-end, including BTP, Business AI, Ariba, integrated business planning, success factors, and amorphous. Second, Alibaba, even more important, will become a partner for WISE in growth journeys. Together, we will be addressing the huge market potential in China, both among installed base and net new customers. Other key wins in Q2 were the pharma company GSK and the fashion brands Balma and Weplay.

Speaker Change: The cloud ERP suite once again 12 this momentum for 14 quarters in a row. It has been consistently expanding at a weight of over 30%.

Speaker Change: Total revenue growth also continued to accelerate and reached 12%.

Speaker Change: Second uncertainty in global markets from earlier this year remains. But sap has an excellent pipeline for half year 2. In almost all markets and regions in a few individual Industries impacted by uncertainty, we are seeing extended approval workflows on the customer side. For example, in the US public sector and among manufacturers affected by terrorists, what, ever the market environment may bring sep is really well prepared.

Speaker Change: Our current cloud backlog grew by 28% in Q2, despite the currency headwind. It came in at 18 billion euros. Finally, our Q2 bottom line. It's a real highlight operating profit surged, 35%. This is a testament to the strength of Sap's business module.

Speaker Change: We are taking big steps in product, Innovation and rapidly increasing our productivity with business AI.

Speaker Change: Before I go deeper into these topics, let's have a look at the Q2 number and customer highlights.

Christian Klein: A number of new customers also joined us via the group chat. Our wide range of net new customers included the American furniture company, Gartner White, and the fitness device maker, eGym. Beyond Cloud ERP, many net new customers are also embracing solutions from the business suite.

Speaker Change: And the lasting improvements we achieved in our cost base with our transformation program, which includes the internal adoption of business AI.

Speaker Change: Mocking, an increase of 2 percentage points, compared with q1.

Speaker Change: The cloud Erp Suite. Once again, 12 this momentum.

Speaker Change: For 4.

Speaker Change: Quarters in a row.

Speaker Change: The customer stories from Q2 at some nice collar to the picture.

Christian Klein: The U.S. construction company NEPCO and the live marketing company MCH, for example, signed up for HR and finance. In our solution areas and LOBs, business was coming, too. For example, nearly 300 cloud customers selected our digital supply chain solutions only in Q2. For example, the airline Delta. Nearly 100 customers selected our customer engagement platform. For example, BMW, who also went live on digital supply chain this quarter. And over 300 customers signed up for our human capital management solution. The German Federal Pension Insurance opted for success factors in Q2. And the global cosmetics leader, L'Oreal, expanded their success factor footprint as well.

Speaker Change: It has been consistently expanding at a weight of over 30%.

Speaker Change: They reflect the whole spectrum of what <unk> has to offer from cloud ERP for our installed base and net new customers to leading data and L. O B solutions to our sovereignty cloud offering and much more.

Speaker Change: Total revenue growth. Also continue to accelerate and reach 12%.

Speaker Change: Let's start with our installed base otherwise journey in Q2, Alibaba entered into a strategic partnership with S&P with a focus on two key areas first we will rollout the S&P business suite at Alibaba end to end, including BTB business AI Reba integrated business planning.

Speaker Change: Our current cloud backlog Group by 28% in Q2 despite the currency had wind, it came in at 18 billion euros. Finally, our Q2 bottom line is a real highlight operating profits surged. 35% this is a testament to the sense of Sap's business module and the lasting improvements we achieved in our cost base, with our transformation program which includes the internal adoption of business. AI.

Speaker Change: Successfactors and amorphous second.

Speaker Change: Alibaba and even more important we will become a partner for our why isn't quote journeys together, we will be addressing the huge market potential in China, both among installed base and net new customers.

Speaker Change: The customer service from Q2, add some nice color to the picture.

Christian Klein: Finally, the German armed forces signed up for SAP Project and Resource Management, Business AI, Analytics Cloud, Linax, and Signario.

Speaker Change: Other key wins in Q2, where the pharma company GSK and the fashion brands polymer and we play.

Speaker Change: They reflect the whole spectrum of what SCP has to offer from cloud Erp for our installed base and net new customers to Leading data and lob solutions to our software, Andy Cloud offering and much more.

Speaker Change: A number of new customers also China us why are the growth journey.

Christian Klein: Let's now have a quick look at our Sofren cloud offering. In Q2, the German defense company, Hensolt, and the British defense and security leader, BAE Systems, were among the customers that embraced SAP's excellent Sofren cloud offering. The debate on digital Sofren-T and the best way to achieve it has picked up speed in recent weeks. SAP stands out as the only vendor that can offer sovereignty over the entire stack, from the infrastructure to the application. We also offer customers additional features on top. For example, EU access, bring your own key, and Ag-App. Our platform runs on any hyperscaler and many local providers, but we also operate data centers of our own across the world.

Speaker Change: Our wide range of net new customers included the American furniture company gotten a wide and a fitness device maker Egypt.

Speaker Change: Let's start with our install base and device journey in Q2 Alibaba entered into a strategic partnership with SAP, with a focus on 2 key areas. First,

Speaker Change: <unk> cloud ERP, many net new customers are also embracing solutions from the business suite.

Speaker Change: The U S. Construction company NAPCO and the life marketing company M. C. H for example signed up for HR and finance.

Speaker Change: In our solution areas and L. O beef business was humming too for example, nearly 300 cloud customer selected our digital supply chain solutions only in Q2 for example, the airlines Delta.

Speaker Change: We will roll out the sap business suite at Alibaba and to end including btb. Business, AI Ariba, integrated business planning success factors and amasses. Second Alibaba, even more important will become a partner for our wise and quote Journeys together, we will be addressing the huge Market potential in China both among install base and net new customers.

Other key wins in Q2 where the farmer company GSK and the fashion brands balma and we play

Speaker Change: Nearly 100 customer selected our customer engagement platform. For example, BMW, who also went live on digital supply chain this quarter and over 300 customers signed up for our human capital management solutions.

Speaker Change: A number of new customers. Also joined us via the quote Journey

Speaker Change: Our wide range of net, new customers included, the American Furniture, Company Gartner, White, and the fitness device maker ichim.

Christian Klein: Our unique capabilities ensure that customers stay in control of their data at all times. They can be sure, regardless of how their local sovereignty requirements evolve, we will be able to meet them.

Speaker Change: German federal pension insurance opted for success factors in Q2.

Speaker Change: Beyond cloudy IP. Many net new customers are also embracing solutions from the business Suite.

Speaker Change: And the global cosmetics leader L'oreal expanded their successfactors footprint for L. <unk>.

Speaker Change: The US construction company, nepco and the life marketing company MC, for example, signed up for HR and finance.

Christian Klein: Let me now conclude the customer stories with a very exciting topic, the SAP Business Data Cloud. Many of the Q2 deals I have mentioned so far included BDC as a key component, including GSK, Replay, BAE Systems, and NEPCO. The software company Adobe selected our new data offering too, and we are deepening our partnership with Palantir in the context of BDC. All taken together. This makes for a great start. Only a few months after we launched, the pipeline for Business Data Cloud is skyrocketing. For all our customers in all geographies, we have one goal. We want to help them to take full advantage of the SAP Business Suite for their company.

Speaker Change: Finally, the German armed forces signed up for S. A people owe checked and resource management business AI analytics cloud lean IX and sitting out here.

Speaker Change: Okay.

Speaker Change: Let's now have a Greek look at our top gun cloud offering in Q2 determine defense company handful and British defense and security leader E systems were among the customers that are in placed Sep's excellence software and cloud offering.

Speaker Change: in our solution areas and lobs business was harming to, for example, nearly 300 Cloud, customers selected our digital Supply Chain Solutions, only in Q2, for example, the airline Delta

Speaker Change: Nearly 100 customer selected, our customer engagement platform. For example, BMW who also went live on digital supply chain disorder.

Speaker Change: And over 300 customers signed up for our human Capital Management Solutions.

Speaker Change: The debate on digital sovereignty and the best way to achieve it has picked up speed in recent weeks.

Speaker Change: The German federal pension Insurance opted for Success factors in Q2.

Speaker Change: C. P stands out as the only one that can offer sovereignty over the entire stack from the infrastructure.

Speaker Change: And the global Cosmetics leader, L'Oreal expanded their success factors for footprint as well.

Speaker Change: The application. We also offer customers additional features on top for example, you access putting your own key and air gap.

Christian Klein: And with each innovation we add, the business suite becomes even more attractive. In Q2, well over half of our cloud order entry volume came from deals that included AI use cases. And every hour, every day, more customers go live. ABB, for example, is using SAP Business AI to bring down the time to create price growth for larger products, from 15 days and more to only one day. Siemens is using Joule for Consultants to speed up the transition to S4HANA Cloud. And the Australian utility company SA Power Network leverages SAP Business AI to maintain its vast network of electricity poles in a targeted, efficient manner, for example, with predictive maintenance techniques.

Speaker Change: Finally, the German Armed Forces signed up for sep project and Resource Management business AI analytics Cloud Lina X and Signal View.

Speaker Change: Our platform runs on any hyper scaler in many local provide us, but we also operate data thunders of our own across the world.

Speaker Change: Our unique capabilities ensure that customer stay in control of their data at all times. They can be sure regardless of how their local sovereignty requirements evolve we will be able to meet them.

Speaker Change: Let's now have a quick look at our software and Cloud offerings in Q2 the German defense company, handled and the British Defence and security leader, BAE systems were among the customers that embraced saps. Excellent, Cloud, offering.

Speaker Change: The debate on digital sovereignty and the best way to achieve it has picked up speed in recent weeks.

Speaker Change: Let me now conclude the customer stories with very exciting topic.

Speaker Change: Business data cloud more.

Speaker Change: Many of the Q2 deals I haven't mentioned, so far including BTC as a key component in.

Speaker Change: Clothing GSK.

Speaker Change: He play.

Speaker Change: SCP stands out. As the only wonder that can offer sovereignty over the entire stack from the infrastructure to the application. We also offer customers additional features on top, for example, EU access bring your own key and air gap.

Speaker Change: E systems and NAPCO the software company Adobe selected our new data offering to add.

Christian Klein: With the next generation of innovation now arriving with customers, we expect business AI adoption to further speed up. In half year one, we released our first 14 AI agents. For example, an agent for the Commerce Cloud. Instructed via natural language, the agent helps online shop customers to find exactly the items they look for. No more clicking through pages of product pictures. The result is higher customer satisfaction and better sales conversion. Other agents released so far help customers to create quotes, streamline customer service, resolve dispute cases, analyze open receivables, and validate expense reports. By the end of the year, we expect the total number of available AI agents to reach 40.

Speaker Change: And we are deepening our partnership with pollen Tia in the context of BDC.

Speaker Change: Our platform once on any hyperscaler and many local providers, but we also operate Data Centers of our own across the world.

Speaker Change: All taken together this makes for a great start only a few months. After we launched the pipeline for business data cloud is skyrocketing.

Speaker Change: Our unique capabilities ensure that customers stay in control of their data at all times.

Speaker Change: For all of our customers in all geographies, we have one goal.

Speaker Change: They can be sure, regardless of how their local sovereignty requirements evolve we will be able to meet them.

Speaker Change: We want to help them to take full advantage of the S&P business week for their company.

Speaker Change: Let me now conclude the customer service with a very exciting topic. The sap business data cloud.

Speaker Change: And with the EG innovation, we add the business suite becomes even more attractive.

Speaker Change: many of the Q2 deals I have mentioned so far, included, BDC as a key component, including GSK

Speaker Change: In Q2.

Speaker Change: Well over half of our cloud order entry volume came from deals that included AI use cases.

Speaker Change: And every hour every day more customers go live.

Speaker Change: We are deepening our partnership with pallante here in the context of BDC.

Speaker Change: <unk> for example is using S&P business AI to bring down the time to create price quotes for larger products from 15 days and more to only one day.

Christian Klein: The agents will work across business functions, addressing all buying centers. In finance, for instance, our agents will streamline financial planning, ensure that accruals are automatically calculated and proactively identify cash shortages. And in supply chain management, upcoming agents will keep production moving, for example, by recommending and onboarding suppliers and proactively responding to shop floor disruptions. As for Juul, our Sapphire announcements are starting to become available to customers. tools will be available everywhere across SAP and non-SAP systems starting in Q3. Thanks to the integration with Vox. And it will also be giving answers to everything, starting in Q4, powered by our partnership with Perplexity.

Speaker Change: All taken together. This makes for a great start. Only a few months after we launched the pipeline for business data, cloud is skyrocketing

Speaker Change: Siemens is using tool for consultants to speed up the transition to <unk> cloud and.

Speaker Change: For all our customers in all geographies, we have 1 goal.

Speaker Change: And the Australian utility company S. A power network level witches S&P business AI to maintain its vast network of electricity poles in the targeted efficient manner for example, with predictive maintenance techniques.

Speaker Change: We want to help them to take full advantage of the sap business suite for their company.

And with each Innovation, we add the business Suite becomes even more attractive.

Speaker Change: With the next generation of innovation in our wiring with customers, we expect business AI adoption to further speed up in.

Speaker Change: In Q2, well, over half of our Cloud order and re volume came from deals that included AI. Use cases.

Speaker Change: And every hour, every day, more customers go live.

Speaker Change: In half year, one we released our first 14 AI agents for example, an agent for the Commerce cloud.

Speaker Change: Instructed via natural language the agent helps online shop customers to find exactly died the items. They look for no more clicking through pages of product Pictures. The result is higher customer satisfaction and better sales conversion.

Speaker Change: ABB for example, is using sap business AI to bring down the time to create price growth for larger products.

Speaker Change: 15 days and more to only 1 day.

Christian Klein: With regard to data products for the Business Data Cloud, we are making very good progress as well. As of today, we have released more than 100 pre-built, SAP-managed data products covering finance, sales, manufacturing, and logistics. And by the end of the year, we will more than double that, covering our entire business suite. These data products underpin our intelligent applications for core ERP, spend, finance, people, customer, and supply chain that bring together data, business simulations, and AI capabilities. Every day, we are expanding our innovation footprint in the data and business AI space.

Speaker Change: Seamans is using tool for Consultants to speed up the transition to S4 Hana cloud.

Speaker Change: Other agents released so far how customers to create quotes streamline customer service resolve dispute cases analyzed open receivables and validate expense reports.

Speaker Change: And the Australian utility company as a power Network, leverages sep business AI to maintain. Its vast network of electricity polls in a targeted efficient manner. For example, with predictive maintenance techniques,

Speaker Change: By the end of the year, we expect the total number of available AI agents to reach 40.

Speaker Change: With the next generation of innovation. Now, arriving with customers, we expect business AI adoption to further speed up.

The agents will walk across business functions addressing all buying centers and finance for instance, our agents will streamline financial planning and sure that our calls automatically calculated and proactively indentified cash shortages and in supply chain management upcoming agents will keep production moving.

Speaker Change: In half year 1, we released our first 14 Aiello.

Christian Klein: Now, coming to our own transformation. Of course, SAP also uses business AI internally to boost productivity. This is reflected in the solid expansion of our operating profit. We are decoupling expense growth from revenue growth thanks to our transformation program.

Speaker Change: For example by recommending an onboarding suppliers and actively responding to shop floor disruptions.

Speaker Change: Instructed via natural language the agent helps online shop customers to find exactly their their items they look for no more. Clicking through pages of product pictures. The result is higher. Customers said it's faction and better sales conversion.

Speaker Change: I thought you our sapphire announcements are starting to become available to customers Shaw will be available everywhere across S&P and non SAP systems, starting in Q suite. Thanks to the integration with walk me.

Speaker Change: Other agents release so far helped customers to create quotes streamline customer service. They solve dispute cases, analyzed open receivables and validate expense reports.

Christian Klein: Three examples for internal AI use cases. Our digital sales engagement platform, powered by Chool, increases productivity by up to 50% for selected sales roles. Thanks to Chool for SuccessFactors, HR tickets are now resolved in up to 20% less time. And with Chool for Developers, coders at SAP are becoming up to 30% more efficient.

Speaker Change: By the end of the year, we expect the total number of available AI agents to reach 40.

Speaker Change: And it will also be giving ourselves to add we're seeing starting in Q4 powered by our partnership with Pep laxity.

Speaker Change: With regard to data products or the business data cloud, we are making very good progress as well.

Christian Klein: This is the beginning. It is already clear that AI will further increase productivity at SAP and in many other companies, and it will further change shops and shop profiles. This is why it is so important to keep evolving and transforming our workforce in a continuous process. As before, this transformation includes a reskilling component, reductions in areas with lower resource demand, and hiring and job profiles that define the future of our company, such as data and business AI.

Speaker Change: As of today, we have released more than 100 prebuilt.

Speaker Change: Manage data products, covering finance sales manufacturing and logistics and by the end of the year, we will more than double that covering our entire business suite.

The agents will work. It was business functions, addressing all buying centers in finance. For instance, our agents will streamline financial planning ensure that across all automatically calculated and proactively identify cash shortages. And in Supply Chain management, upcoming agents will keep production moving for example, by recommending an onboarding suppliers and proactively responding to shop floor disruptions

As for Jewel, our Sapphire announcements are starting to become available to customers.

Speaker Change: These data products underpin our intelligent applications for core ERP spend finance people customer and supply chain that bring together data business emulation and AI AI capabilities.

Speaker Change: Jewel will be available everywhere, across sep and non-sap systems starting in Q3.

Speaker Change: Thanks to the integration with walking.

Speaker Change: [laughter].

Speaker Change: Every day, we are expanding our innovation footprint in the data and business AI space now.

Speaker Change: And it will also be giving answers to everything starting in Q4 powered by our partnership with perplexity.

Christian Klein: To summarize, we achieved an outstanding Q2, despite market uncertainty. Since it is difficult to predict how this market environment will exactly evolve, we continue to focus on what makes us successful in the mid and the long term. With our data and AI innovations, we are strengthening our portfolio, and there's more to come. Our AI-enabled go-to-market transformation is moving ahead with speed. And we remain very diligent about simplification. The AI power transformation of our workforce continues. Thanks to ongoing operating efficiencies, we are able to do more with a leaner headcount.

Speaker Change: Now coming to our own transformation of course, S&P also uses business AI internally to boost productivity.

Speaker Change: With regard to data products for the business data Cloud, we are making very good progress as well.

Speaker Change: This is reflected in the solid expansion of our operating profit.

As of today, we have released more than 100 pre-built. Sep manage data products covering Finance, sales, manufacturing and Logistics.

Speaker Change: We are decoupling expense quote was Tom revenue growth, thanks to our transformation program.

Speaker Change: And by the end of the year, we will more than double that covering our entire business Suite.

Speaker Change: Three examples for internal AI use cases, our digital sales engagement platform powered by tool increases productivity by up to 50% for selected sales world. Thanks to tune for Successfactors HR tickets are now resolved and up to 20% less time, and we've retooled for developers codesa SVP of accounting.

Speaker Change: These data products, underpin, our intelligent applications, for core Erp. Spend Finance people customer and supply chain, that bring together Data Business, emulations and a AI capabilities,

Christian Klein: All this means that SAP is very well prepared for the second half of 2025 and for the coming year.

Speaker Change: Up to 30% more efficient.

Speaker Change: Every day we are expanding our Innovation footprint in the data and business, AI space.

Speaker Change: This is the beginning.

Speaker Change: It is already clear that AI will further increase productivity at S&P and in many other companies and it will further change shops and chop profiles.

Dominik Asam: And with that, I'm handing over to you, Dominik. Thank you very much, Christian, and thank you all for joining us this evening. As you can see from some of the financial results Christian just shared, SAP delivered another great quarter, highlighted by accelerating total revenue growth and continued strength in both operating profit and free cash flow. This further reinforces the strength and consistency of the execution of our strategy. The ongoing momentum of Cloud EIP Suite and the impact of our strict cost discipline were again key contributors to this performance. Together, they reflect the resilience of our business model and our ability to deliver consistent results in a dynamic and uncertain environment.

Speaker Change: Now coming to our own transformation, of course, sap also uses business AI internally to boost productivity.

Speaker Change: This is reflected in the solid expansion of our operating profit.

Speaker Change: Why it is so important to keep evolving and transforming our workforce in a continuous process.

Speaker Change: We are decoupling expense growth from revenue, growth. Thanks to our transformation program.

Speaker Change: That's before this transformation includes the reskilling component reductions in areas with lower resource demand and hiring and shop profiles that define the future of our company such as data and business AI.

Speaker Change: To summarize we achieved an outstanding Q2, despite market uncertainty since it is difficult to predict how does market environment will exactly evolve we continue to focus on what makes us successful in the mid and the long term.

Speaker Change: 3 examples for internal AI use. Cases our digital sales engagement platform, powered by Jewel, increases productivity by up to 50% for selected sales force, thanks to juul for Success. Factors HR tickets are now resolved in up to 20% less time, and with tool for developers coders at SCP are becoming up to 30% more efficient.

Speaker Change: This is the beginning.

Dominik Asam: Our strategy is working and our offerings remain mission critical to customers as they pursue their transformation towards cloud-based business models.

Speaker Change: Our data and AI innovations, we are strengthening our portfolio and there's more to come our AI enabled go to market transformation needs moving ahead with speed and we remain very diligent about simplification.

Speaker Change: It is already clear, that AI will further increase productivity at sap. And in many other companies and it will further change shops and Shop profiles.

Dominik Asam: Now let me provide more details around our financial highlights. Current cloud backlog reached 18.1 billion euros up 28% Cloud revenue increased also by 28% year-on-year. This was again driven by the strong performance of the Cloud ERP suite, which continued to deliver 34% growth in Q2. This represents 86% of total cloud revenue, underscoring its role as a foundational part of our cloud business.

Speaker Change: This is why it is so important to keep evolving and Transforming Our Workforce in a continuous process.

Speaker Change: The AI powered transformation of our workforce continues.

Speaker Change: To ongoing operating efficiencies, we are able to do more with Alina head count.

Speaker Change: Information includes reskilling component, reductions in areas with lower resource, demand, and high ring, and Shop profiles, that Define the future of our company such as data and business AI.

Speaker Change: All these means that S&P is very well prepared for the second half of 2025 and for the coming year and with that I'm handing over to you Dominic thank.

Dominic: Thank you very much Christian and thank you all for joining us this evening.

Dominik Asam: As we look towards half-year two, we are mindful of the broader environment, including geopolitical developments, notably the ongoing uncertainty about trade policy, that has contributed to elongated sales cycles in certain sectors such as U.S. public sector and industrial manufacturing. The sequential one percentage point deceleration in current cloud backlog growth is underscoring the dampening effect on bookings in Q2. It is obviously hard, if not impossible, to predict when exactly we'll catch up on the pushout. Closing these open opportunities will be a focus in half year two, where we, as you will recall, usually close roughly two-thirds of our annual new cloud business.

Dominic: You can see from some of the financial results Christian just sure.

Dominic: <unk> delivered another great quarter highlighted by accelerating total revenue growth and continued strength in both operating profit and free cash flow.

Speaker Change: To summarize. We achieved an outstanding Q2 despite Market uncertainty, since it is difficult to predict how this Market environment will exactly evolve. We continue to focus on what makes us successful in the mid and the long term with our data and AI Innovations. We are strengthening our portfolio and there's more to come

Dominic: This further reinforces the strength and consistency of the execution of our strategy.

Speaker Change: Our AI enabled go to market transformation is moving ahead with speed and we remain very diligent about simplification.

Dominic: The ongoing momentum of cloud ERP suite, and the impact of our strict cost discipline, where again key contributors to this performance.

Speaker Change: The AI power transformation of our Workforce continues. Thanks to ongoing operating efficiencies. We are able to do more with Alina headcount.

Dominic: Together, they reflect the resilience of our business model and our ability to deliver consistent results in a dynamic and uncertain environment.

Dominic Asam: All these means that sep is very well prepared for the second half of 2025 and for the coming year. And with that, I'm handing over to you Dominic

Dominic: Our strategy is working.

Dominic: Our offerings remain mission critical to customers as they pursue their transformation towards cloud based business models.

Dominic Asam: And thank you very much, Christian, and thank you all for joining us this evening.

Dominik Asam: Unfortunately, we have no crystal ball to reliably predict global trade policy decision-making, and it goes without saying that the longer this uncertainty persists, the more pressure it is likely to put on global trade and our customers' ability to make well-informed decisions. So, while capital markets appear to be optimistic and continue to perform at or near all-time highs, we do prepare SAP for less favorable outcomes by focusing on elements within our control to protect our bottom line and safeguarding free cash flow in 2025. These priorities will ensure SAP remains resilient and well-positioned regardless of how external conditions evolve.

Dominic Asam: as you can see from some of the financial results, Christian just shared,

Dominic: Now, let me provide more details around our financial highlights.

Dominic: Current cloud backlog reached $18 1 billion euros up 28%.

Dominic Asam: Sap delivered. Another great quarter highlighted by accelerating. Total revenue growth and continuous strength in both operating profit and free cash flow.

Dominic: <unk> revenue increased also by 28% year on year.

Dominic Asam: This further, reinforces the strength and consistency of the execution of our strategy.

Dominic: This was again driven by the strong performance of the cloud ERP suite, which continued to deliver a 34% growth in Q2.

Dominic Asam: The ongoing momentum of Claudia P suite and the impact of our cost discipline where again, key contributors to this performance.

Dominic: This represents 86% of total cloud cloud revenue.

Dominic: Coring its role as a foundational part of our cloud business.

Dominic Asam: Together. They reflect the resilience of our business model and our ability to deliver consistent results in a dynamic and uncertain environment.

Dominic: As we look towards half your true we are mindful of the broader environment, including and geopolitical developments, notably the ongoing uncertainty about trade policy.

Dominik Asam: Software licenses revenue decreased by 13% in Q2, in line with the strategy we pursue. The pace of contraction remains relatively stable as customers increasingly advance their transformation journeys with the rise and grow with SAP towards the cloud. Finally, total revenue came in at €9 billion, up 12%, driven by broad-based strengths, particularly within our share of more predictable revenue, which increased to 86%.

Dominic Asam: Our strategy is working and our offerings remain, Mission critical to customers as they pursue their transformation towards cloud-based business models.

Dominic: That has contributed to elongated sales cycles in certain sectors, such as U S public sector and industrial manufacturing.

Dominic Asam: Now, let me provide more details around our financial highlights.

Current cloud backlog reached. 18.1 billion, euros up 28%.

Dominic: The sequential one percentage point deceleration and kind of claw back to growth because underscoring the dampening effect on bookings in Q2.

Cloud Revenue increased also by 28% year on year.

Dominic: Obviously hard if not impossible to predict when exactly we will catch up on the push outs.

This was again driven by the strong performance of the cloud here. P Suite, which continued to deliver 34% growth in Q2

Dominik Asam: Now let's take a brief look at our regional performance. In Q2, SAP's cloud revenue performance was particularly strong in the APJ and EMEA region and solid in the Americas. Brazil, Chile, France, India, Italy, South Korea, and Spain had outstanding performance.

Speaker Change: Clothing. He has opened opportunities will be a focus on health care to Barry.

Speaker Change: You'll recall, usually close roughly two thirds of our annual new cloud business.

Dominic Asam: This represents 86% of total crowd. Cloud Revenue underscoring. Its role as a foundational part of our Cloud business.

Speaker Change: Unfortunately, we have no crystal ball to reliably predict global trade policy decision, making and it goes without saying that the longer this uncertainty persists the more pressure it is likely to put on global trade and our customers' ability to make well informed decisions.

Dominik Asam: Now moving down the income statement. Our non-ivorous cloud gross margin for the quarter continues its upward trend, expanding by 1.8 percentage points to 75.2%, driving cloud gross profit up by 31%. IFRS operating profit increased to 2.5 billion euros in the quarter, positively impacted by restructuring expense decline of 0.6 billion euros as compared to the prior year in connection with the 2024 transformation program. In the second quarter, non-IFRS operating profit was up 35% to 2.6 billion euros. Both IFRS and non-IFRS operating profit growth strongly benefited from cloud-driven growth and expanding cloud growth margin and a significant reduction in share-based compensation expenses.

Dominic Asam: as we look towards half year 2, we mindful of the broader environment including a geopolitical developments notably, the ongoing uncertainty about trade policy,

Speaker Change: So while capital markets appear to be optimistic and continue to perform at or near all time highs. We do prepare SVP for less favorable outcomes, but focusing on elements within our control to protect our bottom line and safeguarding free cash flow in 2025.

Dominic Asam: That has contributed to elongated sales Cycles in certain sectors. Such as US public sector and Industrial Manufacturing.

Dominic Asam: The sequential 1 percentage Point deceleration and current law backdoor growth is underscoring. The dampening effect on bookings in Q2

Dominic Asam: It is obviously hard, if not impossible, to predict when exactly, we will catch up on the push-ups.

Speaker Change: These priorities will ensure S&P remains resilient and well positioned regardless of how external conditions evolve.

Dominic Asam: Clothing. These open opportunities will be a focus on half year 2 where we, as you will recall usually close roughly 2/3 of our annual new Cloud business.

Speaker Change: Software licenses revenue decreased by 13% in Q2 in line with the strategy we pursue that.

Speaker Change: The pace of contraction remained relatively stable as customers increasingly advanced their transformation journey with horizon grow with SAP towards the cloud.

Dominic Asam: Unfortunately, we have no crystal ball to reliably predict global trade policy decision-making and it goes without saying that the longer this uncertainty persists, the more pressure, it is likely to put on global trade and our customers ability to make well-informed decisions.

Speaker Change: Finally total revenue came in at 9 billion euros up 12% driven by broad based strength, particularly within our share of more predictable revenue, which increased to 86%.

Dominik Asam: In fact, we have been able to reduce share-based compensation expenses by 331 million or 26% in the first six months of 2025 as compared to the same period last year by allocating grants in a more targeted fashion and largely hedging the residual cash settle part of it through April of this year. Recall that in the last year we had a significant headwind from share-based compensation expenses and the last major cash settle tranches were mark-to-market while our share price increased by roughly 50% in half year one of 2024. The IFRS effective tax rating to pool was 30.1% and the non-IFRS tax rate was 30.8%.

Speaker Change: Now, let's take a brief look at our regional performance.

Dominic Asam: So while Capital markets appear to be optimistic and continue to perform at or near all-time highs, we do prepare sap for Less favorable outcomes by focusing on elements within our control to protect our bottom line and safeguarding free cash flow in 2025.

Speaker Change: In Q2, Sap's cloud revenue performance was particularly strong in the a P J and EMEA region and solid in the Americas.

Dominic Asam: these priorities will ensure sap remains resilient and well, positioned, regardless of how external conditions evolve

Speaker Change: The new Chile, France, India, Italy, South Korea, and Spain had outstanding performance.

Software licenses Revenue, decreased by 13%, in Q2 in line with the strategy, we pursue.

Speaker Change: Now moving down the income statement.

Speaker Change: Our non hybrid cloud gross margin for the for the quarter continued its upward trend expanding by one eight percentage points to 75, 2% driving cloud gross profit up by 31%.

Dominic Asam: The pace of contraction remained relatively stable as customers increasingly Advanced, their transformation, Journeys with the rise and grow with sap towards the cloud.

Dominik Asam: Operating cash flow in the second quarter was up by 71% to 2.6 billion euros and free cash flow increased by 83% to 2.4 billion euros. The increase was mainly attributable to the higher profitability and the positive development of working capital, lower payouts for share-based compensation, restructuring payments, and income tax payments. Finally, basic IFRS earnings per share increased to €1.45 and non-IFRS earnings per share increased to €1.50.

Speaker Change: <unk> operating profit increased to $2 5 million euros in the quarter positively impacted by restructuring expense decline of $4 6 billion euros as compared to the prior year in connection with the 2024 transformation program.

Dominic Asam: Finally total revenue came in at 9 billion euros up, 12% driven by broad-based strengths particularly within our share of more predictable revenues, which increased to 86%. Now, let's take a brief. Look at our regional performance.

Speaker Change: In the second quarter non <unk> operating profit was up 35% to $2 6 billion euros, both <unk> and non <unk> operating profit growth strongly benefited from cloud revenue growth at expanding cloud gross margin and the significant reduction in share based compensation expenses in.

In Q2 saps, Cloud Revenue performance was particularly strong in the apj and Emir region and solid in the Americas.

Dominic Asam: Brazil, Chile, France, India, Italy, South Korea, and Spain had outstanding performance.

Dominic Asam: Now, moving down the income statement.

Dominik Asam: Now let's move on to the outlook. As you have likely seen in the quarterly statement published earlier today, we have decided to keep our 2025 outlook unchanged across all metrics. In summary, Q2 reflects another leap forward for SAP, marked by continued strong momentum in our Cloud ERP suite, resulting in accelerated total revenue growth and strong margin expansion. These results are a clear indication that our priorities are translating into consistent execution and measurable progress. We remain focused on discipline, execution, cost control, and protecting our bottom line and free cash flow for the remainder of the year.

Speaker Change: In fact, we have been able to reduce share based compensation expenses by 331 million.

Speaker Change: Or 26% in the first six months of 2025 as compared to the same period last year by allocating grounds in a more targeted fashion and largely hedging, but a residual cash settled plot of it through April of this year.

Dominic Asam: 5.2% driving Cloud gross profit up by 31%.

Speaker Change: Recall that in the last year, we had a significant headwind from share based compensation expenses and the last major a cash settled tranches were mark to market, while our share price increased by roughly 50% in half year one of 2024.

Dominic Asam: Ifs, operating profit increased to 2.5 million euros in the quarter positively impacted by restructuring expense, decline of 0.6 billion euros as compared to the prior year in connection with the 2024 transformation program.

Dominik Asam: With the first half complete, we are focused on sustaining momentum and closing the year with strength amidst a volatile and uncertain macro environment.

Speaker Change: The <unk> effective tax rate in Q2 was 31% in the non <unk> tax rate was 38%.

Dominic Asam: In the second quarter non-irish, operating profit was up 35% to 2.6 billion euros, both IRS and non operating profit growth strongly better fitted from cloud Revenue growth at expanding Cloud growth, March, and the significant reduction in share based compensation expenses.

Unknown Executive: Thank you, and we'll now be happy to take your questions. All right, we will now take your questions. As always, I would like to kindly remind you to only ask one question when prompted.

Speaker Change: Operating cash flow in the second quarter was up by 71% to $2 6 billion euros and free cash flow increased by 83% to $2 4 billion.

Dominic Asam: In fact, we have been able to reduce share based compensation expenses by 331 million.

The increase was mainly attributable to the higher profitability and the positive development of working capital lower payouts for share based compensation restructuring payments and income tax payments.

Unknown Executive: Operator, please open the line.

Unknown Executive: Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you are using speaker equipment today, please lift the handset before making your selection. Again, anyone who has a question may press star followed by one at this time.

Dominic Asam: Or 26% in the first 6 months of 2025 as compared to the same period last year by allocating grounds in a more targeted fashion, and largely hedging the residual, cash settled part of it through April of this year.

Speaker Change: Finally basic papers earnings per share increased to one year of 45 cents and non <unk> earnings per share increased to 150 <unk>.

Speaker Change: Now, let's move on to the outlook.

Dominic Asam: Recall that in the last year, we had a significant headwind from share based compensation expenses and the last major cash settled trenches were marked to Market. While our share price increased by roughly 50% in half year 1 of 2024.

Speaker Change: As you've likely seen in our quarterly statement published earlier today, we've decided to keep our 2025 ultra unchanged across all metrics.

Adam Wood: We'll take our first question from Adam Wood with Morgan Stanley. Please go ahead. Good evening and thanks for taking the question. Congratulations on another good quarter. If I could just maybe dig in on the operating margin and the EBIT growth for the second half of the year. Obviously, you've had a phenomenal first half with margins up around 8% and then 5% in Q1 and Q2. If the back of my envelope is right, it looks as if we're looking for more like sort of two, two and a half percent increases in margins in the second half.

Dominic Asam: The IRS effective tax rating to 2 was 30.1% and that non tax rate was 30.8%.

Speaker Change: In summary, Q2 reflects another leap forward for S&P marked by continued strong momentum in our cloud ERP suite wins.

Dominic Asam: Operating cash flow on the second quarter was up by 71% to 2.6 billion euros and free cash flow increased by 83% to 2.4 billion euros.

Speaker Change: Salting and accelerated total revenue growth and strong margin expansion.

Speaker Change: These results are a clear indication that whole priorities are translating into consistent execution and measurable progress.

Dominic Asam: The increase was mainly attributable to the higher profitability and the positive development of working capital low payouts for share-based compensation, restructuring payments, and income tax payments.

Speaker Change: We remain focused on disciplined execution cost control and protecting our bottom line and free cash flow for the remainder of the year with.

Dominik Asam: Obviously, Christian, you've talked about decoupling revenues and expenses and the benefits of consuming your technology internally. But I imagine there's some nervousness in terms of how the macro turns out and also some desire to invest for growth. Could you maybe just talk us through how those things play off against each other? How much caution is in there in terms of that big step down in margin improvement in the second half of the year, please? Thank you. Yeah, sure. I'm happy to have a stab at that.

Speaker Change: With the first half complete.

Dominic Asam: Finally basic earnings per share. Increase to 1.45 cents and non ifers earnings per share increase to 1.50 cents.

Speaker Change: Focus on sustaining momentum in closing the year with strength amidst a volatile and uncertain macro environment.

Dominic Asam: Now, let's move on to the Outlook.

Speaker Change: Thank you and we'll now be happy to take your questions.

Dominic Asam: As you'd like to be seen in the quarterly statement published earlier today. We've decided to keep our 2025 Outlook unchanged across all metrics.

Speaker Change: We will now take your questions as always I would like to kindly remind you to only ask one question when prompted operator. Please open the line.

Dominik Asam: So, first of all, let's not forget that one important factor of a strong performance in operating profit in the first half of the year was that kind of 331 million euro improvement in stock-based compensation. We recall that we said we want to end up the year at about 2 billion. We had 2.4 billion last year, so we basically said that about 0.4 billion improvement will come from stock-based compensation, and the lion's share of that is kind of hitting H1. The reason being that, as I mentioned in my introductory remarks, that the headwind we had last year was very kind of first-half-year-centric, so we have kind of much easier comps in the first half than in the second half on that sector.

Speaker Change: Ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question May press star followed by one on their touch tone telephone.

Dominic Asam: In summary, Q2 reflects another leap forward for sap marked by continued. Strong momentum. In our Cloud here. P Suite resulting in accelerated total, revenue, growth and strong margin expansion.

And these results are clear indication that our priorities are translating into consistent execution and measurable problems.

Speaker Change: If you are using speaker equipment today, please lift the handset before making your selection.

We may focus on disciplined, execution, cost control and protecting our bottom line and free cash flow for the remainder of the year.

Speaker Change: Again anyone who ask a question May press star followed by one at this time.

Speaker Change: We'll take our first question from Adam Wood with Morgan Stanley. Please go ahead.

Dominic Asam: With the first half complete, we are focused on sustaining momentum and closing, the year with strength, submits, the volatile, and uncertain micro environment.

Thank you and we'll now be happy to take your questions.

Adam Wood: Hi, good evening and thanks for taking my question congratulations on another good quarter.

Adam Wood: Just maybe dig in on the operating margin and the EBIT growth for the second half of the year, obviously, you've had a phenomenal first half with margins up around 8% and 5% in Q1 and Q2.

Dominik Asam: Secondly, we will continue to fine-tune and adjust our workforce. You mentioned the AI transformation being in full swing, so that means that on the one hand, there will be hiring, so there are resources we need to get on board to future-proof the company. On the other hand, after having now completed this massive restructuring program in the first quarter, we will probably see going forward continuous adjustment, I would call it optimization, of a much smaller magnitude, so you can think of a kind of 1 to 2 percent of workforce annual adjustments. We cannot rule out that there might be some severance payment for one or the other position in certain geographies here, so that will also be kind of happening, and that will not be an adjustment to our non-IFRS operating profit because that will be, I always say, like brushing teeth going forward.

Dominic Asam: All right, we will now take your questions. As always, I would like to kindly remind you to only ask 1 question. When prompted operator please open the line.

Adam Wood: Back to my envelope is right it looks as if we're looking for more like a two 2.5% increases in margins in the second half obviously question you've talked about decoupling revenues the expenses and the benefit of consuming your own technology and suddenly, but I imagine there's some nervous system in terms of how the macro churns out.

Dominic Asam: Ladies and gentlemen, at this time, we will begin the question and answer session.

Dominic Asam: Anyone who wishes to ask a question may press star followed by 1 on their touchtone telephone.

Dominic Asam: If you are using speaker equipment today, please lift the handset before making your selections.

Dominic Asam: Again, anyone who has a question may press star followed by 1 at this time.

Adam Wood: We also have some desire to invest for growth could you maybe just talk us through how those things play off against each other how much caution is in there in terms of the big step down in margin improvement in the second half of the year. Please thank you.

Speaker Change: We'll take our first question from Adam wood with Morgan Stanley. Please go ahead.

Adam Wood: Yeah sure I'm happy to have a step of that so first of all let's not forget that one important factor of the strong performance.

Adam Wood: In operating profit in the first half of it was that kind of 331 million improvement in stock based compensation.

Christian Klein: This will not be something that is very special. By doing that, we want to avoid actually having to kind of every now and then make a huge restructuring but rather continuously adjust as we move along. So these are the factors that I want to call out. So I would say that the full year guidance is solidly on track, so no reason to get overly excited about that. And obviously, the other question is always where exactly will we end up on the cloud revenue side, and yes, I think that protects us also for kind of the lower outcomes in case the trade disputes we alluded to would continue to weigh on sentiment here.

Adam Wood: You'll recall that we said we want to end up the year at about $2 billion. We had $2 4 billion last year. So we basically set at about <unk> four.

Adam Wood: Good evening, and thanks for taking the question. Congratulations on another good quarter. Um, if I could just maybe dig in, um, on the operating margin and and the Epic growth for the second half of the Year. Obviously, you've had a phenomenal first half with margins up around 8% and then 5% in in q1 and Q2 it is the back of my envelope is right. It looks as if we're looking for more like sort of 2 2 and a half percent increases in margins in the second half. Obviously a question you've talked about, you know, decoupling revenues and expenses and the benefits of of consuming your own technology.

Adam Wood: <unk> 4 billion improvement that will come from stock based compensation and the lion's share of that is kind of eating H. One the reason being that as I mentioned in my introductory remarks that the headwinds we had last year was very cold first half year centric.

Adam Wood: So we haven't kind of easier much easier comps in the first half than in the second half on that sector Secondly.

Adam Wood: Technology internally. Um but I imagine you know there's there's some nervousness in terms of another macro turns out um and also some desire to invest for growth. Could you, maybe just talk us through how those things play off against each other? You know how much caution is in there? In terms of that, that big step down in margin Improvement, in the second half of the Year piece. Thank you.

Adam Wood: We will continue to fine tune and adjust our work force you mentioned the.

Christian Klein: Yeah, and maybe Adam just to build on that. We are just in the course, in the planning process for the upcoming years, for the next two years, and obviously Dominik and I have given the team also now the task to say, how can we further decouple the expense growth from the accelerated total revenue growth we are going to achieve in the next year. And when you think about the cloud cost margin, I mean, we just achieved that by economies of scale and 18 billion backlog signals, there is more to come. But when you think about onboarding customers, patching customers, when you think about servicing customers, I mean, there is almost like a digital twin to our operations people who helps to further automate this task by a significant percentage point.

Adam Wood: Yeah, sure. I'm happy to have a stab at that. So, um, first of all, let's not forget that 1 important factor of the strong performance.

Adam Wood: The AI transformation being in full swing and so that means that on one hand, there will be hiring. So there are resources, we need to get on board to future proof the company on the other hand after having now completed this massive restructuring program in the first quarter, we would probably see going forwards continues adjustment I would call it optimization of our <unk>.

Adam Wood: Smaller magnitude. So you can think of it kind of 1% to 2% of workforce annual adjustment.

Adam Wood: Adjustments.

Adam Wood: And we cannot rule out that there might be some severance payments for the one or the other position in certain geographies here. So that will also be kind of been happening and that will not be an adjustment to our non <unk> operating profit because that will be that we feel like brushing piece going forward as we look at something that is very special by doing that we want to avoid.

In operating profit in the first half of the year was that kind of 331 million euro Improvement. In stock based compensation, we recall that we said we want to end up the year at about a 2 billion. We had 2.4 billion last year so we basically said that about 4.4 billion Improvement that will come from stock based compensation. And the line share of that is kind of hitting H1. The reason being that, as I mentioned, in my introductory remarks that the headwind we had last year was very kind of first half year Centric.

Christian Klein: And then second, I mean, when you are in support, solving tickets, ticket routing, ticket solving, I mean, there is more to come. And what we are seeing with Joule and when we are now building these agents, I mean, what we expect is actually that AI will be a further productivity driver also in the years to come for sure. And that is also, I guess, very important for our credibility when we go to customers to showcase, hey, this is how SAP runs and this is our transformation. And that is, of course, also our major goal when it comes to margin optimization for the years to come.

Adam Wood: Having to cut off every now and then make a huge restructuring, but rather continuously adjust them as we move along and so these are the factors that I want to call out. So I wouldn't I would say the full year guidance is solidly on track. So no reason to get overly excited about that and obviously then the other question as always we're exactly where we end up on.

Adam Wood: Cloud revenue side, and yes, I think that protects us also for kind of the lower lower outcomes in case the trade disputes we alluded to will continue to weigh on sentiment here.

And maybe Adam just to build on that.

Christian Klein: And obviously, then it's our obligation to always look at our workforce and do our job and do some cynical, very distinct measures on reducing profiles where we don't need the people anymore. But on the other hand, of course, when it comes to agentic AI, you wouldn't believe how many customers are now coming and say, hey, SAP, I need Joule. I don't need custom AI use cases. I don't even know how to train all of that and how to improve the outcome. And this is where we need also on the consulting side where we dedicated people who can help us to drive the change management with the customers and to implement all of these agents at the business of our customers.

Adam Wood: We are charting the course and the planning progress.

Speaker Change: So for the upcoming years for the next two years, and obviously Dominic and I have given the team also now the task to say how can we further decouple yeah, yeah expense close from the accelerated total revenue calls we are going to achieve in the next year, then I mean think about the cloud cost much.

Easier much easier comes in the first half than the second half on that factor. Secondly, um, we will um, continue to fine-tune and adjust our Workforce. You mentioned um, the AI transformation being in full swing. And so, that means that on the 1 hand, there will be hiring. So there are resources, we need to get on board to Future proof the company on the other hand, um, after having now completed this massive restructuring program in the first quarter, we will probably see going forward, um, continue the adjustment. I would call it optimization of a much smaller magnitude so you can think of a kind of 1 to 2% of Workforce annual, um, adjustments. And um, we cannot rule out that there might be some um, Severance payment for the 1 or the other position, um, in certain geographies here. So that will also be kind of, um, happening and that will not be an adjustment to our non-irish operating profit. Because that will be, I always say, like, brushing teeth going forward is, will not be something. That is very special by doing that. We want to avoid actually

Adam Wood: <unk>, which has achieved that by.

Adam Wood: Economies of scale and 18 billion backlog signals there is more to come but when you think about onboarding customers patching customers. When you think about general servicing customers. I mean, there is almost like a digital twin to our operations people who helps to further automate this task by a significant.

Adam Wood: Having to kind of every now and then make a huge restructuring, but rather continuously adjust and as we move along. Um, so these are the factors that I want to call out. Um, so I would, I would say, the, the full year guidance is, is solidly on track, so no reason to, um, get overly excited about that. And obviously, um, the other question is always where exactly will we end up on the cloud Revenue side and yes, um, I think that protects us also for kind of the lower lower outcomes in case the trade disputes re alluded to would continue to weigh on sentiment.

Adam Wood: You know, and maybe Adam just to build on that.

Mark Moerdler: The next question is from the line of Mark Moerdler with Bernstein Research. Please go ahead. Thank you very much and congratulations on the quarter. I'd like to drill in a little more on the substantial margin improvement that we saw this quarter. We saw it in cloud gross margin. We saw it in sales and marketing and R&D as a percentage of revenue.

Adam Wood: Percentage point, and then second I mean, when you are in support solving tickets ticket routing ticket following.

Adam Wood: There is more to come and what we are seeing with tool and when we are now building gets agents I mean, what we expect is actually that AI will be a further productivity toy wall. So indeed in the years to come for sure that is going to also I guess very important pharma credibility. When we go to customers to showcase Hey, This is how a C. P ones and this is <unk>.

Dominik Asam: Can you give us a color, Dominik, how you think long term sustainability of those improvements, especially as you invest in AI, and how much more room you think there is for continuing to drive that margin improvement? Thank you. Yeah, sure. I mean, I can say that now with more confidence, because as Christian mentioned, we are now kind of starting to sharpen the pencil for the planning exercise for the coming years. And I just always come back and I'm glad to say that won't change our operating leverage, i.e. the increase in total expenses versus the increase in revenues will be contained in a range of 80 to 90 percent.

Dominic Asam: We are just in the of course in the planning process for the upcoming years for the next 2 years. And obviously Dominic and I have given the team more. So now the task to say how can we further decouple? Yeah the expense growth from The Accelerated total revenue growth. So we are going to achieve in the next year and I mean think about the cloud cost margin. I mean we just achieved that by

Speaker Change: Our transformation and that is of course also our major goal when it comes to margin optimization for the years to come and obviously then its our obligation to always look at our work force and do our jobs and do some cynical, where we distinct nationals on reducing profiles, where we don't need the people anymore, but on the other hand of course.

Speaker Change: When it comes to Atlantic AI, you wouldn't believe how many customers are now coming in and say hey, it's a P. I need tool I don't need customer I use cases, I don't even know how to train all of that and how to improve the outcome and this is why we need to also on the consulting side, where we have dedicated people who can help us to twice the change management with the customers.

Dominik Asam: And that is the kind of yardstick for coming years. Now, we have been doing much more than that.

Dominik Asam: Now, with the big restructuring we have executed through Q1 of this year, there was 10,000 jobs being eliminated. And as I just stated, while there might be some continuous fine tuning at a much smaller degree, which will then also not be fully embarked on non-operating profit, that will enable us to get there. So our confidence level on being able to reach these operating leverage ratios is quite high. And now we're exactly when we will end up in that range also for 2026. But that is something we want to really hone in when we communicate the guidance for 2026.

Speaker Change: To implant implement all of these agents.

Speaker Change: At the business of our customers.

Speaker Change: The next question is from the line of Mark more Adler.

Speaker Change: With Bernstein Research. Please go ahead.

Dominic Asam: Economies of scale in 18 billion, backlog signals, there is more to come. But when you think about onboarding customers patching customers, when you think about, you know, servicing customers. I mean, there is almost like a digital twin to our operations. People who helped to further automate, this task by a significant percentage point. And then second, I mean, when you are in support, solving tickets ticket, routing tickets solving, I mean, there's more to come and what we are seeing with fuel. And when we are now building this agents, I mean, what we expect is actually, that AI will be a further productivity trial also in the, in the years to come, for sure. And that is, you know, also I guess very important for our credibility, when we go to customers to Showcase. Hey, this is how sep ones and this is our transformation. And that is, of course, also our major goal when it comes to margin optimization for the years to come. And obviously, then it's Our obligation to always look at our work force, and do our job. And do you know some

Speaker Change: Thank you very much and congratulations on the quarter.

Speaker Change: Like to drill in a little more on the.

Speaker Change: Substantial margin improvement that we saw this quarter, we shorten cloud gross margin, we saw in sales and marketing and R&D as a percentage of revenue can you give us a color Dominic how you think long term sustainability of those improvements, especially as you invest in AI and how much more room, you think there is for <unk>.

Dominik Asam: But it's the best kind of rough yardstick I can give you at present for these coming years.

Dominik Asam: And how it's distributed, I mean, we never go into details because we want to keep the flexibility. You know, sometimes we want to kind of push harder on incentives. Sometimes we want to give more marketing incentives. But the pegging order is still the biggest percent improvement in operating leverages and selling expenses. And then there is also still some improvement potential that we believe on the R&D side and then also some on G&A. On the cross margin, you've seen a pretty favorable development. And we were really pleased with the massive expansion we've seen in Q2, 1.8 percent.

Dominic Asam: Technical very distinct measures on reducing profiles where we don't need the people anymore. But on the other hand, of course, when it comes to agentic AI you wouldn't believe how many customers are now coming and say, hey sap, I need 2, I don't need custom AI, use cases. I don't even know how to train all of that and you know how to improve the outcome. And this is why we need also on the Consulting side where we dedicated people who can help us to drive to change management with the customers and to implant Implement all of these agents.

Speaker Change: For continuing to drive that margin improvement. Thank you.

Dominic Asam: At the business of our customers.

Dominic: Yeah sure I mean, I can say that now with even more confidence because as Christian mentioned, we are now starting to sharpen the pencils for the planning exercise for the coming years.

Speaker Change: The next question is from the line.

Please go ahead.

Dominic: I, just always come back and I'm glad to say that won't change.

Dominic: Operating leverage I E. The increase in total expenses versus the increase in revenues will be contained in a range of 80% to 90% and that is the tunnels.

Dominik Asam: That's really good news because we talk about pushing cloud and also giving transformation incentives. I mean, that's all embarked on that number. So all of that is absorbed and still we kind of come to the 1.8 percent gross margin improvement. Now, that will become a slower, much slower gradient going forward because the one of extra effects that we were benefiting from in the past might not reoccur, but still, that's also part of kind of grinding up the margin.

Dominic: Stick for coming years now we have been doing much more than that now with a big restructuring.

Dominic: We have executed through Q1 of this year that was 10000 jobs being eliminated and as I, just stated and while there might be some continued fine tuning it a much smaller degree which will then also not be.

Dominic: We will fully be embarked on operating profit.

Dominic: That will enable us to get there. So so our confidence level on being able to reach these operating leverage ratios is quite high and know.

Speaker Change: Thank you very much and congratulations on the quarter. Um, I'd like to drill in a little more on the uh substantial margin Improvement that we saw this quarter. We saw it in Cloud, gross margin, we saw it in sales and marketing in R&D as a percentage of Revenue. Can you give us a caller Dominic, how you think long term have sustainability of those improvements, especially as you invest in AI? Um, and how much more room you think there is for, for continuing to drive that margin Improvement. Thank you. Yeah sure. I mean, I can say that now with the more confidence because as Christian mentioned we are now kind of starting to shop with the pencils for the planning exercise for the coming years and

Dominic: Exactly where we'll end up in that range also for in 'twenty, six but that is something we want to really own and when we communicated the guidance for 2026, but it's the best tunnels, Ralph Yardstick I can give you a present for these coming years.

Jackson Ader: The next question comes from Jackson Ader with KeyBank Capital Markets. Please go ahead. Thanks for taking our questions, guys.

Christian Klein: Christian, I'd like to spend a couple of minutes on the Alibaba partnership that you mentioned in your prepared remarks. I'm just curious, how large is your Chinese footprint today? And I guess, are there any more details or maybe mechanics on the go-to-market motion, how this partnership is actually going to work with Alibaba, and maybe how large is that Chinese total addressable market for SAP? Thanks. Yeah, I mean, the China market, we have to look at it from two angles. First, You have to see that. 90% of the multinationals we are running also outside of China are doing business in China.

Dominic: And how it's distributed I mean, we never go into details because we want to keep the flexibility you know, sometimes you want to kind of push harder on incentives, sometimes we want to give more marketing incentives, but the pecking order is still that the biggest percent improvement in operating leverages in selling expenses and then.

Dominic: There is also still some some improvement potential that we believe on the R&D side and then also some of them.

Dominic: On G&A on the gross margin you've seen a pretty favorable development. We were really pleased with the massive expansion. We've seen in Q2, one 8% that's really good news because I mean, you talk about pushing.

Dominic: Pushing.

Dominic: Cloud and also giving transformation incentives.

Continuous fine-tuning at a much smaller degree, which will then also not be um um, kind of fully be embarked on on either operating profit, um, that will enable us to, to get there. So, so our confidence level of being able to reach these operating leverage ratios is, is quite High. And, um, now we're exactly when we will end up in that range also for, um, 26. Um, but that is something we want to really hone in when we communicate the guidance for 2026, but it's the, the best kind of rough yard sticker. I can give you at present for these coming years

Dominic: That's all embarked on that number so all of that is absorbed and still be the kind of come to the one 8% gross margin.

Christian Klein: Because of the trade conflicts, I mean, obviously, they are looking for solutions to further, you know, drive productivity in China for China in their factories to improve their logistics, to get more supply chain resiliency. But they need to decouple it to a certain extent, yeah, to mitigate risk. And there, of course, Alibaba is now key, yeah, because we have now a Chinese partner with us, where we can, you know, really deliver our cloud in China for China. Then the Chinese customers itself, I mean, there are, you know, many, many tech companies who are very open for moving with us to the cloud.

Dominic: <unk> now that will become a slower much slower gradient going forward because of the one off extra effects that we are benefiting from in the past.

Dominic: Reoccur, but still that's also part of our kind of grinding up the margin.

Dominic: The next question comes from Jackson Ader with Keybanc capital markets. Please go ahead.

Dominic: Alright.

Speaker Change: Thanks for taking our questions guys.

Speaker Change: Christian I'd like to spend a couple of minutes on the Alibaba partnership that you mentioned in your prepared remarks, just curious how large is your Chinese footprint today.

Christian Klein: They need SAP also to globalize their business. I mean, also a car manufacturer like BYWD, they started rather small, and now they are became very big on our platform. And so while, of course, you know, the market is still smaller than compared to a US or Germany, actually, the growth, what we are seeing is quite considerable. And, of course, with such a partnership, we definitely want to now see how we can join forces and go to market. And it's not only about the large enterprises, it's also about the upper mid market, which we want to capture, and hopefully then also can win together with Alibaba.

Speaker Change: and how how it's distributed. I mean, we never go in the details because we want to keep the flexibility, you know. Sometimes we want to kind of push harder on, on on incentives. Sometimes we want to give more marketing incentives, but the pegging order is still that the biggest percent Improvement in operating leverages and selling expenses. And then, um, there is also still, um, some, some improvement potential that we believe and on the R&D side and then also, someone on GNA, on the cross margin, you've seen a pretty favorable development. We were really pleased with the, um, massive expansion we've seen in Q2. 1.8%, that's a really good news because I mean, we talked about, um, some pushing, um, um, um, um, cloud and then also giving transformation incentives. I mean, that's all embarked on that number. So all of that is absorbed and still the, the kind of come to the 1.8%. Um, gross margin.

Speaker Change: And I.

Speaker Change: I guess are there any more details or maybe mechanics on the go to market motion. How this partnership is actually going to work with Alibaba and maybe how large is that Chinese total addressable market for our safety. Thanks.

Speaker Change: Improvement. Now, that will, um, become a slower, much slower gradient going forward because the 1-off extra effects that we were benefiting from, in the past, might not re reoccur but but still um, that's also part of a kind of grinding up the margin.

Speaker Change: Yeah, I mean, the China market, we have to look at it from two angles.

Jackson: The next question comes from Jackson. ER, with keybanc capital markets, please go ahead.

Speaker Change: You'll have to see that.

Christian Klein: So I have huge hopes. And then, of course, over the time, let's see with Ali. I mean, we see also now customers, you know, in Asia, in even in EMEA, also asking for our partnership with Ali. So let's see what we are going to do.

Speaker Change: 90% of the multinationals, we are wanting also outside of China doing business in China.

Speaker Change: Cost of <unk>.

Speaker Change: Trade conflict. So I mean, obviously they are looking for solutions to further.

Jackson: Thanks for uh, taking our questions guys. Um Christian. I'd like to send a couple of minutes on the Alley Boba partnership that you mentioned in in your prepared remarks just curious. How large is your Chinese footprint today

Speaker Change: Twice productivity in China for China, and our factories to improve the logistics to get more supply chain facility and see but they need to decouple it to a certain extent to mitigate risk and now of course Alibaba is Nokia because we have now also in our Chinese partner with us that we can really deliver our.

Dominik Asam: But the first focus is now to make it work in China for China. I mean, in terms of revenues, we don't disclose China-specific revenues, but it's included, of course, in what we call rest of APJ, which I just checked is about 10% of our revenues. And of course, not all of that is China. So if you want to pick the middle as a wild guess, you come to mid-single-digit kind of contributions, very roughly so. And you also see the growth rates for this region, which are reasonable. But we don't have by far cry the same business size as the United States, where we generated 31% of revenues in Q2.

and I guess are there any more details or maybe mechanics on the go to market motion? How this partnership is actually going to work with Alibaba? And maybe how large is that Chinese total addressable market for sap thanks.

Speaker Change: Cloud in China for China, then to Chinese customers itself I mean, now many many tech companies well very open for moving with us to the cloud they need a C. P. Also to globalize that business. I mean also a car manufacturer would like be read by weedy, they've started small and nowadays became.

Jackson: Yeah, I mean the China Market we have to look at it from 2.

Jackson: You have to see that.

Toby Ogg: The next question is from the line of Toby Ogg with J.P. Morgan. Please go ahead.

Speaker Change: We built on our platform and so while of course, the market is still smaller compared to a use of Germany actually to close what we are seeing is quite considerable and of course with such a partnership we definitely want to now see how we can join forces on go to market and it's not only about the large end.

Jackson: 90% of the multinationals, we are running. Also outside of China are doing business in China and because of the trade conflicts, I mean, obviously they are looking for solutions to further, you know, Drive productivity in China, for China and their factories to improve their Logistics, to get more supply chain and facility.

Michael Briest: Toby, your line is now open. We'll move on to our next question from Michael Briest with UBS. Please go ahead. Thank you. Good evening and my congratulations as well. Dominik, another really good quarter on cash flow. Contract liabilities, I think the cash inflows up about 400 million year on year. And I know at Sapphire, you were talking about the impact of transformation credits. Can you maybe say whether those are related? And in terms of the unwinding of that transformation credit balance, what size is it today and what impact might it have on cash flow next year?

Speaker Change: So it's also about the upper mid market, which we want to capture and hopefully that also can win together with Alibaba. So I have huge hopes and then of course, all the time lets see with Ali I mean, we see also known customers in Asia in even in EMEA also asking for our partnership with Ali So let's see what.

Speaker Change: What we are going to do but the first focus is now to make it work in China for China.

Speaker Change: I mean in terms of revenues, we don't disclose China specific revenues, but it's included of course in what we call rest of APG, which I've just checked is about 10% of our revenues and of course, not all of that is China. So.

Dominik Asam: Thank you.

Dominik Asam: I mean, on the transformation credit, again, just to make sure we're all on the same page what this is all about, when we are signing deals in certain situations, we are granting a credit to the customer, which is basically a cash voucher to offset some of the non-recurring project costs they have in transforming or adding some of our lines of business or moving to the value of the voucher and we amortize or we spread it over the term of the deal. And then if it's used in early innings, there is, of course, a certain cash conversion negative in that early phase, which is then recovered.

Speaker Change: If you want to pick the middle of the Wildcats, you'll come to a mid single digit kind of contribution very roughly so and you also see the growth rates for those regions, which are reasonable, but we don't have by far cry the same.

Jackson: But they need to decouple it to a certain extent. Yeah. To mitigate risk and there of course Alibaba is now Kia because we have now also in our, a Chinese partner with us where we can, you know, really deliver our cloud in China for China, then the Chinese customers itself. I mean, there are, you know, many many tech companies who are very open for moving with us to the cloud. They need sap also to globalize their business. I mean also a car manufacturer like BVD by vvd, they started rather small and now they are became very big on our platform. And so while of course, you know, the market is still smaller compared to a us or Germany actually the growth. What we are seeing is quite considerable and, of course, with such a partnership, we definitely want to know, see how we can join forces on go to market and it's not only about the large Enterprises. It's also about the upper mid Market, which we want to capture, and hopefully, then also can win together with

Speaker Change: Besides that we have in United States, where we generated 31% of revenues in Q2.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: The next question is from the line of Toby Ogg at with J P. Morgan. Please go ahead.

Jackson: With Alibaba. So I have huge hopes and then, of course, over the time, let's see with Ali, I mean, we see also now customers, you know, in Asia in, even in imia also asking for our partnership with Ali. So let's see what what we are going to do. But the first focus is now to make it work in China for China.

Speaker Change: Your line is now open.

Speaker Change: Well move onto our next question from Michael <unk> with UBS.

Dominik Asam: So over the life of the full transaction, basically, it's a wash, it's a kind of neutral cash conversion. And we don't disclose details on how big that is, that would be also competitively quite sensitive. It's just one part of our working capital management.

Speaker Change: Please go ahead.

Michael: Thank you good evening and my congratulations as well.

Michael: Dominic another really good quarter on cash flow.

Speaker Change: Contract liabilities I think the cash inflows up about 400 million year on year and I know its sapphire you were talking about the impact of transformation credits can you maybe say whether those are related.

Jackson: I mean, in terms of revenues, we don't disclose China specific revenues but it's included of course in what we call rest of apj, which I just checked is about 10% of our revenues. And of course, not, not all of that is China. So if you want to pick the middle as a wild, guess you come to Mid single digit kind of contribution, very roughly so and you also see the growth rates for this region, which are reasonable. But we don't have um by Far Cry, the same um business size. As we have in the United States where we generated 31% of revenues in Q2.

Dominik Asam: So the way I really want to think about it also in terms of what we should look at for 2026 is to really start from non-average operating profit. And then, of course, for that next year, we need to embark on a reasonable currency assumption. You know that on the cash flow, we are hedging that and while we have been able to hedge a very good rates for free cash flow in 2025, now we need to still hedge for 2026 in the remain to do of the year and maybe even in the early innings of 2026 when the planning is finalized.

Jackson: From the line.

Michael: <unk>.

Michael: In terms of the unwinding of that transformation credit balance well what size is it today and what impact might it have on cash flow next year. Thank you.

Speaker Change: Sophie, your line is now open.

Michael: Yeah, I mean on the transformation credits.

Michael: But again just to make sure. We're all on the same page what this is all about.

Speaker Change: we'll move on to our next question from Michael Breeze with UBS

Michael: When we're signing deals them in certain situations we are granting.

Please go ahead.

Dominik Asam: So we have a very solid base for that. So these are all the elements we need to take into account. So we start from non-average operating profit, we deduct taxes and the current tax rates you see are pretty reasonable proxy of what they might be also in 2026. And then there is always that offset between the cash and the P&L on stock-based comp, which is adding roundabouts a billion. You can also see that we did a little bit more than half a billion in the first half of the year in terms of positive contribution to cash conversion from stock-based comp.

Michael: A credit to the customer, which is basically a cash boat voucher to offset some of the nonrecurring project costs, they have in transforming or adding some of our lines of business moving.

Michael: Moving to the public cloud as examples.

Michael: And then what we do is we take that kind of value of the voucher and we amortize always spread it over the <unk>.

Michael: Term of the deal.

Michael: And then if it's used in the early innings. There is of course, a certain hedge conversion from negative in that early phase, which is then recovered so over the life of.

Michael Breeze: Uh thank you, good evening. And um my congratulations as well. Dominic and other really good quarter on cash flow. Um a contract liabilities I think the the cash inflows up about 400 million year on year and I know it's Sapphire. You were talking about the impact of transformation credits. Can you maybe say whether those are related and um in terms of the unwinding of that transformation credit balance, what what size is it today? And what impact might it have on cash flow next year? Thank you.

Dominik Asam: And then I would not really overemphasize the attribution of the puts and takes every quarter because they can be quite, they are volatile sometimes, seasonal sometimes. And there is a lot of information actually in the balance sheet, as you point out, to contract liabilities and so forth, but it would really now bust the scope of this call if we go jointly through all the accounts payables, contract liabilities and all of that.

Michael: The food from transaction basically its a wash it's a carbon neutral cash conversion and we don't disclose details on how big that is that would be also competitively quite sensitive.

Michael: It's just one part of our working capital management.

Michael: The way I really want to think about it also in terms of what we should look at for 2026 is to really start from non <unk> operating profit and then of course for the next giving them to embark on a reasonable currency assumption.

Dominik Asam: And I'm actually preparing a little bit of a talk sheet for that so we can all take that offline and go through this if you're interested in playing that game. But you will see when you do that, any given quarter can be kind of misleading. And what really matters is more like a rolling 12-month window. So this is why I tend to focus on the full year. And I can only reemphasize, again, now having looked at the first view on the planning for the midterm, that this kind of stupid rule of thumb, take the account of non-IFR, profit, tax-affected, and then take into account the positive impact from stock base being equity settled to a certain degree, is a very good proxy over that type of timeframe with certain fluctuations year by year.

Michael Breeze: Yeah I mean on the transformation credit um again just to make sure we're all on the same page what this is all about. Um when we are signing deals with them in certain situations, we are granting um a credit to the customer which is basically a cash voucher to offset some of the non-recurring project costs they have in transforming or adding some of our lines of business um or moving to the public Cloud as examples. And then what we do is we take that kind of value of the voucher and The Advertiser we spread it over the

Michael: So that on the cash flow via hedging that and while we have been able to hedge the very at very good rates for free cash flow in 2020, fives, a lull that we need to still hedged for 2026, and the remainder to be and maybe even in the early innings of 26. When the planning is finalized so we have a very solid base for that so these are all the element.

Michael: We need to take into account. So we start Manav is operating profit we deduct taxes.

Michael: And the current tax rates, you'll see a pretty reasonable proxy of what they might be also in 'twenty six.

Michael: And then.

Michael: There is always that offset between.

Michael: The cash in the P&L on stock based comp, which is adding round about a billion. You can also see that we did a little bit more than half a billion in the first half of the year in terms of positive contribution to cash conversion from stock based comp.

Christian Klein: And Michael, just to build on that, looking at the health of business we are closing these days. I mean, obviously, when do we use this migration credits? I mean, we are using that when especially large customers go into a massive transformation greenfield, they are really completely redesigning the way how they predict demand, optimize supply chain on the shop floor, logistics. And that, of course, comes with some initial costs. Also, not only on system migration, but also really working on the business processes. Now, obviously, what we are doing is then, okay, we say, okay, to make the business case even more compelling, we give this migration credits at a limited threshold.

Michael: And then I wouldn't want to really overemphasize the attribution of the puts and takes every quarter because they can be quite.

The term of the deal. And then if it's used in early Innings, there is, of course, a certain hash conversion negative in that early phase which is then recovered. So, over the life of um the full transaction basically, it's a wash, it's a kind of neutral cash conversion and um, we don't disclose details on how how big that is? That would be also competitively quite sensitive. Um, it's just 1 part of our working Capital Management. Um, so the way I really want to think about it, also, in terms of what we should look at for 2026 is to really start from non-irish operating profit and and then, of course, um, for that next year, we need to embark on a reasonable currency, assumption. Um, you know, that on the cash flow. We are hedging that and while we have been able to hedge, a very a very good rates, um, for free cash flow in 2025. And now we need to still Hedge for 2026 in the remain to do of the year and maybe even in the early Innings of 26.

Michael: Quite some volatile sometimes seasonal sometimes and there is a lot of information actually in in the balance sheet as you pointed out to contract liabilities and so forth, but it would really no bust the scope of this call as we go jointly through all the accounts payables contract liabilities and all of that.

Michael Breeze: When the planning is finalized. So we have a very solid base for that. So these are all the elements you need to take into account. So, we start from 1. I first operating profit we deduct taxes and the current tax rates. Um, you see are pretty reasonable proxy of what they might be. Offered in 26.

Michael: I'm actually preparing them a little bit of a top sheets for that so we can all take that offline and go through this if you're interested in playing that game, but it's you.

Michael: You will see when you do that any given quarter can be kind of misleading and what really matters is more like a rolling 12 month window. So that is why I tend to focus on the full year and I can only reemphasize again now having looked at the first view on the planning for the midterm that this kind of stupid rule of thumb take their calls mono for open period.

Christian Klein: And then, but what we also then achieving is actually that our prices after discount go also constantly up. I mean, our goal is, of course, which is super important for the margin and the profit long-term, is, of course, that our prices are actually increasing quarter over quarter. And that's what we are achieving. And despite some desperate moves, I have to say, from some of our competitors out there, we are achieving really a healthy increase of prices quarter over quarter. And when you then offset that and compare that, I would say we are using this migration credits good and a very wise way to also protect our prices on subscription and recall and cloud revenue.

Michael Breeze: Um, and then, um, there is always that offset between the cache and the p&l on stock based calm, which is adding around about a billion. You can also see that we did a little bit more than half a billion in the first half of the year. In terms of positive contribution to cash, conversion from stock-based comp,

Michael Breeze: Um and then um, I would not really overemphasize. Um, the attribution of the puts and takes every quarter because they can be quite um,

Michael: <unk>.

Michael: The tax affected and then take into account the.

Michael: The positive impact from stock based being equity settled to a certain degree.

Michael: A very good proxy over that type of timeframe with certain fluctuations year over year.

Michael: And Michael.

Michael: To build on that looking at the house.

Michael: We are closing these days I mean, obviously when do we used is my equation credits I mean, we are using that win especially large customers go into a massive transformation greenfield. They are really completely redesigning the way how they predict demand optimize supply chain on the shop floor.

Frederic Boulan: The next question is from the line of Frederic Boulan with Bank of America. Please go ahead. Hey good evening Christiane and Dominik. You both started your comments with a fairly prudent message on the macro environment.

Michael: Logistics and that of course comes with some initial POS also not only on system My equation, but also really working on the business processes. Now obviously, what we are doing is then okay. We say okay to make the business case, even more compelling we gave this migration of credits.

Michael Breeze: Uh, quite um, yeah, volatile, sometimes seasonal sometimes and there is a lot of information actually, in in the balance sheet as you point out to contract liabilities and so forth. But it would really now bust the scope of this call. If you go jointly through all the accounts, payables, the contract, liabilities, and all of that. I'm actually preparing a little bit of a talk sheet for that so we can all take that offline and and go through this if you're interested in playing that game but it's um you will see when you do that. Any given quarter can we kind of misleading and what really matters is more like a rolling 12 month window. So this is why I tend to focus on the full year and I can only re-emphasize again now having looked at the first view on the planning for the midterm, that this kind of stupid rule of thumb, take the kind of smaller open profit,

Christian Klein: It would be great if you could discuss How do you see the demand impacting CCDs in the rest of the year? You highlighted the rest of the sectors and some manufacturing. segment impacted by tariffs, but also a novel family positive message.

Michael Breeze: Um, text affected and then take into account the, um, the the positive, um, impact from stock based being Equity settled to a certain degree, um, is a very good proxy, um, over that type of time frame with certain fluctuations year by year.

Michael: At limited threshold and then but what we also then achieving is actually that our prices. After discount go also constantly op. I mean, our goal is of course, which is super important for the margin and deposit long term is of course that our prices are actually increasing.

Christian Klein: So it would be great to understand a little bit your assumptions and how we should think about TCB and also cloud with a nice pickup to 20% growth in Q2, but any specific factors we should bear in mind. Yeah, so thanks a lot. And look, I mean, first, we clearly said already at the beginning of the year that we always expected a slight deceleration of CCB. So, you know, what we said at the beginning of the year is now actually also becoming a reality and was planned in as we, honestly, after this massive Q4, we, of course, also came in at a very high base and Q1 was, of course, definitely a record high.

Michael Breeze: Yeah, and Michael um, just to build on that. Looking at the health of business, we are closing these days. I mean, obviously, when do we use this migration credits? I mean, we are using that when

Michael: Quarter over quarter, and that's what we are achieving and despite some desperate moves so I have to say from some of our competitors out there we are achieving really a healthy increase of prices quarter over quarter and when you then offset.

Michael: Offset that and compare that I would say we are using this migration credits in a very good and a very wise way to also protect our prices on subscription limit eco and cloud revenue.

Christian Klein: Now, when you're looking at half year two, I mean, first, which gives me the confidence on the guidance is that I plan coverage. We actually have the same coverage like last year, where we had a stellar half year, too. And that, of course, assuming now we're going to hit the same conversion rates like last year, I mean, that is, of course, a very creative position to be in. I mean, that is good, strong pipeline on, of course, on a set of very ambitious bookings numbers for half year two. Now, of course, what now comes in is the uncertainty.

Michael: Right.

Speaker Change: The next question is from the line of Frederic <unk> with Bank of America. Please go ahead.

Michael: Sure.

Speaker Change: Hey, good morning Christian.

Speaker Change: E boosters your comments were pretty message on the macro environment.

Speaker Change: We'd be really if you could discuss.

Speaker Change: How you see the demand impacting CCD.

Michael Breeze: Hey, we say okay to make the business case even more compelling. We give this migration credits. Yeah. At The Limited threshold and then, but what we also then achieving is actually that our prices after this count, go also constantly up. I mean, our goal is, of course, which is super important for the margin and the prophet long term is, of course that our prices are actually, you know, increasing quarter over quarter and that's what we are achieving. And despite some desperate moves, I have to say from some of our competitors out there.

Speaker Change: The rest of the year you.

Speaker Change: You highlighted U S public sector and manufacturing.

Speaker Change: Segments impacted by tariffs.

Speaker Change: Louisville and positive message so it would be great to understand withdraw your assumptions.

Christian Klein: The same like in Q1, I would love to have a crystal ball. I mean, there are some mega deals where, of course, this creates a swing in CCB on both sides. And obviously, what we need to see, especially in a few sectors like U.S. public sector, manufacturing industries where customers are impacted by tariffs, I mean, that is, of course, now really an important factor in half year two. So we have the pipeline, we have really good coverage. And look, the fascinating thing about SAP is also when you're sitting in these forecast calls, I mean, you see the sheer resiliency of this company.

Speaker Change: How we should think about <unk> and also our cloud with a nice tick up to 20%.

Michael Breeze: We are achieving really a healthy increase of of prices quarter over quarter and when you then you know offset that and compare that I would say we are using this. Migration credits in a very good in a very wise way to also protect our prices on subscription and recall and Cloud Revenue.

Speaker Change: Specific factors.

Speaker Change: Very much thank you.

Speaker Change: The next question is from the line of Frederick Bulan with Bank of America. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Yeah, well cycle out and look I.

Frederick Bulan: Hey, good evening, Christian.

Speaker Change: I mean first we clearly set already at the beginning of the year that we always expected a slight deceleration of CCP. So no. What we said at the beginning of the year is now actually also becoming a reality and was blended in as we honestly. After this massive Q4 now we of course also came in at.

Um you you both started your comments with a fairly cooling message on the the macro environments, uh, would be great if you could discuss.

How you see the the demand impacting ccds uh in the the rest of the year? You you highlighted US public sector. Some some manufacturing. Um

Speaker Change: Very high base in Q1 was of course definitely a workload high now when youre looking at half year two.

Christian Klein: And I'm not sure if all of our peers have that. I mean, no matter if one GEO is performing a little bit soft, we have other GEOs who are actually performing really well. And then you also see a good swing in the product. I mean, we have a broad portfolio. Last quarter, it was definitely a very good quarter in cash flow optimization. We had a good quarter in spend, etc.

Speaker Change: I mean first which gives me the confidence on the guidance is that.

Speaker Change: Pipeline coverage, we actually have the same coverage like last year remember, we had to sell off here too.

Segments impacted by by tariffs. So also a noble value positive message so it would be great to understand but your your assumptions how and how we we should think about CCB and also cloud with a nice pick up to 20% Works in YouTube but you know, any specific factors uh we should bear in mind for the second half. Thank you.

Speaker Change: And that of course, assuming now a week on a hit the same conversion rates like last year. I mean that is of course, a very equate to position to be in I mean that that is good strong pipeline on of course on a set of very ambitious bookings numbers for half year two now.

Christian Klein: So now it's really hard to say for half year two. It's really about do we get all of the deals in with a similar conversion rate like last year? And of course, what we need for that is really predictability on trade and customers will really then sign up for those deals. In one addition, don't forget the walk-me impact for the main to-do. This is the last quarter, Q2, where we still benefit from the year-on-year improvement. And this will kind of phase out over the next couple of quarters. Actually, Q3 already on CCB, it will be done because we disclosed a deal in the Q3 of the prior year.

Speaker Change: Cause what now comes in it's the uncertainty at the same lag in Q1, I would love to have a crystal ball I mean, there are some mega deals now where we have call space. This creates a swing in C. C b.

Speaker Change: Yeah. So thanks a lot and look. I mean, first, uh, we clearly said or already at the beginning of the year that we always expected a slight deceleration of CCP. So, you know what, we said at the beginning of the year, is now actually also becoming a reality and was planned in as we honestly after this massive Q4. Uh, we of course also came in at a very high base and q1 was, of course, definitely a work out high. Now, when you're looking at half year 2, I mean first, which gives me the confidence on the guidance. Is that

Speaker Change: On both sides, and obviously and what we need to see especially in a few sectors like U S public sector manufacturing industries, and where customers as impacted by tariffs I mean that is of course now really an important factor and in half year. Two so we have the pipeline we have really good coverage.

Speaker Change: Pipeline coverage. We actually have the same coverage like last year where we had a stellar half year too.

Christian Klein: And so it's kind of apples to apples at that point in time. And that roughly, very roughly, is one and a half percentage points. So once that happens, now what happens?

Christian Klein: Otherwise, Christian has already commented, but I also want to make the point, you should also not forget that we have some room in terms of protecting the accelerated revenue growth for 26, 27 because of the very strong mix effect we're currently benefiting. So even if we had beyond that kind of 1.5, a very slight continued deceleration, I would still not derail that objective.

Speaker Change: We looked at the fascinating thing about S. E. P is also when youre sitting in this forecast calls I mean, you see the the sheer resiliency of this company and I'm not sure. If all of our peers have that I mean, no matter if you're in a one <unk> is performing a little bit soft we have other geos, who actually performing really well and then you also see a good swing in the pool.

Speaker Change: I mean, we have a poor portfolio last quarter. It was definitely a very good quarter in cash flow optimization, we had a good quarter and spend et cetera. So and now it's it's really hard to say for half year. Two it's really about you know do we get all of these deals in a with a similar conversion rate.

Charlie Brennan: The next question is from the line of... Charlie Brennan with Jeffreys. Please go ahead. Hi, great. Yeah, thanks for taking my question. Just a couple of quick ones, if I can. Firstly, on the cloud revenues, we don't often see growth matching the CCB.

Speaker Change: Like last year and of course, what we need for that is really predictability on trade and customers will really then sign up for those deals.

Dominik Asam: Were there any one-off catch-up payments in the cloud revenues that we should be aware of, or was it a fairly clean quarter? And then secondly, obviously, in the prepared remarks, you were calling out the business data cloud. You gave a couple of examples of contracts where you've got BDC embedded into the contract. Is there anything you can say in terms of the commercials that you've been able to extract that shed some light on how material it could be for you over time? Thank you.

Speaker Change: And that of course assuming now we going to hit the same conversion weights like last year, I mean that is of course a very great to position to be in. I mean that that is good strong Pipeline and of course, on a set of very ambitious, bookings numbers for half year 2. Now, of course, what now comes in is the uncertainty and the same like in q1, I would love to have a crystal ball. I mean, there are some Mega deals in. Yeah, where, where? Of course, there is, you know, this creates a swing in, in CCB. Yeah. On both sides. And obviously, what we need to see, especially in a few sectors like us public sector, manufacturing Industries, where, you know, customers have impacted by terrorists. I mean, that is, of course, now really an important factor in in half year 2. So, we have the pipeline, we have really good coverage. And look, the, the fascinating thing about sap is also when you're sitting in this forecast, for

Speaker Change: Maybe one additional don't forget the walk me impact for the remain to do here and this is the last quarter Q2, where we still benefit from the year on year of improvement and this will phase out over the next couple of quarters.

Speaker Change: So Q3 already on CCP it will be done now because we just closed a deal in the Q3 of the prior year and so it's kind of apples to apples at that point in time and that roughly very roughly one five percentage points.

Speaker Change: I mean you see the the sheer resiliency of this company and I'm not sure if all of our peers have that. I mean, no matter if you know 1 go is, you know, performing a little bit soft. We have other GEOS who are actually performing really well, and then you also see a good swing in the products. I mean, we have a broad portfolio last quarter. It was definitely a very good quarter in, you know, cash flow optimization. We had a good quarter in in spend Etc. So and now it's it's really hard to say for half year.

Speaker Change: So once that happens what happens otherwise Christian has already commented, but I also want to make the point you should also not forget that we have some room in terms of protecting the accelerated revenue growth for 'twenty six 'twenty seven because of the very strong mix effect. We are currently benefiting so.

Dominik Asam: Maybe have a stab at that kind of 28% both on CCB and cloud revenue. You're right. I mean, if you look at the cloud, the CCB growth, normally there is then some attrition downwards because of transaction revenues. And we actually didn't mention that, but I can mention now that the transactional part of the business was, again, disappointing, frankly. And it's not surprising. I mean, if you look at share prices of temporary workforce companies imploding over the last half year or so, and the airlines also reporting on travel restrictions, and also sometimes because of policy, that's not a super good environment again.

Speaker Change: 2. It's really about you know. Um do we get all of the deals in? Yeah with a similar conversion rate like last year. And of course what we need for that is really predictability on trade and customers who really then you know, sign up for those deals.

Speaker Change: Even if we had to and beyond that kind of one five.

Speaker Change: Slide continued deceleration that we're still not derail that objectives.

Speaker Change: The next question is from the line of Bill.

Charlie Brennan: Charlie Brennan with Jefferies. Please go ahead.

Speaker Change: Maybe 1 additional. Don't forget the, the walk me impact for the Romaine to do and this is the last quarter Q2 where we still benefit from the year-on-year Improvement and this will kind of phase out over the next couple of quarters. Um, so execute 3 already on CCB, it will be done, know because we we we closed the deal in the Q3 of the prior year.

Charlie Brennan: Hi, great. Thanks for taking my question just a couple of quick ones if I can.

Dominik Asam: So that was dilutive. But the good news is that kind of, we always said, kind of 800 million-ish ticket is now further and further diluted in the mix. So the dilutive effect on cloud revenue growth is coming down. But indeed, normally, CCB growth is followed by cloud revenue growth, which is a touch lighter because of that transactional business.

Charlie Brennan: Firstly on the cloud revenues, we don't often see growth matching the CCP.

Charlie Brennan: Were there any one off catch up payments in the cloud revenues that we should be aware of ROFO was a fairly clean quarter.

Charlie Brennan: And then secondly, obviously in the prepared remarks, you were calling out.

Charlie Brennan: Business data cloud.

Charlie Brennan: You gave a couple of examples of contracts.

Christian Klein: BTC, I can take that. I can take that question. Look, BTC, I mean, first, it's good to see that we can leverage BTC and sell it in many ways. I mean, first, we indeed, BTC is part of many wise deals, especially customers, you know, and there are many who still have their BW system on prem. They are now seeing with BTC a real business case because they're saying, hey, I'm not only now shifting the BW to the cloud, I'm actually now working with Databricks, you know, to harmonize data, to really build the semantic layer, and then, of course, consume the intelligent apps on top.

Speaker Change: In terms of protecting The Accelerated, Revenue growth for 2627 because of the very strong mix effect, we are currently benefiting. So, um, even if we had beyond that kind of, 1.5 a very slight continued, deceleration, that was still not derailed that objectives.

Charlie Brennan: You've got BDC embedded into the contracts is there anything you can say in terms of the commercials that you've been able to extract.

Speaker Change: The next question is from the line.

Charlie Brennan with Jeffrey's, please go ahead.

Charlie Brennan: Shed some light on how material it could be for you over time. Thank you.

Charlie Brennan: Maybe I'll have a stab at that at all from 28% both on <unk> and its all revenue you're right I mean, if you look at the.

Charlie Brennan: The cloud.

Charlie Brennan: CPP growth normally there is been some attrition downwards because of transaction revenues.

Speaker Change: You didn't mention that but I can mention now the transactional part of the business was disappointing frankly, and it's not surprising I mean, if you look at share prices or temporary workforce companies imploding over the last half year or so and the airlines are also reporting on travel restrictions or more sometimes because of policy.

Christian Klein: And that kind of uplift on a wise deal can be up to 20 to 30 percent of ACV. It really depends on the size of the BW system and how many data products a customer is consuming. Now, BTC is not only a wise add-on, BTC is, of course, now embedded in all of our solutions. I mean, when you consume in the future success factors, you can have actually our intelligent app for HR in it, and you get prepackaged content, prepackaged data product semantically for the skills of your workforce, for hiring profiles, for, you know, to really manage your workforce end-to-end, and so that BTC will be also added to all of our LOB deals.

Speaker Change: It's not a super good environment again, so that that was dilutive, but the good news is and that's kind of we always set calls 800 million ish ticket is now further further diluted in the mix. So the dilutive effect on cloud revenue growth is coming down, but indeed, the normally CCP growth has followed by.

Speaker Change: Hi, great. Yeah, thanks for taking my question. Just a couple of quick ones if I can. Um, firstly on the cloud revenues, we don't often see growth, uh, matching the, the CCB, um, were there any 1 off, uh, catch up payments and the cloud revenues, uh, that we should be aware of or was it a fairly clean, uh, quarter? Uh, and then secondly, um, obviously in the prepared remarks, you were calling out the, uh, business data Cloud. Uh, you gave a couple of examples of contracts where you've got, BDC embedded into the contracts, is there anything you can say, in terms of the commercials that you've been able to extract the, uh, the shed some light on on how material it could be for you, uh, over time. Thank you. Maybe you have a step at that kind of from 28% both on CCB and Cloud Revenue, you're right? I mean if you look at the uh, the the the cloud,

Speaker Change: By cloud revenue growth, which is a touch lighter because of the transactional business.

Christian Klein: And, you know, when you sum that up, obviously, BTC, I expect that this will be, you know, in a few years, of course, also a business which can be a few billions big, absolutely, when you just consider the installed base, what we are having also on the BW.

Speaker Change: Now on BCP immediately.

Speaker Change: I can take I can take that question look BDC I mean first it's good to see that we can leverage our BDC and sell it in many ways I mean first.

Speaker Change: We indeed BDC is part of many wives deals, especially cosmos and all and there are many will still have that BW system on Prem Dan are seeing with BDC, a real business case, because they were saying hey, I'm not only now shifting to BW to the cloud I'm actually not working with data breaks through.

Mohammed Moawalla: The next question is from the line of Mohammed Moawalla with Goldman Sachs. Please go ahead. Great, thank you. Hi, Christian. Hi, Dominik. And well done on the quarter. My question was just again around coming back to some of the macro impacts that you're seeing. You've obviously been able to withstand that pretty impressively. And when we look at your CCB growth versus corresponding metrics to some of your peers, still quite impressive. You know, in your view, what has perhaps changed? Is it the change really in the last couple of months that has has kind of driven this change?

Speaker Change: To harmonize data to really build the semantic layer and then of course consumed intelligent apps on top and that kind of uplift on our wives deal can be up to 20% to 30% of ACB. It really depends on the size of the BW system and how many data products customized consuming now bdcs not only one.

CCP growth. Um, normally there is then some attrition downwards because of transaction revenue and we actually didn't mention that, but I can mention now that the transactional part of the business was, again, disappointing, frankly, and it's not surprising. I mean, if you look at share prices of temporary Workforce companies, imploding over the last half year or so and the airlines also reporting on travel restrictions and also sometimes because of policy that's not a super good environment again, so that that was dilutive. But the good news is that kind of we always said kind of 800 million ticket is now um further and further diluted in the mix. So that dilutive effect on cloud. Revenue growth is coming down but indeed. Um, normally CCB growth is followed by, um, by Cloud Revenue growth, which is a touch lighter because of that transactional business.

Speaker Change: Is at.

Speaker Change: At on Bdcs of course, now embedded in all of our solutions. So I mean, when you consume into future success factors you can have actually our intelligent app for HR and it and Youll get pre packaged content play package data product semantically to fotis skills of your workforce for hiring pull files for.

Christian Klein: You alluded to some of the sort of the mega deals being a gating factor. And I noticed that the percentage of kind of 5 million plus order entry has been diminishing a little bit. Is is it down to that? Or is it perhaps the complexity of some of the deals that customers are looking to kind of break up into smaller pieces? It would be helpful to get some color on that. And are there any particular verticals that you're seeing this weakness in?

Speaker Change: To really manage our workforce and to end and so that BDC will be also added to all of our Adobe deals and.

Speaker Change: Now on BCP BC I can say that I can take, I can take that question. Look, BTC. I mean first it's good to see that we can leverage BDC and sell it in many ways. I mean first we indeed BTC is part of many wise deals, especially customers, you know, and there are many who still have their BW system on Prem. They are now seeing with BDC, a real business case because they're saying, hey, I'm not only now, Shifting the BW to the cloud. I'm actually now working with data bricks, you know, to harmonize data to really build the semantic layer. And then, of course, consume the intelligent apps.

Christian Klein: Thank you. A really good question. Look, I mean, first, very important. No deal with elongated deal cycles is lost. I mean, obviously, we have seen in the last few weeks that suddenly, you know, customers needed additional approval at the very top. So, deal cycles just become longer because there's much more strict cost controls, you know, especially in the few industries which we mentioned. Now, I mean, when you're now looking into half year two, I mean, for all of these big deals, what we're having, and obviously half year two, we have some of them. I mean, we have clear closing plans.

Speaker Change: When you sum that up obviously, a BDC I expect that this will be in <unk>.

Speaker Change: Few years of course also a business, which can be a few billions pik and absolutely. When you just consider the installed base, but we are having also on the VW funds.

Speaker Change: The next question is from the line of Mohammed Ahmad with Goldman Sachs. Please go ahead.

Speaker Change: Great. Thank you Hi, Christian Hi, Dominic.

Mohammed Ahmad: Well down in the quarter. My question was just again around going back to some of the the macro impacts that you're seeing we've obviously been able to withstand that pretty impressively and when we look at your C V growth versus corresponding metrics to some of your peers still quite impressive.

Christian Klein: We have, of course, you know, also customers leaning in. They like what they see with the business case. They also oftentimes see S&P as a solution to overcome their own financial challenges. They are coming from macro uncertainty. But obviously, you know, can you now, can we certainly say in Q3, we're going to hit, you know, all deals which are now lined up, especially the mega deals? I mean, obviously, that is really hard to predict. And that's why the CCB, I mean, we always said we're going to see a slight deceleration. We can't predict, you know, how big this swing will be.

Mohammed Ahmad: In your view what has perhaps changed a change really in the last couple of months that has has kind of driven this change you alluded to some of the sort of the mega deals being a gating factor and I noticed that the percentage of kind of 5 million plus order entry has been diminishing a little bit is it down to that or is it perhaps that <unk>.

Speaker Change: On top, and that kind of uplift on a wise deal can be up to 20 to 30% of ACV. It really depends on the size of the BW system, and how many data products? The customer is consuming. Now, BTC is not only a wise. Um, add-on BTC is, of course, now embedded in all of our Solutions. I mean, when you consume in the future success factors you can have actually our intelligent app for hi in it and you get prepackaged content, prepackaged data products semantically. Yeah, to for the skills of your Workforce for hiring profiles for, you know, to really manage your Workforce and to end. And so that BDC will be also added to all of our lb deals. And, you know, when you sum that up, obviously a BDC, I, I expect that this will be, you know, in a, in a few years, of course, also a business, which can be a few billion big. I mean, absolutely when you just consider the install base, what we are having also on the BW

Side.

Speaker Change: The next question.

Speaker Change: Just from the line.

On that Mobile in, with Goldman Sachs, please go ahead.

Mohammed Ahmad: <unk> some of the deals that customers are looking to kind of break up into smaller pieces that would be helpful to get some color on that and are there any particular verticals that youre seeing this this weakness in thank you.

Mohammed Ahmad: And really good question look I mean first very important no deal.

Mohammed Ahmad: And gated deal cycles is lost.

Mohammed Ahmad: I mean, obviously, we have seen in the last few weeks that suddenly and our customers needed additional approval.

Mohammed Ahmad: At the very top so deal cycles, just become longer because there is much more strict cost controls.

Christian Klein: But again, the good piece is we have the pipeline and we have the material and the customers responding very positively to the business cases, what we are showing to them.

Especially in a few industries, there, which we mentioned now I mean, when you are now looking into half year. Two I mean for all of these big deals yeah. What we are having and obviously have you to rehash some of them I mean, we have clear closing plants. We have of course also customers leaning in days.

Ben Castillo: The next question is from the line of Ben Castillo with BNP Paribas. Please go ahead. Good evening. Thanks for taking my question. Just coming back to the OPEX trajectory, obviously, you've just grown a bit, you know, some 40-something percent in H1. I know you talked about the stock comp impact there. But nevertheless, that still implies the OPEX and profit growth slows quite materially in H2.

Speaker Change: Up into smaller pieces, it'll be helpful to get some color on that. And are there any particular verticals that you're seeing this? This weakness and thank you.

Mohammed Ahmad: Like what they see with the business case. They also oftentimes the S&P as a solution to overcome their own financial challenges. They are coming from macro uncertainty, but obviously you know can you now can be certainly say in Q3, and we garner hit all deals, which are now lined up especially to make.

Dominik Asam: How much of that is just kind of conservatism on your part versus concrete plans to accelerate the investments in the back half? I guess tying that into your comments around headcount, which, you know, was only up very modestly, Dominic, you mentioned possible continued optimisation going forward. What's the level of hiring that you feel is appropriate to deliver on the growth acceleration there? Thanks.

Mohammed Ahmad: Deals I mean, obviously that is really hard to predict and thats why the <unk> I mean, we always said, we're going to see a slight deceleration, but even a few of them. You know there will be a further percentage point of deceleration in Q3, even that would mean that we can further accelerate our total revenue closed and look the good piece is the.

Dominik Asam: I tried to really mention the things that will make the kind of second half remain to do versus first half a little bit more challenging. You mentioned yourself on the stock-based compensation that we have already taken the lion's share of the improvement because that improvement was against, I'd say, very easy coms in the first half of the year where we had this big impact on a large cash settle, the last tranches, weighing on our results in 24 and that's kind of going away in 25 and that will not reoccur in the second half of the year.

Mohammed Ahmad: The pipeline is there and we are not losing these deals we just now need to be more diligent in managing the closing plans and be even closer to the customer that we are getting these deals and because obviously the CCP hassles swing in her in half year, two and that's hard to predict how big the swing will be but.

Yeah, and really good question. Look, I mean, first very important. There are no deal with elongated deal Cycles is lost. Yeah I mean obviously we have seen in the last few weeks that suddenly you know, customers needed additional approval. Yeah at the very top. So deal Cycles just become longer because there is much more strict cost controls, you know, especially in the, in a few Industries, which we mentioned now. I mean, when when you're now looking into half year 2, I mean, for all of these big deals. Yeah, what we are having and obviously half year 2, we have some of them. I mean we have clear closing plans. We have, of course, you know, also customers leaning in. They like what they see with the business case, they also often times see sap as as a solution to overcome their own Financial challenges. Yeah, coming from macro uncertainty, but obviously you know. Can you now can we certainly say in Q3 and

Mohammed Ahmad: Again, the good pieces, we have the pipeline and we have the material and the customers responding very positively to the business cases, what they what we are showing to them.

Ben Castillo: The next question is from the line of Ben Castillo with BNP Paribas. Please go ahead.

Dominik Asam: Now, very specifically on some investments we need to make, it's about hiring gifts and I don't want to be precise now on how many headcount exactly, but we are talking about several thousands of headcounts, we will still embark. But I also mentioned that this kind of continuous improvement to avoid like massive restructuring models like we had last year, recall was 10,000 people, would probably require some fine tuning every now and then. And we think that Q3 is probably a good point in time to do that. So, and that will also in some geographies, like Germany, of course, implies severance payments that we need to pay.

Speaker Change: We, we going to hit, you know, all deals which are now lined up, especially the maker deals. I mean, obviously, that is really hard to predict and that's why the CCB. I mean, we always said we going to see a slight deceleration. But even assume, you know, there will be a further percentage point of deceleration in Q3. Even that would mean you know that we can further accelerate our to

Ben Castillo: Hi, good evening and thanks for taking my question just coming back to the Opex trajectory of so you're just grown EBIT 40, something percent in H, one and they talked about stock comp impact.

Speaker Change: Total revenue growth and look the good pieces.

Ben Castillo: But nevertheless, it still implies the operating profit growth slows quite materially in H two.

Ben Castillo: How much of that is just kind of conservatism on your part versus concrete plans to accelerate investments in the back half.

Ben Castillo: I guess tying that into your comments around head count, which was only up very modestly.

Ben Castillo: Dominic you mentioned possible continued optimization going forward, what's the level of hiring that you feel is appropriate to deliver on the growth acceleration. Thanks.

The pipeline is there and we are not losing these deals. We just now need to be more, diligent in managing the closing plans, and be even closer to the customer that we are getting these deals in because obviously the CCB has a swing in in, in half year 2. And that's hard to predict, you know, how big the swing will be. But again, the good pieces, we have the pipeline and we have the material and the customers responding very positively to the business cases, what they what we are showing to them

Dominik Asam: So if you say one to 2% of the population, you can make the math on 100,000 plus that we talk about up to 2000. And then you can make a certain assumption about what could happen in Germany, but that or in France or in some other jurisdictions where you have severance and that will also cost some money.

Ben Castillo: Well I mean.

Speaker Change: The next question is from the line of Ben Castillo with BNP, parabas. Please go ahead.

Ben Castillo: I tried to really mentioned the things that will make the tunnels second half remain to do versus.

Ben Castillo: Uh huh.

Dominik Asam: And we deliberately decided to not kind of start disclosing it like we did with the big programs, because we feel that this will be a recurring topic in the coming years. And so in a certain way, it's an upgrade, you could say, because we are really embarking that, digesting that in our numbers without affecting our operating profits by that. So that's what I wanted to allude to. And that's the reason why the second half looks a little bit more manageable. And then I also made the comment that, yeah, we have to be cautious, prudent about H2 in terms of remain to do of all the top line.

Ben Castillo: A little bit more challenging.

Speaker Change: You mentioned that sell from stock based compensation that you are taking.

Speaker Change: Taking the lion's share of the improvement because of that improvement was again I'd say very easy comes in the first half of the year when we had this.

Speaker Change: Big impact on a large cash settled last tranches.

Speaker Change: Weighing on our results in 'twenty, four and that's kind of going away in 'twenty, five and that will not reoccur in the second half of a year.

Speaker Change: Now I'm very specifically on some investments we need to make its about hiring guests incur I don't want to be precise now on how many head count exactly but we're talking about several thousand docs that Congress would still embark.

Ben Castillo: Hi, good evening. Thanks for taking my question. I just coming back to the the Opex trajectory obviously, you've just grown a bit, you know, some 40, something percent in H1. And I know you talked about this top compact impact there, um, but nevertheless, that's still implies the, the, the operating profit growth slows by materially in H2. Um, how much is that just kind of conservatism on your part versus concrete plans to accelerate the investments in the back half? I guess tying that into your comments around headcount, which, you know, is only up very modestly. Um, dominant you mentioned possible. Continued optimization going forward. What's the level of hiring that you feel is appropriate to deliver on the growth acceleration there? Thanks.

Dominik Asam: And we don't want to speculate on kind of most frothy part of our guidance on that for operating profit, but also be able to absorb in case we are lending a little bit more towards the lower half, in case that will materialize that we also have protection and operating profit and be solid on that one. Same true for cash flow, by the way. I mean, cash flow, we also look quite robust, as you've commented, or some of you have commented yourself, for the remain to do. It's a manageable task, I'd say.

Speaker Change: I also mentioned that this kind of continuous improvement to avoid like massive restructuring one offs like we have last year recall was 10000 people.

Yeah, I mean, I try to really, um, mention the things that will make the kind of second half remain to do versus first half.

Speaker Change: Probably require some fine tuning.

Speaker Change: Every now and then and we think that Q3 is probably a good point in time to do that so and that will also in some geographies like Germany of course imply a severance payments that we need to pay so if you say, 1% to 2% of the population you can make the math on our towers.

A little bit more challenging. Um you mentioned this yourself on the stock based compensation that we have already taken the line share of the Improvement because that Improvement was against, I'd say, very easy. Comes in the first half of the Year, where we had this, um, big impact on a large cash settled, the last trenches, um, Weighing on our results in 24 and that's kind of going away in 25 and that will not reoccur in the second half of the year.

Speaker Change: <unk> thousand plus that we talk about up to 2000, and then you can make a certain assumption about what could happen in Germany, but the or.

Johannes Schaller: The next question is from the line of Johannes Schaller with Deutsche Bank. Please go ahead. Yeah, thanks. Good evening. Thanks for taking my question. One for Christian, maybe. I mean, yesterday, we launched the Made for Germany initiative. SAP is unsurprisingly part of that, and I think you also attended the launch event. Can you maybe talk a little bit about that?

Speaker Change: Or in France or in some other jurisdictions, where you have some runs on that will also cost some money and we deliberately decided to not titled start disclosing it like we did with the big programs because we feel that this will be a recurring topic in the coming years and so in a certain way. It's an upgrade you could say because we are we are really embark.

Um, now a very specifically on, on some Investments, we need to make. It's it's about hiring. Yes. And I don't want to be precise now on how many head count. Exactly. But we are talking about several thousands of headcounts. We would still embark

Christian Klein: Just firstly, maybe in terms of SAP's contribution to this initiative, are there any also maybe investments that you're planning as a part of that that's material enough for us to think about? And then secondly, just what you're hoping to get out of this as SAP, it's obviously 600 billion plus massive investments planned over the next few years. So talk a bit about potentially, you know, the financial impact for you, but also what you hope to get out of it non-financially. Thank you. Johannes, happy to answer your question. I mean, look. First of all, in Germany, some definitely some Optimism is needed.

Speaker Change: That digesting that and our numbers are about <unk>.

Speaker Change: Affecting our operating profit by that.

Speaker Change: So that's what I wanted to allude to and that's the reason why the second half looks a little bit more manageable and then I also made the comment that.

Speaker Change: Yeah, we have to be cautious prudent about H two in terms of some remained to do all the top line and we don't want to speculate on the kind of most profit part of our guidance on that for operating profit, but also be able to absorb in case, we are lending a little bit more towards the lower half in case that we're going to.

But um, I also mentioned that this kind of continuous Improvement to avoid like massive restructuring, 1 of like we had last year, recall was 10,000 people, but probably require, um, some fine tuning. Um, every now and then and we think that Q3 is probably a good point in time to do that. So and that will also in some geographies like Germany, of course, implies 7 payments that we need to pay. So if you say 1 to 2% of the population, you can make the math on 100,000 plus that we talked about up to 2000. And then you can make a certain assumption about what would happen in Germany, but that all in France or in some other jurisdictions.

Speaker Change: Realize that we also have protection in the operating profit is solid on that one.

Christian Klein: And I guess this initiative yesterday is also a good starting point that also the private sector sees now some really early positive actions by our new government, which we definitely also want to support by also further highlighting the importance of Germany as one of our investment areas in the future. With regard to SAP, I mean, we have actually very important labs in Munich, in Berlin. We are actually collaborating a lot with the Technical University on supply chain AI. We are doing a lot with obviously the HPI, which is world-class when it comes to AI on the data side.

Speaker Change: Same true for cash flow by the way I mean, the cash flow.

Speaker Change: We also look quite robust as you commented on some of you have commented yourself for the remainder of two it's a manageable task.

You have Severance and that will also cost some money and we deliberately decided to not kind of start disclosing it like we did with a big programs because we feel that this will be a recurring topic um, in the coming years. And so in a certain way it's it's it's an upgrade you could say because we are we are really embarking that digesting that in our numbers without, um, affecting our operating profit, um, by that.

Speaker Change: Okay.

Speaker Change: The next question is from the line of Yohanan Shah with Deutsche Bank. Please go ahead.

Speaker Change: Yeah. Thanks, Good evening, Thanks for taking my question.

Speaker Change: One for Christian maybe I mean yesterday, we launched the Mako, Germany initiatives Sap's Unsurprisingly part of that and I think you also attended the launch event can you maybe talk a little bit about that just firstly, maybe in terms of Sap's contribution to this initiatives are there any also maybe investments that you're planning.

Christian Klein: And we are doing a lot also there in some research in industrial-related AI modules. And that is, of course, a few investment areas we are going to see also going forward.

Ben Castillo: Um, um yeah, we have to be cautious prudent about, um, H2 in terms of Romaine to do of all the top line and we don't want to speculate on the kind of most trophy part of our guidance on that for operating profit but also be able to um absorb in case we are lending a little bit more towards the lower half. In case that wasn't utilized that we also have protection and operating profit and be solid on that 1.

Part of that that's material enough for us to think about and then secondly, just what youre, hoping to get out of this as a P. It's obviously with 600 billion plus massive investments planned over the next few years, so talk a bit about potentially you know the financial impact for you, but also what you hope to get out of it on financially. Thank you.

Christian Klein: For us as SAP, obviously, in this initiative, it's also very important to further push down the over-regulation we have in Europe, because that is clearly a factor which reduces the competitiveness of not only the industry, but also especially the many startups we are having. I mean, we do a lot of development of AI in Palo Alto, in India, etc. But think about all the tech startups we are having in Europe. And with the kind of over-regulation we are having, I mean, they are starting already with a big, big disadvantage compared to some other startups around the world.

Same truth of cash flow. By the way, I mean, cash flow. Um, we also look quite robust as your commented or some of you have commented yourself. Um, for the Romaine to do, it's a manageable tasks, I'd say

Speaker Change: The next question is from the line of Johanna Schaller with Deutsche Bank. Please go ahead.

Yeah, perfect. Thanks. Good evening. Thanks for taking my question. Um,

Speaker Change: Yeah.

Speaker Change: No one is happy to answer your question I mean look.

Speaker Change: First of all in Germany, some definitely some.

Speaker Change: Optimism is needed and I guess this initiative yesterday is also a good starting point at all to the private sector is now some really early positive actions by our new government.

Christian Klein: And then last but not least, obviously, what we are pushing is with Sofenti. I mean, I mentioned Hansold. I mentioned we have a lot of defense customers in Europe. And obviously, with this initiative and a big focus on digital, I mean, obviously, we see another strong momentum coming to us when it comes to transforming defense, where there is anyway a lot of spend these days. But of course, all of these defense customers are also now reaching out and say, hey, we cannot only spend in assets, in more production capabilities. We also definitely need to drive digitization.

Speaker Change: Which we definitely also want to support them.

Speaker Change: They also further highlighting the importance of Germany as one of our investment areas in the future with regard to S&P.

Speaker Change: I mean, we have actually a very important lapse in Munich in Berlin, we are actually calibrating a lot with the technical University on supply chain AI. We are doing a lot with obviously, the <unk>, which is a world class when it comes to AI on the data side and we are doing a lot also there and some research.

Speaker Change: 1 for Christian. Maybe. I mean yesterday, we launched the uh made for Germany initiatives, sap is unsurprisingly part of that. And I think you also attended the launch event can you maybe talk a little bit about that just firstly. Maybe in terms of Sap's contribution to this initiative, are there any also maybe Investments that you're planning, um, as as a part of that, that's material enough for us to to think about and then, secondly, just what you are hoping to get out of this as ASAP. It's obviously with 600 billion plus massive, Investments planned over the next few years. So talk a bit about potentially, you know, the financial impact for you but also what you hope to

Get out of it. Non financially, thank you.

Speaker Change: um, you know, and as happy to answer your question, I mean, look, um,

first of all in Germany, um, some definitely some

Speaker Change: Search in.

Christian Klein: And that is, of course, the Sofenti aspect is, of course, also a huge aspect where SAP can contribute to the competitiveness of Europe, especially in areas like public sector and, of course, also defense.

Speaker Change: Industrial related AI modules, and so and that is of course, an overview investment areas. We are going to see also going forward for us as SVP. Obviously in this initiative. It's also very important to further push.

Speaker Change: optimism is needed. And I guess this initiative yesterday is also a good starting point that also the private sector, you know, sees, now, some really early positive actions by our new government.

Speaker Change: Down the overall regulation, we have in Europe, because that is clearly a factor which reduces the competitiveness of.

Michael Turrin: The next question is from the line of Michael Turrin with Wells Fargo Securities. Please go ahead. Hey, great. Good afternoon. Thanks for taking the question. Christian, you mentioned Sapphire as the main highlight in Q2. Can you speak more around any business impacts you're seeing on the back of that event?

Speaker Change: Only an hour.

Speaker Change: The industry, but also especially the many startups we are having I mean, we do a lot of development of AI in Palo Alto, and India et cetera, but think about all the tech start ups, we are having in Europe and with the kind of overall regulation. We are having I mean theyre starting already now with a big big disadvantage compared to some other stop at the startup.

Christian Klein: Any commentary around pipeline, new product impacts or adoption trends and how that sets you up for the rest of the year? And just a small follow-on on the U.S. public sector commentary, are you confident any elongation impacts you're seeing there currently are appropriately factored into how you're looking at the rest of the year from a guidance perspective? Thank you. Yeah, I mean, Sapphire, I mean, it's always the event of the year where we actually generate the pipeline to have enough coverage to close out the year, according to our guidance. And this was definitely the case this year.

Speaker Change: So on the World and then last part not least obviously and what we are pushing as with sovereignty.

Speaker Change: I mentioned 10, Salt I mentioned, we have a lot of defense customers in Europe, and obviously with this initiative and a big focus on digital I mean, obviously, we see you know were not as strong and more momentum coming to us when it comes to transforming defense, but as any way a lot of spend these days so but of course all of these defense customer for us on our way.

Speaker Change: Um which we definitely also want to support uh by also further highlighting the importance of of Germany as 1 of our investment areas in the future with regard to sap. I mean, we have actually a very important labs in Munich in Berlin. We are actually collaborating a lot with the Technical University on supply chain, AI. We are doing a lot with, obviously, the HPI, which is, uh, world class when it comes to AI on the data side and we are doing a lot. Also there, in some um research in industrial related, AI modules. And so and that is of course, you know a few investment areas. We are going to see. Also going forward for us as SCP obviously in this initiative. It's also very important to further push uh down the over regulation we have in Europe because that is clearly a factor which reduces the competitiveness of, you know, not only, you know,

Speaker Change: <unk> out and say, Hey, we cannot only announced spend in assets and more production.

Christian Klein: I mean, it was a few billion of pipeline, which we added on top of the Sapphire, which but again, yeah, which is, you know, every year needed.

Speaker Change: Capabilities, we also definitely need to drive Digitization and that is of course. The sovereignty aspect is of course also a huge aspect what S&P can could contribute to the competitiveness of Europe, especially in areas like public sector and of course also defense.

Christian Klein: But this year, I would say it was definitely a very, very positive outcome when you just look at the pipeline we generated out of Orlando and of course, one week later out of Madrid. Now on the public sector, I mean, this is of course, when you think about the US public sector, I mean, obviously, you know, things have become a bit more difficult with DOGE, with certain agencies. And of course, the decision cycles and who is now deciding, you know, to move forward on a certain project. I mean, of course, there we are also, of course, working extremely close together with DOGE, with a few agencies.

Speaker Change: Okay.

Speaker Change: The next question is from the line of Michael <unk> with Wells Fargo Securities. Please go ahead.

Speaker Change: Hey, great. Good afternoon. Thanks for taking the question Christian you mentioned Sapphire is the main highlight in Q2 can you speak more around any business impacts you're seeing on the back of about Iran.

Speaker Change: Any commentary around pipeline, new product impacts or adoption trends and how that sets you up for the rest of the year and just a small follow on on the U S. Public sector commentary are you confident any elongation impacts you're seeing there currently are appropriately factored into how youre looking at the rest of the year from a guidance perspective.

Christian Klein: And we just hope that in half year two, that pays off. But still, I have to say, of course, this is one of the areas where we have to see that we can hopefully accelerate sales cycles in half year two and we are on it.

Speaker Change: Uh, the industry, but also, especially the many startups. We are having. I mean, we do a lot of development of AI in Palo Alto in India, Etc, but think about all the tech startups. We are having in Europe. And with the kind of over regulation, we are having. I mean, they are starting already, you know, with a big, big disadvantage, uh, compared to some other start startups around the world. And then last but not least, obviously what we are pushing is with sovereignty. I mean, I mentioned hensold. I mentioned we have a lot of Defense customers in Europe and obviously, with this initiative and a big focus on digital, I mean obviously we see you know, another strong and momentum coming to us when it comes to transforming defense, where there is. Anyway, a lot of spend these days so but of course, all of these defense customers are also now reaching out and say, hey, we cannot only, you know, spend in Assets in more production, uh, capabilities. We also definitely need to drive digitization. And that is, of course, the software aspect is, of course, also a huge

Speaker Change: Aspect word sep can contribute to the competitiveness of Europe especially in areas like public sector. And of course also defense,

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Sapphire I mean, it's always the of end of the year, where we actually generate.

Christian Klein: That is the situation in the US public sector.

Speaker Change: The next question is from the line of Michael Turran with Wells Fargo Securities. Please go ahead.

Speaker Change: Pipeline to have enough coverage to close out the year.

Unknown Executive: Awesome.

Unknown Executive: Well, thank you, Christiane, Dominik, and this concludes our call for today. Thank you everyone for joining. Thanks a lot. Have a great day. Bye bye.

Speaker Change: Coding to our guidance.

Speaker Change: This was definitely the case this year I mean, it was a.

Speaker Change: A few billion of pipeline, which we added on top off the sapphire, which but again the averages.

Unknown Executive: Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.

Speaker Change: Every year needed, but this year I would say it was definitely a very very positive outcome. When you just look at the pipeline we generated.

Speaker Change: Out of Orlando and of course, one week laid out of moderate now on on the public sector. I mean this is of course here. When you think about the U S. Public sector. I mean, obviously, you know things are have become a bit more difficult.

Michael Turran: Hey great. Good afternoon. Thanks for taking the question. Christian, you mentioned Sapphire is the main highlight in Q2. Can you speak more around any business impacts you're seeing on, on the back of that event any comments area around pipeline new product impacts or adoption Trends? And how that sets you up for the rest of the year and just a small follow on on the US? Public sector commentary. Are you confident any elongation impacts you're seeing there currently are? Appropriately. Factored into how you're looking at the rest of the year from a guidance perspective. Thank you.

Speaker Change: Oh sure with certain agencies and of course, we are decision cycles and who is now deciding now to move forward almost certain project.

Speaker Change: I mean of course, there we also of course working extremely close together.

Michael Turran: Here where we actually generate, um, the pipeline. Yeah, to have enough coverage to close out the year according to our guidance. And this was definitely the case this year. I mean, it was a few billion of pipeline, which we added on top of the sapphire which, but again, yeah, which is

Speaker Change: I'll start with a few agencies and we just hope that in half year, two that pays off but still I have to say of course. This is one of the areas, where we definitely have to see that we can hopefully accelerate site sales cycles in the half year, two and when we are on it.

Speaker Change: That is the situation in the U S public sector.

Speaker Change: So I think your question Dominic and this concludes our call for today. Thank you everyone for joining.

Michael Turran: You know, every year needed. But this year I would say it was definitely a very, very positive outcome when when you just look at the pipeline, which generated um, out of Orlando and of course, 1 week later out of Madrid. Now, on on the public sector. I mean, this is of course yeah. When you think about the US public sector, I mean obviously, you know, things or have become a bit more difficult.

Speaker Change: Thanks, a lot have a great day bye.

Speaker Change: Bye bye.

Speaker Change: Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone. Thank you for joining and have a pleasant day.

Michael Turran: With Doge. Yeah, with certain agencies. And of course, yeah, decision cycles and who is now deciding, you know, to move forward on a certain project. I mean, I mean, of course, there we are. Also, of course, working extremely close together. Yeah, with with Doge with a few agencies and we just hope that in in half year 2. Yeah, that that pays off but still, I have to say, of course this is 1 of the areas where we definitely have to see that we can hopefully accelerate cycle, uh, sales Cycles in a half year too. And when we are on it. Yeah. And um, yeah, that is the situation in in the US public sector.

Awesome. Well, thank you Christian Dominic and this concludes our call for today. Thank you, everyone for joining.

Speaker Change: Thanks a lot. Have a great day. Bye bye.

Speaker Change: Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.