SAP Q4 2025 SAP SE Earnings Call - Financial Analysts Conference | AllMind AI Earnings | AllMind AI
Q4 2025 SAP SE Earnings Call - Financial Analysts Conference
Speaker #3: Looking at the 50 largest deals in Q4, 90% of them included AI or SAP Business Data Cloud. We also saw the number of customers using our AI Copilot tool grow nine-fold over the course of the year.
Speaker #3: Now, let's have a broader look at our financial performance. Q4 was the best bookings quarter of 2025, ahead of our expectations. This resulted in a total cloud backlog of €77 billion, up 30%.
Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the SAP Q4 and Full Year 2025 Earnings Conference Call. 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 one on your touch-tone telephone. I would now like to turn the conference over to Alexandra Steiger, Global Head of Investor Relations. Please go ahead.
Speaker #3: This also clearly shows the underlying momentum of our business, as well as our potential in the future. In addition, we achieved our 2025 financial outlook for cloud revenue, as well as cloud and software revenue.
Speaker #3: A great performance, considering the macroeconomic challenges we faced in half-year one. The ongoing transformation of SAP's operating model, combined with applying AI across the company, allowed us to even beat our operating profit and free cash flow outlook in 2025.
Alexandra Steiger: Good morning, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein and CFO Dominik Asam. On this call, we will discuss SAP's fourth quarter and full year results for 2025. You can find the deck supplementing this call, as well as our quarterly statement on our Investor Relations website. 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 and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to the risk factor section of our annual reports on Form 20-F for 2024.
Alexandra Steiger: Good morning, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein and CFO Dominik Asam. On this call, we will discuss SAP's fourth quarter and full year results for 2025. You can find the deck supplementing this call, as well as our quarterly statement on our Investor Relations website. 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 and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to the risk factor section of our annual reports on Form 20-F for 2024.
Q4 2025 SAP SE Earnings Call - Financial Analysts Conference
Speaker #3: Some of you might remember, back in 2020, we started our disruptive cloud transformation with very ambitious targets for 2025. And today, I'm happy to say we have delivered what we promised, and even outperformed this ambition.
Speaker #3: But more importantly, the great technological achievements of our cloud transformation are now giving SAP the right to win with business AI. It is the time to thank our customers, partners, and more than 100,000 colleagues worldwide.
Speaker #3: For the trust in our strategy, and for making the transformation happen. For sure, the biggest in SAP's history. Let me directly turn to Q4 numbers, where I expect some questions.
Alexandra Steiger: Unless otherwise stated, all numbers on this call are non-IFRS, and growth rates and percentage point changes are non-IFRS, year-on-year on constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. And with that, I would like to turn the call over to Christian.
Unless otherwise stated, all numbers on this call are non-IFRS, and growth rates and percentage point changes are non-IFRS, year-on-year on constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. And with that, I would like to turn the call over to Christian.
Speaker #3: Our current cloud backlog—in Q4, it grew 25%. Back in Q3, we expected to reach 26%. Before I explain the deviation, let me outline that in Q4, new bookings came in clearly ahead of plan, and we saw strong customer retention, low churn, and stable discount rates.
Christian Klein: Thank you, Alexandra, and a warm welcome to everyone joining this call. In countless conversations with business leaders in Q4 and at the World Economic Forum, it became clear customers are facing geopolitical uncertainty, macroeconomic volatility, and they would like to leverage AI to make their companies more resilient and more productive, driving growth as well as cost efficiencies. At the same time, it is very encouraging that more and more customers and partners are turning to SAP to gain real business value from AI. Why? Because they realize that they don't gain value by developing a number of custom AI agents or by applying commodity large language models on top of transactional business applications. The formula for gaining real value from AI as an enterprise is becoming clear. It's important to reimagine first how AI will change existing business models and mission-critical business processes.
Christian Klein: Thank you, Alexandra, and a warm welcome to everyone joining this call. In countless conversations with business leaders in Q4 and at the World Economic Forum, it became clear customers are facing geopolitical uncertainty, macroeconomic volatility, and they would like to leverage AI to make their companies more resilient and more productive, driving growth as well as cost efficiencies. At the same time, it is very encouraging that more and more customers and partners are turning to SAP to gain real business value from AI. Why? Because they realize that they don't gain value by developing a number of custom AI agents or by applying commodity large language models on top of transactional business applications. The formula for gaining real value from AI as an enterprise is becoming clear. It's important to reimagine first how AI will change existing business models and mission-critical business processes.
Speaker #3: This resulted in a 30% increase to $77 billion total cloud backlog, an impressive growth on an already large base. Despite the strong Q4 performance, two factors led to the deviation.
Speaker #3: First, we closed a higher share of significantly large deals in Q4 compared to our forecast in October, which is great for the total cloud backlog.
Speaker #3: But large customers often don't move their mission-critical ERP in the first year. These deals always have more back-end loaded ramps and, as a consequence, a limited impact on current cloud backlog in the first 12 months.
Speaker #3: The good news? The average contract duration remained stable, so we expect higher revenue contributions from these deals over the next few years. Second, we closed a higher share of government deals in Q4 that included a termination for convenience by law.
Christian Klein: To boost process automation and efficiency, AI agents must be embedded in business processes and trained with context-rich business data that is not available to large language model providers. This is a unique combination only SAP can deliver because our business suite provides us with access to the world's largest volume of business data, and we directly infuse our agentic AI layer in the most mission-critical business processes of a company. This momentum of SAP Business AI is also clearly visible in our Q4 numbers. More than 2/3 of our Q4 cloud order entry includes business AI, increasing by more than 20 percentage points compared with Q3. Looking at the 50 largest deals in Q4, 90% of them included AI or SAP Business Data Cloud. We also saw the number of customers using our AI Copilot tool growing ninefold over the course of the year.
To boost process automation and efficiency, AI agents must be embedded in business processes and trained with context-rich business data that is not available to large language model providers. This is a unique combination only SAP can deliver because our business suite provides us with access to the world's largest volume of business data, and we directly infuse our agentic AI layer in the most mission-critical business processes of a company. This momentum of SAP Business AI is also clearly visible in our Q4 numbers. More than 2/3 of our Q4 cloud order entry includes business AI, increasing by more than 20 percentage points compared with Q3. Looking at the 50 largest deals in Q4, 90% of them included AI or SAP Business Data Cloud. We also saw the number of customers using our AI Copilot tool growing ninefold over the course of the year.
Speaker #3: Such deals are not reflected in the CCB. So, while we even overperformed on bookings and are very satisfied with the outcome of Q4, the combination of both effects resulted in a 1 percentage point difference compared to what we expected in October.
Speaker #3: And consequently, a slight shift of cloud revenue from 2026 to 2027 and beyond. Now, the great bookings performance, including some impressive wins in Q4, added us L'Oréal and Groupe are embarking on the Rise with SAP journey. Deloitte, Pirelli, RTX, Nokia, JBL, and the US Navy chose Wise too.
Speaker #3: While Toyota and Daimler Truck are even expanding their ongoing Wise journey, Lockheed Martin went live on Wise with one of their business areas, a further step in our multi-year partnership.
Speaker #3: It will continue in 2026 with our human capital management solutions, as they keep transforming their workforce. Across all sectors, companies selected SAP to grow and transform their business.
Christian Klein: Now, let's have a broader look at our financial performance. Q4 was the best bookings quarter of 2025 ahead of our expectations. This resulted in a total cloud backlog of EUR 77 billion, up 30%. This also clearly shows the underlying momentum of our business as well as our potential in the future. In addition, we achieved our 2025 financial outlook for cloud revenue as well as cloud and software revenue. A great performance considering the macroeconomic challenges we faced in half year one. The ongoing transformation of SAP's operating module, combined with applying AI across the company, allowed us to even beat our operating profit and free cash flow outlook in 2025. Some of you might remember, back in 2020, we started our disruptive cloud transformation with very ambitious targets for 2025. And today, I'm happy to say we have delivered what we promised and even outperformed this ambition.
Now, let's have a broader look at our financial performance. Q4 was the best bookings quarter of 2025 ahead of our expectations. This resulted in a total cloud backlog of EUR 77 billion, up 30%. This also clearly shows the underlying momentum of our business as well as our potential in the future. In addition, we achieved our 2025 financial outlook for cloud revenue as well as cloud and software revenue. A great performance considering the macroeconomic challenges we faced in half year one. The ongoing transformation of SAP's operating module, combined with applying AI across the company, allowed us to even beat our operating profit and free cash flow outlook in 2025. Some of you might remember, back in 2020, we started our disruptive cloud transformation with very ambitious targets for 2025. And today, I'm happy to say we have delivered what we promised and even outperformed this ambition.
Speaker #3: KPMG, Snowflake, and Müller, a large German retailer, just to name a few. On business AI, new customers included names such as Tech Mahindra, Mondelez, Kirin, and Sun Chemical.
Speaker #3: In healthcare, Fresenius selected SAP Business AI to sustainably improve patient care. We also saw the Bosch Group select SAP Business AI in Q4 to help boost innovation across all four of its business sectors.
Speaker #3: This momentum is translating into business AI adoption. Our customers are already achieving impressive outcomes—just one example: at Siemens, consultants can reinvest 25% of their weekly working time into higher value activities thanks to a tool for consultants.
Speaker #3: These impressive wins aren't just a list of logos. They are the result of our focused strategy execution throughout the year. Looking back at 2025, we made huge progress.
Speaker #3: Let me name a few highlights. First, our cloud transformation is in full swing. Customers representing 40% of our support revenue base have now initiated their move to Grow with SAP offerings.
Christian Klein: But more importantly, the great technological achievements of our cloud transformation are now giving SAP the way to win with business AI. It is the time to thank our customers, partners, and more than 100,000 colleagues worldwide for the trust in our strategy and for making the transformation happen, for sure the biggest in SAP's history. Let me directly turn to Q4 number, where I expect some questions. Our current cloud backlog in Q4, it grew 25%. Back in Q3, we expected to reach 26%. Before I explain the deviation, let me outline that in Q4, new bookings came in clearly ahead of plan, and we saw strong customer retention, low churn, and stable discount rates. This resulted in a 30% increase to EUR 77 billion total cloud backlog, an impressive growth on an already large base. Despite the strong Q4 performance, two factors led to the deviation.
But more importantly, the great technological achievements of our cloud transformation are now giving SAP the way to win with business AI. It is the time to thank our customers, partners, and more than 100,000 colleagues worldwide for the trust in our strategy and for making the transformation happen, for sure the biggest in SAP's history. Let me directly turn to Q4 number, where I expect some questions. Our current cloud backlog in Q4, it grew 25%. Back in Q3, we expected to reach 26%. Before I explain the deviation, let me outline that in Q4, new bookings came in clearly ahead of plan, and we saw strong customer retention, low churn, and stable discount rates. This resulted in a 30% increase to EUR 77 billion total cloud backlog, an impressive growth on an already large base. Despite the strong Q4 performance, two factors led to the deviation.
Speaker #3: Cloud ERP using the wise, and in the go-to-market side, we established a partner-first approach for the mid-market. And our focus on public cloud pays off.
Speaker #3: With order entry growing more than five times faster than private cloud in 2025, it is now almost half of our order entry. We have also expanded our software and cloud capabilities and continue to see high demand for our offerings in the public sector.
Speaker #3: In Q4, for example, we closed a new one-gov agreement with the US General Services Administration and with HMRC in the UK. Finally, our innovations in SAP Business Data Cloud and Business AI are seeing strong traction.
Speaker #3: SAP Business Data Cloud secured around €2 billion in total contract value in less than a year since its launch. And as I mentioned earlier, more than two-thirds of our Q4 cloud order entry included AI.
Christian Klein: First, we closed a higher share of significantly large deals in Q4 compared to our forecast in October, which is great for the total cloud backlog. But large customers often don't move their mission-critical ERP in the first year. These deals always have more back-end loaded ramps and, as a consequence, a limited impact on current cloud backlog in the first 12 months. The good news, the average contract duration remained stable, so we expect higher revenue contributions from these deals over the next few years. Second, we closed a higher share of government deals in Q4 that included a termination for convenience by law. Such deals are not reflected in the CCB.
First, we closed a higher share of significantly large deals in Q4 compared to our forecast in October, which is great for the total cloud backlog. But large customers often don't move their mission-critical ERP in the first year. These deals always have more back-end loaded ramps and, as a consequence, a limited impact on current cloud backlog in the first 12 months. The good news, the average contract duration remained stable, so we expect higher revenue contributions from these deals over the next few years. Second, we closed a higher share of government deals in Q4 that included a termination for convenience by law. Such deals are not reflected in the CCB.
Speaker #3: Now, let's turn to our growth ambition for the year 2026 and beyond. Over the last years, we have built a solid foundation for future growth.
Speaker #3: Thanks to the successful execution of our transformation. Building on this momentum, we are confident that we will further expand our market share through cloud revenue and accelerate total revenue growth through 2027.
Speaker #3: This confidence is based on several key growth drivers. First, coming back to our total cloud backlog of €77 billion. This grew by 30%.
Christian Klein: So, while we even overperformed on bookings and are very satisfied with the outcome of Q4, the combination of both effects resulted in a one percentage point difference to what we expected in October, and consequently, a slight shift of cloud revenue from 2026 to 2027 and beyond. Now, the great bookings performance included some impressive wins in Q4. adidas, L’Oréal, and H&M Group are embarking on the RISE with SAP journey. Deloitte, Pirelli, RTX, Nokia, Jabil, and the US Navy chose RISE too, while Toyota and Daimler Truck are even expanding their ongoing RISE journey. Lockheed Martin went live on RISE with one of their business areas, a further step in our multi-year partnership. It will continue in 2026 with our human capital management solutions as they keep transforming their workforce.
So, while we even overperformed on bookings and are very satisfied with the outcome of Q4, the combination of both effects resulted in a one percentage point difference to what we expected in October, and consequently, a slight shift of cloud revenue from 2026 to 2027 and beyond. Now, the great bookings performance included some impressive wins in Q4. adidas, L’Oréal, and H&M Group are embarking on the RISE with SAP journey. Deloitte, Pirelli, RTX, Nokia, Jabil, and the US Navy chose RISE too, while Toyota and Daimler Truck are even expanding their ongoing RISE journey. Lockheed Martin went live on RISE with one of their business areas, a further step in our multi-year partnership. It will continue in 2026 with our human capital management solutions as they keep transforming their workforce.
Speaker #3: It outperformed our current cloud backlog growth by 5 percentage points. In short, we have a significant amount of our future cloud revenue in the books.
Speaker #3: Next four years, we are given the RAMs of the large deals over the— and increasingly building a strong foundation for total revenue acceleration through 2027.
Speaker #3: Second, we will continue converting our installed base to the cloud with a multiplier of two to three X. Considering our support revenue base of €10.5 billion, this represents a multi-billion euro cloud revenue opportunity for us.
Speaker #3: Third, the vast majority of our cloud customers are expanding their SAP footprint across the SAP Business Suite. They now clearly see the value of best of suite over best of breed.
Speaker #3: Especially in the age of AI, they leverage the best-of-suite approach not only to run their business processes end to end, but they also seek a harmonized data platform that provides the foundation for high-value business AI.
Christian Klein: Across all sectors, companies selected GROW with SAP to transform their business: KPMG, Snowflake, and Müller, a large German retailer, just to name a few. On business AI, new customers included names such as Tech Mahindra, Mondelēz, Kirin, and Sun Chemical. In healthcare, Fresenius selected SAP Business AI to sustainably improve patient care. We also saw the Bosch Group select SAP Business AI in Q4 to help boost innovation across all four of its business sectors. This momentum is translating into business AI adoption. Our customers are already achieving impressive outcomes. Just one example: at Siemens, consultants can reinvest 25% of their weekly working time into higher value activities thanks to Tool for Consultants. These impressive wins aren't just a list of logos. They are the result of our focused strategy execution throughout the year. Looking back at 2025, we made huge progress. Let me name a few highlights.
Across all sectors, companies selected GROW with SAP to transform their business: KPMG, Snowflake, and Müller, a large German retailer, just to name a few. On business AI, new customers included names such as Tech Mahindra, Mondelēz, Kirin, and Sun Chemical. In healthcare, Fresenius selected SAP Business AI to sustainably improve patient care. We also saw the Bosch Group select SAP Business AI in Q4 to help boost innovation across all four of its business sectors. This momentum is translating into business AI adoption. Our customers are already achieving impressive outcomes. Just one example: at Siemens, consultants can reinvest 25% of their weekly working time into higher value activities thanks to Tool for Consultants. These impressive wins aren't just a list of logos. They are the result of our focused strategy execution throughout the year. Looking back at 2025, we made huge progress. Let me name a few highlights.
Speaker #3: As a result, in Q4 alone, almost two-thirds of our deals exceeding €1 million involved four or more lines of business—a remarkable increase of 25 percentage points.
Speaker #3: But we see this not only in increased up- and cross-selling numbers, but also in market share gains. Overall, we outperformed the cloud market by 10 percentage points in 2025.
Speaker #3: Fourth, it is not just the world's largest enterprises that rely on SAP. With our business suite in the public cloud, SAP's mid-market business is growing too.
Speaker #3: We expand in the mid-market, and we are winning new customers through our partner-first strategy and the significant expansion of our reseller ecosystem. This channel is already growing more than one and a half times faster than our direct business.
Christian Klein: First, our cloud transformation is in full swing. Customers representing 40% of our support revenue base have now initiated their move to cloud ERP using the RISE and GROW with SAP offerings. On the go-to-market side, we established a partner-first approach for the mid-market, and our focus on public cloud pays off, with order entry growing more than 5 times faster than private cloud in 2025, now almost half of our order entry. We have also expanded our software and cloud capabilities, and continue to see high demand for our offerings in the public sector. In Q4, for example, we closed a new one-gov agreement with the US General Services Administration and with the HMRC in the UK. Finally, our innovations in SAP Business Data Cloud and business AI are seeing strong traction.
First, our cloud transformation is in full swing. Customers representing 40% of our support revenue base have now initiated their move to cloud ERP using the RISE and GROW with SAP offerings. On the go-to-market side, we established a partner-first approach for the mid-market, and our focus on public cloud pays off, with order entry growing more than 5 times faster than private cloud in 2025, now almost half of our order entry. We have also expanded our software and cloud capabilities, and continue to see high demand for our offerings in the public sector. In Q4, for example, we closed a new one-gov agreement with the US General Services Administration and with the HMRC in the UK. Finally, our innovations in SAP Business Data Cloud and business AI are seeing strong traction.
Speaker #3: And we will substantially increase the contribution from our ecosystem. Finally, let's conclude with the growth driver that has the highest potential and is, of course, of the greatest strategic relevance by far.
Speaker #3: Our business AI and business data cloud. The traction from 2025 is just the beginning. Many customers have seen that an LLM alone is not enough.
Speaker #3: They need modules, business data, and context to build high-value AI use cases and derive business value. So let me explain to you how we drive growth with SAP's unique combination of apps, data, and AI.
Speaker #3: First, tool, we are reinventing the user experience and the way people work across all our apps with our Copilot tool. Unlike other digital coworkers, tool doesn't just access the world's leading LLMs.
Christian Klein: SAP Business Data Cloud secured around EUR 2 billion in total contract value in less than a year since its launch. As I mentioned earlier, more than 2/3 of our Q4 cloud order entry included AI. Now, let's turn to our growth ambition for the year 2026 and beyond. Over the last years, we have built a solid foundation for future growth thanks to the successful execution of our transformation. Building on this momentum, we are confident that we will further expand our market share, grow cloud revenue, and accelerate total revenue growth through 2027. This confidence is based on several key growth drivers. First, coming back to our total cloud backlog of EUR 77 billion, this grew by 30%. It outperformed our current cloud backlog growth by five percentage points. In short, we have a significant amount of our future cloud revenue in the books.
SAP Business Data Cloud secured around EUR 2 billion in total contract value in less than a year since its launch. As I mentioned earlier, more than 2/3 of our Q4 cloud order entry included AI. Now, let's turn to our growth ambition for the year 2026 and beyond. Over the last years, we have built a solid foundation for future growth thanks to the successful execution of our transformation. Building on this momentum, we are confident that we will further expand our market share, grow cloud revenue, and accelerate total revenue growth through 2027. This confidence is based on several key growth drivers. First, coming back to our total cloud backlog of EUR 77 billion, this grew by 30%. It outperformed our current cloud backlog growth by five percentage points. In short, we have a significant amount of our future cloud revenue in the books.
Speaker #3: It also has broad access to business data. No matter the task, the tool is setting new standards for user experience, simplicity, and productivity, and will just redefine the future of work.
Speaker #3: Second, embedded and extensible AI agents. We are embedding AI agents across the main business processes of every company. In doing so, we are helping our customers realize efficiency through automation, make better decisions, and gain agility across their value chain with connected agents.
Speaker #3: To extend where differentiation is needed, we provide a powerful agent builder with capabilities that are unique to SAP. Such as the access to a semantical BDC data product and the ability to benchmark and infuse agents directly into the business process layer within our apps.
Speaker #3: Our Pro Code offering serves the needs of our developers, while our business users can use the agent builder in a deploy-and-manage AI low-code mode to easily build agents.
Christian Klein: Given the VAMs of the large deals over the next four years, we are increasingly building a strong foundation for total revenue acceleration through 2027. Second, we will continue converting our installed base to the cloud with a multiplier of 2 to 3x. Considering our support revenue base of EUR 10.5 billion, this represents a multi-billion euro cloud revenue opportunity for us. Third, the vast majority of our cloud customers are expanding their SAP footprint across the SAP Business Suite. They now clearly see the value of best of suite over best of suite, especially in the age of AI. So they leverage the best of suite approach not only to run their business processes end to end, but they also seek a harmonized data platform that provides the foundation for high-value business AI.
Given the VAMs of the large deals over the next four years, we are increasingly building a strong foundation for total revenue acceleration through 2027. Second, we will continue converting our installed base to the cloud with a multiplier of 2 to 3x. Considering our support revenue base of EUR 10.5 billion, this represents a multi-billion euro cloud revenue opportunity for us. Third, the vast majority of our cloud customers are expanding their SAP footprint across the SAP Business Suite. They now clearly see the value of best of suite over best of suite, especially in the age of AI. So they leverage the best of suite approach not only to run their business processes end to end, but they also seek a harmonized data platform that provides the foundation for high-value business AI.
Speaker #3: Third, we have always differentiated ourselves by our deep industry and business process knowledge and coded high-value, industry-specific applications. Now, we are reimagining these strategic industry capabilities with AI.
Speaker #3: Together, with some industry-leading customers, we are already redefining mission-critical parts of an industry value chain by developing next-generation AI solutions—like redefining patient care in healthcare, delivering higher predictability and supply chain resilience in manufacturing, and running smarter trade promotions and personalizing the shopping experience in retail.
Speaker #3: Some of these industry AI use cases were already crucial to the success of our Q4 deals. Fourth, BDC addresses one of the biggest roadblocks for AI adoption that our customers face today.
Christian Klein: As a result, in Q4 alone, almost 2/3 of our deals exceeding EUR 1 million involved 4 or more lines of businesses, a remarkable increase of 25 percentage points. But we see this not only in increased up and cross-selling numbers, but also in market share gains. Overall, we outperformed the cloud market by 10 percentage points in 2025. Fourth, it is not just the world's largest enterprises that rely on SAP. With our business suite in the public cloud, SAP's mid-market business is growing too. We expand in the mid-market, and we are winning new customers through our partner-first strategy and the significant expansion of our reseller ecosystem. This channel is already growing more than 1.5 times faster than our direct business, and we will substantially increase the contribution from our ecosystem.
As a result, in Q4 alone, almost 2/3 of our deals exceeding EUR 1 million involved 4 or more lines of businesses, a remarkable increase of 25 percentage points. But we see this not only in increased up and cross-selling numbers, but also in market share gains. Overall, we outperformed the cloud market by 10 percentage points in 2025. Fourth, it is not just the world's largest enterprises that rely on SAP. With our business suite in the public cloud, SAP's mid-market business is growing too. We expand in the mid-market, and we are winning new customers through our partner-first strategy and the significant expansion of our reseller ecosystem. This channel is already growing more than 1.5 times faster than our direct business, and we will substantially increase the contribution from our ecosystem.
Speaker #3: Data silos. BDC brings together SAP and non-SAP data, providing our customers with the harmonized data they need to enable their agentic AI vision. In 2026, we will heavily accelerate the development of data products to enrich the semantic layer for all of our customers.
Speaker #3: And fifth, accelerated ERP migration. Often, customers spend 10x more on their ERP migration compared to what they spend on their ERP software. With our integrated, AI-powered migration toolchain in Device Journey, we are shrinking this ratio by cutting the migration costs and making it faster and easier for customers to realize value from their transformation.
Speaker #3: Net-net, in all of the focus areas, SAP has a clear way to win. Together, they'll secure SAP's position as the leading business AI company.
Christian Klein: Finally, let's conclude with the growth driver that has the highest potential and is, of course, the greatest strategic relevance by far: our Business AI and Business Data Cloud. The traction from 2025 is just the beginning. Many customers have seen that an LLM alone is not enough. They need modules, business data, and context to build high-value AI use cases and derive business value. So let me explain to you how we drive growth with SAP's unique combination of apps, data, and AI. First, Joule. We are reinventing the user experience and the way people work across all our apps with our copilot tool. Unlike other digital coworkers, Joule doesn't just access the world's leading LLMs. It also has broad access to business data. No matter the task, Joule is setting new standards for user experience, simplicity, productivity, and will just redefine the future of work.
Finally, let's conclude with the growth driver that has the highest potential and is, of course, the greatest strategic relevance by far: our Business AI and Business Data Cloud. The traction from 2025 is just the beginning. Many customers have seen that an LLM alone is not enough. They need modules, business data, and context to build high-value AI use cases and derive business value. So let me explain to you how we drive growth with SAP's unique combination of apps, data, and AI. First, Joule. We are reinventing the user experience and the way people work across all our apps with our copilot tool. Unlike other digital coworkers, Joule doesn't just access the world's leading LLMs. It also has broad access to business data. No matter the task, Joule is setting new standards for user experience, simplicity, productivity, and will just redefine the future of work.
Speaker #3: Finally, to be credible in the AI market, we role model the use of business AI and kicked off an extensive AI transformation program internally, where we are using AI across all functions to unlock significant long-term operating profit potential.
Speaker #3: In R&D, we see huge efficiency gains as the role of a developer is shifting from traditional code writing toward designing, guiding, and validating AI-generated solutions.
Speaker #3: In sales, business AI will help us to better quote, price, and identify opportunities. In HR, business AI will help us better plan and transform our workforce.
Speaker #3: Every SAP leader across every function is infusing AI into their business and driving the reskilling of our workforce. Because AI isn't just about technology.
Speaker #3: It first needs to be enabled by our people. Altogether, our goal is to achieve a one-way of around €2 billion in real cost efficiencies by the end of 2028.
Christian Klein: Second, embedded and extensible AI agents. We are embedding AI agents across the main business processes of every company. Doing so, we are helping our customers to realize efficiency through automation, make better decisions, and gain agility across their value chain with connected agents. To extend where differentiation is needed, we provide a powerful agent builder with capabilities that are unique to SAP, such as the access to a semantic BDC data product and the ability to benchmark and infuse agents directly into the business process layer within our apps. Our GrowCode offering serves the needs of our developers, while our business users can use the agent builder in a low-code mode to easily build, deploy, and manage AI agents. Third, we have always differentiated ourselves by our deep industry and business process knowledge and coded high-value industry-specific applications. Now, we are reimagining these strategic industry capabilities with AI.
Second, embedded and extensible AI agents. We are embedding AI agents across the main business processes of every company. Doing so, we are helping our customers to realize efficiency through automation, make better decisions, and gain agility across their value chain with connected agents. To extend where differentiation is needed, we provide a powerful agent builder with capabilities that are unique to SAP, such as the access to a semantic BDC data product and the ability to benchmark and infuse agents directly into the business process layer within our apps. Our GrowCode offering serves the needs of our developers, while our business users can use the agent builder in a low-code mode to easily build, deploy, and manage AI agents. Third, we have always differentiated ourselves by our deep industry and business process knowledge and coded high-value industry-specific applications. Now, we are reimagining these strategic industry capabilities with AI.
Speaker #3: Thanks to the internal usage of AI, this equates to efficiency gains of 15 to 20 percent of addressable cost, which also helps us to reinvest into our AI roadmap.
Speaker #3: So, to sum it all up, we closed 2025 with strong momentum of a strategy, it's validated by our customers, and we have all the ingredients to win in the age of AI.
Speaker #3: The groundwork is done, and 2026 will be the year AI delivers—enterprise-scale return on investment. And with that, I'll hand over to
Speaker #3: Dominik. Thank you very
Speaker #2: Much appreciated, Christian, and thank you all for joining us this morning. I'd also like to wish you all a happy and healthy year 2026. SAP's strong close to the year reflects steady execution against our priorities.
Speaker #2: As we navigated a rapidly shifting macroeconomic backdrop at the beginning of the year, we remained focused on operational discipline and driving value for our customers in times of unprecedented technological change.
Christian Klein: Together with some industry-leading customers, we are already redefining mission-critical parts of an industry value chain by developing the next-generation AI solutions, like redefining patient care in healthcare, delivering higher predictability and supply chain resilience in manufacturing, and to run smarter trade promotions and personalize the shopping experience in retail. Some of these industry AI use cases were already crucial to the success of our Q4 deals. Fourth, BDC addresses one of the biggest roadblocks for AI adoption that our customers face today: data silos. BDC brings together SAP and non-SAP data, providing our customers with the harmonized data they need to enable their agentic AI vision. In 2026, we will heavily accelerate the development of data products to enrich the semantic layer for all of our customers. And fifth, accelerated ERP migration.
Together with some industry-leading customers, we are already redefining mission-critical parts of an industry value chain by developing the next-generation AI solutions, like redefining patient care in healthcare, delivering higher predictability and supply chain resilience in manufacturing, and to run smarter trade promotions and personalize the shopping experience in retail. Some of these industry AI use cases were already crucial to the success of our Q4 deals. Fourth, BDC addresses one of the biggest roadblocks for AI adoption that our customers face today: data silos. BDC brings together SAP and non-SAP data, providing our customers with the harmonized data they need to enable their agentic AI vision. In 2026, we will heavily accelerate the development of data products to enrich the semantic layer for all of our customers. And fifth, accelerated ERP migration.
Speaker #2: Our ability to drive top-line growth while consistently exceeding our profitability and free cash flow expectations reflects the consistent execution against the outlook we provided at the beginning of the year.
Speaker #2: While challenges persisted, we took deliberate steps to reinforce our foundation and align the business for durable, sustainable performance. As a result, we closed the year in a position of strength, and the progress we've made has set the stage for continued advancement towards our financial and strategic priorities in the years ahead.
Speaker #2: Rise and Grow with SAP both remain core pillars of our transformation strategy, serving as a go-to solution for large-scale enterprises and high-growth, mid-sized companies undergoing complex end-to-end modernization efforts.
Speaker #2: And as highlighted by Christian, AI and the Business Data Cloud are beginning to show real commercial impact, emerging as a meaningful contributor to customer decision and deal activity.
Speaker #2: This combined momentum continues to materialize in large cloud transactions, with deal volumes greater than €5 million contributing a record 71 percent to our total cloud order entry in the fourth quarter.
Christian Klein: Often, customers spend 10x more on their ERP migration compared to what they spend on their ERP software. With our integrated AI-powered migration toolchain in the RISE with SAP journey, we are shrinking this ratio by cutting the migration cost and making it faster and easier for customers to realize value from their transformation. Net-net. In all of the focus areas, SAP has a clear why to win. Together, they'll secure SAP's position as the leading business AI company. Finally, to be credible in the AI market, we role modeled the use of business AI and kicked off an extensive AI transformation program internally. We are using AI across all functions to unlock significant long-term operating profit potential. In R&D, we see huge efficiency gains as the role of a developer is shifting from traditional code writing toward designing, guiding, and validating AI-generated solutions.
Often, customers spend 10x more on their ERP migration compared to what they spend on their ERP software. With our integrated AI-powered migration toolchain in the RISE with SAP journey, we are shrinking this ratio by cutting the migration cost and making it faster and easier for customers to realize value from their transformation. Net-net. In all of the focus areas, SAP has a clear why to win. Together, they'll secure SAP's position as the leading business AI company. Finally, to be credible in the AI market, we role modeled the use of business AI and kicked off an extensive AI transformation program internally. We are using AI across all functions to unlock significant long-term operating profit potential. In R&D, we see huge efficiency gains as the role of a developer is shifting from traditional code writing toward designing, guiding, and validating AI-generated solutions.
Speaker #2: These results validate our role as a partner of choice, trusted by world-class organizations navigating high-stakes transformation at speed and scale. Now, let me provide more details around our financial highlights.
Speaker #2: Current cloud backlog reached €21 million, up 25 percent. This is a more pronounced slowdown than what we had anticipated, and more than the slight deceleration we guided to at the beginning of last year.
Speaker #2: Thank you, and Christian's remarks. This outcome reflects a deal mix weighted towards larger transformations, many of which include longer ramp periods and more flexible structuring, reducing their near-term CCB contribution.
Speaker #2: Also, further mounting geopolitical tensions have led to many customers putting even more emphasis on exploring sovereign SaaS options. While SAP is extremely well positioned in this segment and we have a significant pipeline of opportunities, due to the trust Germany and SAP continue to enjoy on a global scale, it takes longer to negotiate these more complex transactions and also longer to deploy and ramp as compared with plain vanilla offerings of U.S. infrastructure-as-a-service vendors.
Christian Klein: In sales, business AI will help us to better quote, price, and identify opportunities. In HR, business AI will help us better plan and transform our workforce. Every SAP leader across every function is infusing AI into their business and driving the reskilling of our workforce. Because AI isn't just about technology, it first needs to be enabled by our people. Altogether, our goal is to achieve a run rate of around EUR 2 billion in real cost efficiencies by the end of 2028, thanks to the internal usage of AI. This equates to efficiency gains of 15% to 20% of addressable costs, which also helps us to reinvest into our AI roadmap. So, to sum it all up, we close 2025 with strong momentum. Our strategy is validated by our customers, and we have all the ingredients to win in the age of AI.
In sales, business AI will help us to better quote, price, and identify opportunities. In HR, business AI will help us better plan and transform our workforce. Every SAP leader across every function is infusing AI into their business and driving the reskilling of our workforce. Because AI isn't just about technology, it first needs to be enabled by our people. Altogether, our goal is to achieve a run rate of around EUR 2 billion in real cost efficiencies by the end of 2028, thanks to the internal usage of AI. This equates to efficiency gains of 15% to 20% of addressable costs, which also helps us to reinvest into our AI roadmap. So, to sum it all up, we close 2025 with strong momentum. Our strategy is validated by our customers, and we have all the ingredients to win in the age of AI.
Speaker #2: This is particularly true for any state-owned and related entities, as well as defense, but it is starting to also affect commercial customers in certain particularly sensitive geographies and industries.
Speaker #2: Total cloud backlog for the year grew 30 percent to a record $77 billion, again significantly exceeding our current cloud backlog and cloud revenue growth.
Speaker #2: Cloud revenue actually grew 26 percent year-on-year in 2025, again primarily driven by the strong performance of cloud ERP suite. Cloud ERP suite had another notable year, reinforcing its position as a key engine of growth with an increase of 32 percent in 2025. And I want to make the remark: this is a constant currency number; in US dollar, the number would be two percentage points higher if you want to compare to competition.
Christian Klein: The groundwork is done, and 2026 will be the year AI delivers enterprise-scale return on investment. And with that, I'll hand over to Dominik. Thank you very much, Christian, and thank you all for joining us this morning. I'd also like to wish you all a happy and healthy year 2026. SAP's strong close to the year reflects steady execution against our priorities. As we navigated a rapidly shifting macroeconomic backdrop at the beginning of the year, we remained focused on operational discipline and driving value for our customers in times of unprecedented technological change. Our ability to drive top-line growth while consistently exceeding our profitability and free cash flow expectations reflects the consistent execution against the outlook we provided at the beginning of the year. While challenges persisted, we took deliberate steps to reinforce our foundation and align the business for durable, sustainable performance.
The groundwork is done, and 2026 will be the year AI delivers enterprise-scale return on investment. And with that, I'll hand over to Dominik.
Speaker #2: This performance is especially meaningful given the expansion of its revenue base over time, highlighting its ability to scale at a sustainable growth rate, now accounting for 86 percent of total cloud revenue for the year.
Dominik Asam: Thank you very much, Christian, and thank you all for joining us this morning. I'd also like to wish you all a happy and healthy year 2026. SAP's strong close to the year reflects steady execution against our priorities. As we navigated a rapidly shifting macroeconomic backdrop at the beginning of the year, we remained focused on operational discipline and driving value for our customers in times of unprecedented technological change. Our ability to drive top-line growth while consistently exceeding our profitability and free cash flow expectations reflects the consistent execution against the outlook we provided at the beginning of the year. While challenges persisted, we took deliberate steps to reinforce our foundation and align the business for durable, sustainable performance.
Speaker #2: Software licenses revenue decreased by 27 percent. Finally, total revenue for the full year approached €37 billion, up 11 percent. Now let's take a brief look at our regional performance.
Speaker #2: For the full year, Brazil, France, Germany, India, Italy, South Korea, and Spain all had outstanding performances in cloud revenue, while China, Japan, Saudi Arabia, the United Kingdom, as well as the US, were particularly strong.
Speaker #2: Now, down the income statement, our non-IFRS cloud gross margin for the full year continued its upward trend from last year and expanded by 1.6 percentage points to 75 percent, driving cloud gross profit up by 29 percent.
Speaker #2: In the fourth quarter, IFRS operating profit increased 27 percent to €2.6 billion, non-IFRS operating profit was up 21 percent. Both IFRS and non-IFRS operating profit growth were negatively impacted by approximately €100 million related to a 2025 workforce transformation.
Christian Klein: As a result, we closed the year in a position of strength, and the progress we've made has set the stage for continued advancement towards our financial and strategic priorities in the years ahead. RISE with SAP and GROW with SAP both remain core pillars of our transformation strategy, serving as a go-to solution for large-scale enterprises and high-growth, mid-sized companies undergoing complex end-to-end modernization efforts. As highlighted by Christian, AI and the business data cloud are beginning to show real commercial impact, emerging as a meaningful contributor to customer decision and deal activity. This combined momentum continues to materialize in large cloud transactions with deal volumes greater than EUR 5 million, contributing a record 71% to our total cloud order entry in Q4. These results validate our role as a partner of choice, trusted by world-class organizations navigating high-stakes transformation at speed and scale.
As a result, we closed the year in a position of strength, and the progress we've made has set the stage for continued advancement towards our financial and strategic priorities in the years ahead. RISE with SAP and GROW with SAP both remain core pillars of our transformation strategy, serving as a go-to solution for large-scale enterprises and high-growth, mid-sized companies undergoing complex end-to-end modernization efforts. As highlighted by Christian, AI and the business data cloud are beginning to show real commercial impact, emerging as a meaningful contributor to customer decision and deal activity. This combined momentum continues to materialize in large cloud transactions with deal volumes greater than EUR 5 million, contributing a record 71% to our total cloud order entry in Q4. These results validate our role as a partner of choice, trusted by world-class organizations navigating high-stakes transformation at speed and scale.
Speaker #2: In addition, IFRS operating profit growth was negatively impacted by $200 million related to Teradata litigation expenses. For the full year, IFRS operating profit increased to €9.8 billion, and non-IFRS operating profit to €10.4 billion.
Speaker #2: The IFRS effective tax rate for the full year was 28.5 percent. The non-IFRS tax rate was 30.4 percent, which is below the outlook for approximately 32 percent, mainly resulting from an increasing ability to offset foreign withholding taxes in Germany.
Speaker #2: Looking forward, we expect the midterm non-IFRS effective tax rate to be in the range of 28 to 30 percent, which is slightly lower and in the lower half of the previously communicated range of 28 to 32 percent.
Christian Klein: Now, let me provide more details around our financial highlights. Current cloud backlog reached EUR 21 million, up 25%. This is a more pronounced slowdown than what we had anticipated and more than the slight deceleration we guided to at the beginning of last year. Thank you for Christian's remarks. This outcome reflects a deal mix weighted towards larger transformations, many of which include longer ramp periods or flexible structuring, reducing their near-term CCB contribution. Also, further mounting geopolitical tensions have led to many customers putting even more emphasis on exploring sovereign SaaS options.
Now, let me provide more details around our financial highlights. Current cloud backlog reached EUR 21 million, up 25%. This is a more pronounced slowdown than what we had anticipated and more than the slight deceleration we guided to at the beginning of last year. Thank you for Christian's remarks. This outcome reflects a deal mix weighted towards larger transformations, many of which include longer ramp periods or flexible structuring, reducing their near-term CCB contribution. Also, further mounting geopolitical tensions have led to many customers putting even more emphasis on exploring sovereign SaaS options.
Speaker #2: Pre-cash flow for the full year was around negative €8.2 billion, i.e., at the very high end of our revised outlook range of €8.0 billion to €8.2 billion.
Speaker #2: This increase was mainly attributable to higher profitability and to lower payments for restructuring and share-based compensation. This result reflects our continued emphasis on disciplined cash management and operating efficiency, building on the progress we've made in strengthening the quality and consistency of our cash flow over time.
Speaker #2: We are very proud of the progress we've made this year, and the business momentum that contributed to our strong net cash position. As a result, SAP has decided to further step up its capital returns with a new two-year share repurchase program of up to €10 billion, scheduled to start in February.
Christian Klein: While SAP is extremely well-positioned in the segment and we have a significant pipeline of opportunities due to the trust Germany and SAP continue to enjoy on a global scale, it takes longer to negotiate these more complex transactions and also longer to deploy and ramp as compared with plain vanilla offerings of US Infrastructure as a Service vendors. This is particularly true for any state-owned and related entities as well as defense, but starts to also affect commercial customers in certain particularly sensitive geographies and industries. Total cloud backlog for the year grew 30% to a record EUR 77 billion, again significantly exceeding our current cloud backlog and cloud revenue growth. Cloud revenue actually grew 26% year-on-year in 2025, again primarily driven by the strong performance of Cloud ERP Suite.
While SAP is extremely well-positioned in the segment and we have a significant pipeline of opportunities due to the trust Germany and SAP continue to enjoy on a global scale, it takes longer to negotiate these more complex transactions and also longer to deploy and ramp as compared with plain vanilla offerings of US Infrastructure as a Service vendors. This is particularly true for any state-owned and related entities as well as defense, but starts to also affect commercial customers in certain particularly sensitive geographies and industries. Total cloud backlog for the year grew 30% to a record EUR 77 billion, again significantly exceeding our current cloud backlog and cloud revenue growth. Cloud revenue actually grew 26% year-on-year in 2025, again primarily driven by the strong performance of Cloud ERP Suite.
Speaker #2: This decision reflects our confidence in the sustainable strengths of the business and our continued commitment to returning capital to shareholders in a disciplined and balanced way.
Speaker #2: Finally, non-IFRS basic earnings per share in fiscal year 2025 increased by 36 percent to €6.15. Now, let's move on to our outlook. As you've probably seen in the quarterly statement published earlier today, we have provided this year's outlook by now.
Speaker #2: We expect CCB growth to moderate to moderately slow over the course of 2026, while some deceleration is anticipated. It is expected to be meaningfully less than what we saw in 2025 in terms of deceleration.
Christian Klein: Cloud ERP Suite had another notable year, reinforcing its position as a key engine of growth with an increase of 32% in 2025. I want to make the remark, this is a constant currency number. In US dollar, the number would be two percentage points higher if you want to compare to competition. This performance is especially meaningful given the expansion of its revenue base over time, highlighting its ability to scale at a sustainable growth rate, now accounting for 86% of total cloud revenue for the year. Software licenses revenue decreased by 27%. Finally, total revenue for the full year approached EUR 37 billion, up 11%. Now, let's take a brief look at our regional performance.
Cloud ERP Suite had another notable year, reinforcing its position as a key engine of growth with an increase of 32% in 2025. I want to make the remark, this is a constant currency number. In US dollar, the number would be two percentage points higher if you want to compare to competition. This performance is especially meaningful given the expansion of its revenue base over time, highlighting its ability to scale at a sustainable growth rate, now accounting for 86% of total cloud revenue for the year. Software licenses revenue decreased by 27%. Finally, total revenue for the full year approached EUR 37 billion, up 11%. Now, let's take a brief look at our regional performance.
Speaker #2: At the same time, we see a path for total revenue growth to accelerate, supported by the foundation we've built and the continued strength of our business.
Speaker #2: And our operating profit outlook reflects sustained operating discipline, driving our expense-to-revenue growth ratio towards the lower end of our long-term operating leverage objectives of 80 to 90 percent, giving us the opportunity to continue to drive non-IFRS operating profit growth significantly above revenue growth.
Speaker #2: In addition, in 2026, we expect to generate a record free cash flow of approximately €10 billion, supported by continued efficiency improvements and operational rigor.
Speaker #2: Overall, our guidance reflects a balanced view of the opportunity ahead, grounded in disciplined execution and an ongoing commitment to long-term value creation. With 2025 now behind us, we move into 2026 focused on consistency, clarity, and execution.
Christian Klein: For the full year, Brazil, France, Germany, India, Italy, South Korea, and Spain all had outstanding performances in cloud revenue, while China, Japan, Saudi Arabia, and the United Kingdom, as well as the US, were particularly strong. Now, down in the income statement, our non-IFRS cloud gross margin for the full year continued its upward trend from last year and expanded by 1.6 percentage points to 75%, driving cloud gross profit up by 29%. In the fourth quarter, IFRS operating profit increased 27% to EUR 2.6 billion. Non-IFRS operating profit was up 21%. Both IFRS and non-IFRS operating profit growth were negatively impacted by approximately EUR 100 million related to a 2025 workforce transformation. In addition, IFRS operating profit growth was negatively impacted by EUR 200 million related to Teradata litigation expenses. For the full year, IFRS operating profit increased to EUR 9.8 billion and non-IFRS operating profit to EUR 10.4 billion.
For the full year, Brazil, France, Germany, India, Italy, South Korea, and Spain all had outstanding performances in cloud revenue, while China, Japan, Saudi Arabia, and the United Kingdom, as well as the US, were particularly strong. Now, down in the income statement, our non-IFRS cloud gross margin for the full year continued its upward trend from last year and expanded by 1.6 percentage points to 75%, driving cloud gross profit up by 29%. In the fourth quarter, IFRS operating profit increased 27% to EUR 2.6 billion. Non-IFRS operating profit was up 21%. Both IFRS and non-IFRS operating profit growth were negatively impacted by approximately EUR 100 million related to a 2025 workforce transformation. In addition, IFRS operating profit growth was negatively impacted by EUR 200 million related to Teradata litigation expenses. For the full year, IFRS operating profit increased to EUR 9.8 billion and non-IFRS operating profit to EUR 10.4 billion.
Speaker #2: The groundwork we have laid across both transformation incentives initiatives and commercial performance puts us in a strong position to deliver against the guidance we outlined today.
Speaker #2: While geopolitical and trade tensions have taken a certain toll on our top-line performance in 2025, the growing need for sovereignty and resilience also offers unique opportunities for those vendors that can offer technologies and tools to reduce dependencies from dominant offerings.
Speaker #2: As the largest non-U.S. software SaaS and PaaS vendor, there's no company better positioned than SAP to satisfy this rapidly growing demand. Our strategy to design a stack which is not locked into any particular IaaS vendor is particularly valuable in that respect.
Speaker #2: And our decision to keep developing our powerful SAP Converge Cloud infrastructure with sovereign infrastructure, thereby preserving capability to run infrastructure as a service efficiently in our own data centers, provides us with another, now even more valuable, option to deploy our SaaS and PaaS offerings.
Christian Klein: The IFRS effective tax rate for the full year was 28.5%. The non-IFRS tax rate was 30.4%, which is below the outlook for approximately 32%, mainly resulting from an increasing ability to offset foreign withholding taxes in Germany. Looking forward, we expect the midterm non-IFRS effective tax rate to be in the range of 28% to 30%, which is slightly lower than half, which is in the lower half of the previously communicated range of 28% to 32%. Free cash flow for the full year was rounded down EUR 8.2 billion, i.e., at the very high end of our revised outlook range of EUR 8 billion to EUR 8.2 billion. This increase was mainly attributable to higher profitability and to lower payments for restructuring and share-based compensation.
The IFRS effective tax rate for the full year was 28.5%. The non-IFRS tax rate was 30.4%, which is below the outlook for approximately 32%, mainly resulting from an increasing ability to offset foreign withholding taxes in Germany. Looking forward, we expect the midterm non-IFRS effective tax rate to be in the range of 28% to 30%, which is slightly lower than half, which is in the lower half of the previously communicated range of 28% to 32%. Free cash flow for the full year was rounded down EUR 8.2 billion, i.e., at the very high end of our revised outlook range of EUR 8 billion to EUR 8.2 billion. This increase was mainly attributable to higher profitability and to lower payments for restructuring and share-based compensation.
Speaker #2: Despite an unpredictable macro and geopolitical environment, our strategy remains clear, and our execution is already driving meaningful progress across the business. Customers are choosing us as their North Star to lead mission-critical change, and we remain committed to helping them move faster, scale smarter, become more sovereign, more resilient, and modernize with confidence.
Speaker #2: Thank you, and we will now be happy to take your questions. Thank you, Dominik. And with that, we'll now take your question. I would like to kindly remind you to only ask one question when prompted.
Speaker #2: Operator, please open the
Speaker #2: line. Ladies
Speaker #3: 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.
Christian Klein: This result reflects our continued emphasis on disciplined cash management and operating efficiency, building on the progress we've made in strengthening quality and consistency of our cash flow over time. We are very proud of the progress we've made this year and the business momentum that contributed to our strong net cash position. As a result, SAP has decided to further step up its capital returns with a new two-year share repurchase program of up to EUR 10 billion, scheduled to start in February. This decision reflects our confidence in the sustainable strengths of the business and our continued commitment to returning capital to shareholders in a disciplined and balanced way. Finally, non-IFRS basic earnings per share in fiscal year 2025 increased by 36% to EUR 6.15. Now, let's move on to our outlook.
This result reflects our continued emphasis on disciplined cash management and operating efficiency, building on the progress we've made in strengthening quality and consistency of our cash flow over time. We are very proud of the progress we've made this year and the business momentum that contributed to our strong net cash position. As a result, SAP has decided to further step up its capital returns with a new two-year share repurchase program of up to EUR 10 billion, scheduled to start in February. This decision reflects our confidence in the sustainable strengths of the business and our continued commitment to returning capital to shareholders in a disciplined and balanced way. Finally, non-IFRS basic earnings per share in fiscal year 2025 increased by 36% to EUR 6.15. Now, let's move on to our outlook.
Speaker #3: If you are using speaker equipment today, please lift the handset before making your selections. Again, anyone who has a question may press star followed by one at this time.
Speaker #3: One moment for the first question, please. We'll take our first question from Adam Wood with Morgan Stanley.
Speaker #4: Hey, good morning, Christian. Good morning, Dominik. Thanks very much for taking the question. Maybe if we go to, I guess, the main focus for investors on the CCB at the end of the year—you spoke, obviously, at the end of the year of 25 percent being disappointing, which is unfortunately where we ended up.
Speaker #4: Bit through the end of the fourth quarter, could you maybe talk us a little closer? Was it entirely that you had these large deals with later ramps and deals with cancellation clauses in them?
Speaker #4: Or did you also see some slippage? And maybe, if that was also the case, could you help us with what the pipeline looks like going into Q1?
Christian Klein: As you've probably seen in the quarterly statement published earlier today, we have provided this year's outlook by now. We expect CCB growth to moderate slightly over the course of 2026. While some deceleration is anticipated, it is expected to be meaningfully less than what we saw in 2025 in terms of deceleration. At the same time, we see a path for total revenue growth to accelerate, supported by the foundation we've built and the continued strength of our business. And our operating profit outlook reflects sustained operating discipline, driving our expense-to-revenue growth ratio towards the lower end of our long-term operating leverage objectives of 80% to 90%, giving us the opportunity to continue to drive non-IFRS operating profit growth significantly above revenue growth. In addition, in 2026, we expect to generate a record free cash flow of approximately EUR 10 billion, supported by continued efficiency improvements and operational rigor.
As you've probably seen in the quarterly statement published earlier today, we have provided this year's outlook by now. We expect CCB growth to moderate slightly over the course of 2026. While some deceleration is anticipated, it is expected to be meaningfully less than what we saw in 2025 in terms of deceleration. At the same time, we see a path for total revenue growth to accelerate, supported by the foundation we've built and the continued strength of our business. And our operating profit outlook reflects sustained operating discipline, driving our expense-to-revenue growth ratio towards the lower end of our long-term operating leverage objectives of 80% to 90%, giving us the opportunity to continue to drive non-IFRS operating profit growth significantly above revenue growth. In addition, in 2026, we expect to generate a record free cash flow of approximately EUR 10 billion, supported by continued efficiency improvements and operational rigor.
Speaker #4: Obviously, if there was slippage out of a very big Q4, that could mean a very good pipeline for the first quarter. And then I appreciate you want to give these numbers to the big figure and not to the decimal point, but unfortunately, I think for everybody, the kind of rounding up and rounding down would help.
Speaker #4: Could you give us any insights into whether 25 percent and then 26 percent, adjusted for those effects, is being rounded down or rounded up?
Speaker #4: And then maybe just finally, you talked about slight deceleration. I guess everybody’s going to say, well, slight deceleration last year was 4 points; I guess we could say 3 points organic.
Speaker #4: Is that the same type of range that people should be thinking about? Because I think that's initially where people would go to. Thank you.
Speaker #4: you.
Speaker #5: Yeah, thanks a lot, Adam. So, look, let me start with the CCB of 25 percent. Yes, we said in October 26 percent would be the target.
Speaker #5: I mean, first, let me reiterate again. Compared to October, we even overachieved our bookings plan. And also, the churn came out lower than expected.
Christian Klein: Overall, our guidance reflects a balanced view of the opportunity ahead, grounded in disciplined execution and an ongoing commitment to long-term value creation. With 2025 now behind us, we move into 2026 focused on consistency, clarity, and execution. The groundwork we have laid across both transformation initiatives and commercial performance puts us in a strong position to deliver against the guidance we outlined today. While geopolitical and trade tensions have taken a certain toll on our top-line performance in 2025, the growing need for sovereignty and resilience also offers unique opportunities for those vendors that can offer technologies and tools to reduce dependencies from dominant offerings. As the largest non-US software, SaaS, and PaaS vendor, there's no company better positioned than SAP to satisfy this rapidly growing demand. Our strategy to design a stack which is not locked into any particular IaaS vendor is particularly valuable in that respect.
Overall, our guidance reflects a balanced view of the opportunity ahead, grounded in disciplined execution and an ongoing commitment to long-term value creation. With 2025 now behind us, we move into 2026 focused on consistency, clarity, and execution. The groundwork we have laid across both transformation initiatives and commercial performance puts us in a strong position to deliver against the guidance we outlined today. While geopolitical and trade tensions have taken a certain toll on our top-line performance in 2025, the growing need for sovereignty and resilience also offers unique opportunities for those vendors that can offer technologies and tools to reduce dependencies from dominant offerings. As the largest non-US software, SaaS, and PaaS vendor, there's no company better positioned than SAP to satisfy this rapidly growing demand. Our strategy to design a stack which is not locked into any particular IaaS vendor is particularly valuable in that respect.
Speaker #5: And we also, very importantly, had stable discount rates. Now, why did we end up at 25 percent? What we have seen is that during the course of Q4, actually, the deal mixes changed.
Speaker #5: We closed larger deals. And I mean, it's quite standard for larger customers. Oftentimes, in the first year, they are shifting some smaller solutions to the cloud because the larger ERPs need time.
Speaker #5: First, to figure out how they would love to run their business processes. We talk about clean core, but of course, there are also a lot of technical things to be figured out before you really lift and shift your most mission-critical system to the cloud.
Speaker #5: So that was clearly, I would say, the largest factor. And the second one is actually that we have seen that, actually, we performed much better in the public sector and in some deals.
Speaker #5: You have a termination for convenience by law. So, per se, we are not including this in the CCB. And that was the only mix effect, I would say, we had compared to October.
Christian Klein: And our decision to keep developing our powerful SAP Converged Cloud infrastructure, the sovereign infrastructure, thereby preserving capability to run infrastructure as a service efficiently in our own data centers, provides us with another, now even more valuable option to deploy our SaaS and PaaS offerings. Despite an unpredictable macro and geopolitical environment, our strategy remains clear, and our execution is already driving meaningful progress across the business. Customers are choosing us as their North Star to lead mission-critical change, and we remain committed to helping them move faster, scale smarter, become more sovereign, more resilient, and modernize with confidence. Thank you, and we will now be happy to take your questions. Thank you, Dominik. And with that, we'll now take your question. I'd like to kindly remind you to only ask one question when prompted. Operator, please open the line.
And our decision to keep developing our powerful SAP Converged Cloud infrastructure, the sovereign infrastructure, thereby preserving capability to run infrastructure as a service efficiently in our own data centers, provides us with another, now even more valuable option to deploy our SaaS and PaaS offerings. Despite an unpredictable macro and geopolitical environment, our strategy remains clear, and our execution is already driving meaningful progress across the business. Customers are choosing us as their North Star to lead mission-critical change, and we remain committed to helping them move faster, scale smarter, become more sovereign, more resilient, and modernize with confidence. Thank you, and we will now be happy to take your questions. Thank you, Dominik. And with that, we'll now take your question. I'd like to kindly remind you to only ask one question when prompted. Operator, please open the line.
Speaker #5: Again, bookings performance was ahead of plan. Now, for some of the larger deals where the slippage is—I mean, in every quarter, you have slippages.
Speaker #5: But I would say the execution—the sales execution—was actually really good. I mean, some of these larger mega deals, what I was mentioning is actually that some of them closed, some of them not.
Speaker #5: So, clearly, also for 2026, we see actually a better pipeline coverage than when we compare the pipeline now compared to where we were at in 2025.
Speaker #5: Consider what Dominik also mentioned. Also, of course, one thing to note is sovereignty. I mean, in some countries of the world, in some industries, obviously, also deal cycles took a little bit—tensions, customers have more questions around sovereignty.
Christian Klein: 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 selections. Again, anyone who has a question may press star followed by one at this time. One moment for the first question, please. We'll take our first question from Adam Wood with Morgan Stanley. Hey, good morning, Christian. Morning, Dominik. Thanks so much for taking the question. Maybe if we go to, I guess, the main focus for investors on the CCB at the end of the year, you spoke obviously at the end of the year of 25% being disappointing, which is unfortunately where we ended up. Could you maybe talk us a little bit through the end of the Q4 close?
Operator: 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 selections. Again, anyone who has a question may press star followed by one at this time. One moment for the first question, please. We'll take our first question from Adam Wood with Morgan Stanley.
Speaker #5: And actually, that also then reflects in longer negotiation cycles. Now, for 2026, what ‘marginal decline’ or ‘slight decline’ over the year means is definitely not a 4% decline.
Speaker #5: That is not what we are seeking for. It will not be such a decline like what you have seen in 2025. Also, again, given the strong pipeline we have now at the beginning of the year.
Speaker #5: Also mentioning, I mentioned the 90 percent of deals which included AI. I mean, we see an even better trend for 2026. So you clearly see with BDC and AI, customers are now not only doing wise to just reimagine their business model and try to clean core.
Adam Wood: Hey, good morning, Christian. Morning, Dominik. Thanks so much for taking the question. Maybe if we go to, I guess, the main focus for investors on the CCB at the end of the year, you spoke obviously at the end of the year of 25% being disappointing, which is unfortunately where we ended up. Could you maybe talk us a little bit through the end of the Q4 close?
Speaker #5: We see now in more and more deals that also, of course, AI and BDC is kicking in as another growth driver, also helping, of course, the multiples of these.
Speaker #5: deals. We'll
Christian Klein: Was it entirely that you had these large deals with later ramps and deals with cancellation clauses in them, or did you also see some slippage? And maybe if that was also the case, could you help us with what the pipeline looks like going into Q1? Obviously, if there was slippage out of a very big Q4, that could mean a very good pipeline for the first quarter. And then I appreciate you only give these numbers to the big figure and not to the decimal point, but unfortunately, I think for everybody, the kind of rounding up and rounding down would help. Could you give us any insight into whether 25% and then 26% adjusted for those effects is being rounded down or rounded up? And then maybe just finally, you talked about slight deceleration.
Was it entirely that you had these large deals with later ramps and deals with cancellation clauses in them, or did you also see some slippage? And maybe if that was also the case, could you help us with what the pipeline looks like going into Q1? Obviously, if there was slippage out of a very big Q4, that could mean a very good pipeline for the first quarter. And then I appreciate you only give these numbers to the big figure and not to the decimal point, but unfortunately, I think for everybody, the kind of rounding up and rounding down would help. Could you give us any insight into whether 25% and then 26% adjusted for those effects is being rounded down or rounded up? And then maybe just finally, you talked about slight deceleration.
Speaker #3: Take our next question from Charlie Brennan with Jefferies.
Speaker #6: Great, good morning. Thanks for taking my question. I'll do two if I can. Firstly, everyone's preoccupied with AI at the moment. I think you referred to a $2 billion saving at SAP over the next couple of years.
Speaker #6: Can you talk to how that's going to flow through the business? Are you going to extract that through natural churn in the organization, or do we have to think more about another restructuring program?
Speaker #6: And then, as you rewire the business towards a sort of AI age, how much of your R&D today do you think is based on AI-driven tools?
Christian Klein: I guess everybody's going to say, well, slight deceleration last year was 4 points. I guess we could say 3 points organic. Is that the same type of range that people should be thinking about? Because I think that's initially where people would go to. Thank you. Yeah, thanks a lot, Adam. So look, let me start with the CCB of 25%. As yes, we said in October, 26% would be the target. I mean, first, let me reiterate again, compared to October, we even overachieved our bookings plan. And also, the churn came out lower than expected, and we also, very importantly, had stable discount rates. Now, why did we end up at 25%? What we have seen is that during the course of Q4, actually, the deal mix has changed. We closed larger deals. And I mean, it's quite standard for a larger customer.
I guess everybody's going to say, well, slight deceleration last year was 4 points. I guess we could say 3 points organic. Is that the same type of range that people should be thinking about? Because I think that's initially where people would go to. Thank you.
Speaker #6: Output today is—and how much of your focus is on AI, as opposed to some of the core products? Thank you.
Christian Klein: Yeah, thanks a lot, Adam. So look, let me start with the CCB of 25%. As yes, we said in October, 26% would be the target. I mean, first, let me reiterate again, compared to October, we even overachieved our bookings plan. And also, the churn came out lower than expected, and we also, very importantly, had stable discount rates. Now, why did we end up at 25%? What we have seen is that during the course of Q4, actually, the deal mix has changed. We closed larger deals. And I mean, it's quite standard for a larger customer.
Speaker #5: Yeah, talking about our internal transformation, obviously it's both super important to also be credible to our customers. And indeed, I mean, all our business leaders are already working with our product management teams on implementing certain AI use cases. For the $2 billion that will be reached, obviously, by first, we will have a heavily growing business.
Speaker #5: And with that, we will just underproportionately grow our cost and headcount base. And you will see the efficiencies. Obviously, in R&D, I mean, this is where the LLM modules alone can do magic, especially on the code generation side.
Christian Klein: Oftentimes, in the first year, they are shifting some smaller solutions to the cloud because the larger ERPs that needs time first to figure out how they would love to run their business processes. We talk about clean core, but of course, there are also a lot of technical things to be figured out before you really lift and shift your most mission-critical system to the cloud. So that was clearly, I would say, the largest factor. The second one is actually that we have seen that actually we performed much better in the public sector. In some deals, you have a termination for convenience by law. So per se, we are not including this in the CCB. That was the only mixed effect, I would say, we had compared to October. Again, bookings performance was ahead of plan.
Oftentimes, in the first year, they are shifting some smaller solutions to the cloud because the larger ERPs that needs time first to figure out how they would love to run their business processes. We talk about clean core, but of course, there are also a lot of technical things to be figured out before you really lift and shift your most mission-critical system to the cloud. So that was clearly, I would say, the largest factor. The second one is actually that we have seen that actually we performed much better in the public sector. In some deals, you have a termination for convenience by law. So per se, we are not including this in the CCB. That was the only mixed effect, I would say, we had compared to October. Again, bookings performance was ahead of plan.
Speaker #5: But in all other areas, obviously, our own AI foundation is kicking in, where heavily, also, you need business data to build those smart agents who can take over a lot of the work that people are doing today.
Speaker #5: So today, as of today, there is no restructuring plan—restructuring plan. Obviously, can you rule this out forever? No. But today, I can tell you we're going to achieve that by just scaling our business way more than in the past with AI.
Speaker #5: Now, on the R&D side, I mean, first, what we did is, I mean, we have great talents in the organization. But obviously, these talents are oftentimes buried in development backlog.
Speaker #5: So already last year, we lifted and shifted a lot of our AI talents into the work to build the AI foundation, to train our foundational module, to build those AI agents.
Christian Klein: Now, for some of the larger deals where there are slippages, I mean, in every quarter, you have slippages. But I would say the execution, the sales execution was actually really good. I mean, some of these larger mega deals, what I was mentioning, is actually that some of them closed, some of them not. So clearly, also for 2026, we see actually a better pipeline coverage than when we compare the pipeline now compared to where we are at in 2025. Also, of course, one thing to consider, what Dominik also mentioned, is sovereignty. I mean, in some countries of the world, in some industries, obviously, also deal cycles took a little bit longer. I mean, with the geopolitical tensions, customers have more questions around sovereignty. And actually, that also then reflects in longer negotiation cycles.
Now, for some of the larger deals where there are slippages, I mean, in every quarter, you have slippages. But I would say the execution, the sales execution was actually really good. I mean, some of these larger mega deals, what I was mentioning, is actually that some of them closed, some of them not. So clearly, also for 2026, we see actually a better pipeline coverage than when we compare the pipeline now compared to where we are at in 2025. Also, of course, one thing to consider, what Dominik also mentioned, is sovereignty. I mean, in some countries of the world, in some industries, obviously, also deal cycles took a little bit longer. I mean, with the geopolitical tensions, customers have more questions around sovereignty. And actually, that also then reflects in longer negotiation cycles.
Speaker #5: So, a lift and shift has already happened. And so, for example, the things which are, of course, now becoming less and less is code generation.
Speaker #5: So, we already automated 35 percent of the code. And then, obviously, that will increase now also again significantly this year. So actually, the profile of a software developer is already changing quite within SAP also, significantly again investing.
Speaker #5: And it's not a question of quantity or the size of people. It's really about getting the best people, the best data scientists, the best AI developers on board to actually build what I just lined out with the five growth drivers within.
Speaker #5: AI, maybe on the R&D side, let's
Speaker #6: Not forget that I think one of the challenges we used to face very heavily is the enormous, rigorous prioritization of what we're actually developing, because there's such a scarcity of topics we can go after versus, in terms of, opportunities.
Christian Klein: Now, for 2026, what means marginal decline or slight decline over the year, definitely not a 4% decline. That is not what we are seeking for. It will be not such a decline like what you have seen in 2025. Also, again, given the strong pipeline, what we have now at the beginning of the year. Also mentioning, I mentioned the 90% of deals which included AI. I mean, we see an even better trend for 2026. So you clearly see with BDC and AI, customers are now not only doing wise to just reimagine their business model and drive to a clean core. We see now in more and more deals that also, of course, AI and BDC is kicking in as another growth driver, also helping, of course, the multiples of these deals. We'll take our next question from Charlie Brennan with Jefferies. Great. Good morning.
Now, for 2026, what means marginal decline or slight decline over the year, definitely not a 4% decline. That is not what we are seeking for. It will be not such a decline like what you have seen in 2025. Also, again, given the strong pipeline, what we have now at the beginning of the year. Also mentioning, I mentioned the 90% of deals which included AI. I mean, we see an even better trend for 2026. So you clearly see with BDC and AI, customers are now not only doing wise to just reimagine their business model and drive to a clean core. We see now in more and more deals that also, of course, AI and BDC is kicking in as another growth driver, also helping, of course, the multiples of these deals.
Speaker #6: There are, so let's not forget that there is ample wood to chop, so to speak, on R&D to do things that previously we couldn't do using the modern technologies.
Speaker #6: And this is also why, in terms of financial model, we stick to our 80% to 90% operating leverage. Yes, we are going to be at the lower end of that in 2026, but the last thing we want to have is putting some mortgages on the top line.
Speaker #6: We really want to push the top line very hard by aggressively investing, and so we want to use these tools to really push the envelope and secure innovation and top line, and to be ahead of the pack.
Speaker #6: We really want to push the top line very hard by aggressively investing, and so we want to use these tools to really push the envelope and secure innovation and top line, and to be ahead of the pack.
Operator: We'll take our next question from Charlie Brennan with Jefferies.
Speaker #3: The next question is from the line of Frederic Boulin with Bank of America.
Charlie Brennan: Great. Good morning. Thanks for taking my question. I'll do two if I can. Firstly, everyone's preoccupied with AI at the moment. I think you referred to a EUR 2 billion saving at SAP over the next couple of years. Can you talk to how that's going to flow through the business? Are you going to extract that through natural churn in the organization, or do we have to think more about another restructuring program? And then, as you rewire the business towards a sort of AI age, how much of your R&D today do you think is based on AI-driven tools, and how much of your output today is focused on AI as opposed to some of the core products? Thank you.
Speaker #7: Hey, good morning. Christian and Dominik, if I can follow up on the AI side—we've seen growing concerns about risks from AI impacting the enterprise SaaS.
Christian Klein: Thanks for taking my question. I'll do two if I can. Firstly, everyone's preoccupied with AI at the moment. I think you referred to a EUR 2 billion saving at SAP over the next couple of years. Can you talk to how that's going to flow through the business? Are you going to extract that through natural churn in the organization, or do we have to think more about another restructuring program? And then, as you rewire the business towards a sort of AI age, how much of your R&D today do you think is based on AI-driven tools, and how much of your output today is focused on AI as opposed to some of the core products? Thank you. Yeah, talking about our internal transformation, obviously, it's super important to also be credible to our customers.
Speaker #7: You made a strong pitch around the kind of software, data, and agent ecosystem. It would be good to share, in terms of AI traction, what percentage of existing cloud customers are currently using your AI offering?
Speaker #7: I mean, it’s good to have the kind of 90 percent of bookings now, including that, but it would be good to see existing cloud customers using the product.
Speaker #7: And can you give us a range of revenue uplift you're seeing, in particular with some of the customers where you've seen earlier adoption? And from a risk standpoint, I mean, there's a huge amount of concern in the industry about new tools out there. You made a pitch about the relevance of your own models versus commoditized LLMs, but do you see any of your customers starting to use different tools to respond to needs that were previously addressed by SAP, either in Core ERP or across HCM, et cetera?
Christian Klein: Yeah, talking about our internal transformation, obviously, it's super important to also be credible to our customers. And indeed, I mean, all our business leaders are already working with actually our product management teams on implementing certain AI use cases. For the EUR 2 billion, that will be reached, obviously, by first, we will have a heavily growing business, and with that, we will just underproportionally grow our cost and headcount base. You will see the efficiencies, obviously, in R&D. I mean, this is where the LLM modules alone can do magic, especially on the code generation side. But in all other areas, obviously, our own AI foundation is kicking in where heavily also you need business data to build those smart agents who can take over a lot of the work what people are doing today. So today, as of today, there is no restructuring plan. Restructuring plan, obviously, can you rule this out forever? No.
Christian Klein: And indeed, I mean, all our business leaders are already working with actually our product management teams on implementing certain AI use cases. For the EUR 2 billion, that will be reached, obviously, by first, we will have a heavily growing business, and with that, we will just underproportionally grow our cost and headcount base. You will see the efficiencies, obviously, in R&D. I mean, this is where the LLM modules alone can do magic, especially on the code generation side. But in all other areas, obviously, our own AI foundation is kicking in where heavily also you need business data to build those smart agents who can take over a lot of the work what people are doing today. So today, as of today, there is no restructuring plan. Restructuring plan, obviously, can you rule this out forever? No.
Speaker #7: Thank you very
Speaker #7: much. Yeah, I can start,
Speaker #5: Dominik, please also comment. I mean, first on the number of customer adoptions. As I already said, customer adoption of the tool increased ninefold, which is really significant, especially when I compare this back to January 25.
Speaker #5: And then second, obviously, what we are seeing is, of course, now that we are developing builds, more users are jumping on it. Customers are wanting a number of users.
Speaker #5: And what we see is actually in the cloud base, a healthy penetration of our AI—around 60 percent of our customers are already using our AI actively.
Christian Klein: But today, I can tell you, we're going to achieve that by just scaling our business way more than in the past with AI. Now, on the R&D side, I mean, first, what we did is, I mean, we have great talents in the organization, but obviously, these talents are oftentimes buried in development backlogs. So already last year, we lifted and shifted a lot of our AI talents into the work to build the AI foundation, to train our foundational module, to build those AI agents. So a lift and shift has already happened. And so, for example, the things which are, of course, now becoming less and less is code generation. So we already automated 35% of the code. And then, obviously, that will increase now also again significantly this year. So actually, the profile of a software developer is already changing quite significantly within SAP.
But today, I can tell you, we're going to achieve that by just scaling our business way more than in the past with AI. Now, on the R&D side, I mean, first, what we did is, I mean, we have great talents in the organization, but obviously, these talents are oftentimes buried in development backlogs. So already last year, we lifted and shifted a lot of our AI talents into the work to build the AI foundation, to train our foundational module, to build those AI agents. So a lift and shift has already happened. And so, for example, the things which are, of course, now becoming less and less is code generation. So we already automated 35% of the code. And then, obviously, that will increase now also again significantly this year. So actually, the profile of a software developer is already changing quite significantly within SAP.
Speaker #5: Twenty percent are on the way to it. But also, please do not forget—and I know what the market is fearing right now—to give you one practical example or two.
Speaker #5: In the business world, in order to deliver high-value AI—I mean, let's take code generation. Yes, of course, the LLMs can understand code, can find the patterns, understand how people use the code.
Speaker #5: And actually, we're super powerful on that. There is no business data involved. Let's use the German customer. Actually, started with an LLM to build a cash flow agent.
Speaker #5: No value, because why? The LLM would, of course, read certain emails, support tickets, and try to figure out, why is this customer not paying?
Speaker #5: But what was completely missing is all the business data, the inventory data, the financial bank statements, the other data on the customer side—if there's still a deal ongoing, maybe that's blocking actually the payment of this customer.
Christian Klein: Also, again, investing, and it's not a size of quantity of people. It's really about getting the best people, the best data scientists, the best AI developers on board to actually build what I just lined out with the five growth drivers within AI. Maybe on the R&D side, let's not forget that I think one of the challenges we used to face very heavily is the enormous rigorous prioritization of what we are actually developing because there's such a scarcity of topics we can go after versus in terms of opportunities there are. So let's not forget that there is ample of wood to chop, so to speak, on R&D to do things that previously we couldn't do using the modern technologies. And this is also why, in terms of financial model, we stick to our 80% to 90% operating leverage.
Also, again, investing, and it's not a size of quantity of people. It's really about getting the best people, the best data scientists, the best AI developers on board to actually build what I just lined out with the five growth drivers within AI.
Speaker #5: So actually, what we did is we used this LLM, we brought it together with our AI foundation and our knowledge graph, and actually what it did—the customer did—they removed actually over 200 predictive modules now, which they built on their own, using our AI foundation.
Dominik Asam: Maybe on the R&D side, let's not forget that I think one of the challenges we used to face very heavily is the enormous rigorous prioritization of what we are actually developing because there's such a scarcity of topics we can go after versus in terms of opportunities there are. So let's not forget that there is ample of wood to chop, so to speak, on R&D to do things that previously we couldn't do using the modern technologies. And this is also why, in terms of financial model, we stick to our 80% to 90% operating leverage.
Speaker #5: And that example, you can actually replicate to every AI agent in the business world. Second, we won a large deal with H&M; we actually built a prototype for them.
Speaker #5: I mean, and that's what they are now going to implement on AI. We showed them the personalized shopping experience in commerce, obviously also using an LLM, but we combined it again with our AI foundation to better understand what did the consumer buy in the past, to understand better patterns about what he clicked on the web page, et cetera.
Christian Klein: Yes, we are going to be at the lower end of that in 2026, but the last thing we want to have is putting some mortgages on the top line. We really want to push the top line very hard by aggressively investing. And so we want to use these tools to really push the envelope and secure innovation, top line, and to be ahead of the pack. The next question is from the line of Frederik Boulon with Bank of America. Good morning, Christian and Dominik. If I can follow up on the AI side, we've seen growing concerns about risks from AI impacting the enterprise SaaS. You made a strong pitch around the kind of software data and agent ecosystem. It would be good to share in terms of AI traction, what percentage of existing cloud customers are currently using your AI offering?
Yes, we are going to be at the lower end of that in 2026, but the last thing we want to have is putting some mortgages on the top line. We really want to push the top line very hard by aggressively investing. And so we want to use these tools to really push the envelope and secure innovation, top line, and to be ahead of the pack.
Speaker #5: Then we went into returns, claims management, all of that. We had this industry capability always in our portfolio. Now we are actually reimagining this industry capability with AI.
Speaker #5: Making it smarter, making it more efficient, when it comes to returns claims management. So, and that is a very good example. We closed one of these mega deals.
Operator: The next question is from the line of Frederik Boulon with Bank of America.
Speaker #5: I personally was involved in it. We didn't win it. Actually, again, only because, hey—cloud, clean core—that was the thing we did a year ago.
Frederic Boulan: Good morning, Christian and Dominik. If I can follow up on the AI side, we've seen growing concerns about risks from AI impacting the enterprise SaaS. You made a strong pitch around the kind of software data and agent ecosystem. It would be good to share in terms of AI traction, what percentage of existing cloud customers are currently using your AI offering?
Speaker #5: Now we are winning it because last mile delivery. Again, these customers try to reinvent last mile delivery with an LLM. Again, they were missing business data.
Speaker #5: We brought it together. We showed them what we can build together with our AI foundation, and they were totally convinced. So, to make this very clear, we are winning deals because of AI.
Speaker #5: We are not losing deals because of AI. And definitely, these deals are actually now leveraging AI to increase the win rate in Q4.
Christian Klein: I mean, it's good to have the kind of 90% of bookings now, including that, but it would be good to see existing cloud customers using the product and give us a range of revenue uplift you're seeing, in particular with some of the customers where you've seen earlier adoption. From a risk standpoint, I mean, a huge amount of concern in the industry about new tools out there. You made a pitch about the relevance of your own models versus commoditized LLMs, but do you see any of your customers starting to use different tools to respond to needs that they were previously addressed by ACP, either in Core ERP or across HCM, etc.? Thank you very much. I can start, Dominik, and please also comment. I mean, first on number of customer adoption.
I mean, it's good to have the kind of 90% of bookings now, including that, but it would be good to see existing cloud customers using the product and give us a range of revenue uplift you're seeing, in particular with some of the customers where you've seen earlier adoption. From a risk standpoint, I mean, a huge amount of concern in the industry about new tools out there. You made a pitch about the relevance of your own models versus commoditized LLMs, but do you see any of your customers starting to use different tools to respond to needs that they were previously addressed by ACP, either in Core ERP or across HCM, etc.? Thank you very much.
Speaker #1: Deals, I'm always a little bit—financial color around that kind of winning. Maybe to give a little bit of—I'm nervous about how people compare our numbers to the industry.
Speaker #1: We have a constant currency disclosure, but don't forget we had a massive devaluation of the US dollar. I think over the year it was about a 13 percent appreciation of the euro.
Speaker #1: So, our constant currency performance in SaaS is parsing, and there's also a different strategy. I mean, we are not investing massively in infrastructure. Actually, you've seen our infrastructure business decline. Frankly, that decline might slow as the sovereign solutions become more prevalent.
Speaker #1: But still, we will largely leverage third-party infrastructure. And there's a spree of investment appetite right now in this frothy business. So we are not very concerned about lack of opportunities to leverage that infrastructure.
Christian Klein: I can start, Dominik, and please also comment. I mean, first on number of customer adoption. As I already said, customer adoption of tools increased by ninefold, which is really significant, starting when I compare this back to January 2025. Then second, obviously, what we are seeing is, of course, now that we are developing new skills, more users are jumping on it. Customer is the one saying number of users. And what we see is actually in the cloud base, a healthy penetration of our AI. Around 60% of our customers are already using our AI actively. 20% are on the way to it. But also, please not forget, and I know what the market is fearing right now. To give you one practical example, or two, what in the business world, in order to deliver high-value AI, I mean, let's take code generation.
Christian Klein: As I already said, customer adoption of tools increased by ninefold, which is really significant, starting when I compare this back to January 2025. Then second, obviously, what we are seeing is, of course, now that we are developing new skills, more users are jumping on it. Customer is the one saying number of users. And what we see is actually in the cloud base, a healthy penetration of our AI. Around 60% of our customers are already using our AI actively. 20% are on the way to it. But also, please not forget, and I know what the market is fearing right now. To give you one practical example, or two, what in the business world, in order to deliver high-value AI, I mean, let's take code generation.
Speaker #1: Now, what we focus on is SaaS and PaaS. And we have delivered in Q4 a whopping 27 percent constant currency growth for that. If you transform that into comparable US dollar numbers, that's above 30 percent.
Speaker #1: Now, you have seen some of our competitors—Dynamics and ServiceNow—report numbers in Q4, which are hovering around the 20s, I think 19, 20 percent.
Speaker #1: You've seen our largest competitors, some of them not even reaching 10%. And so, I'd say that is the evidence that we are actually winning in AI.
Speaker #1: As opposed to
Speaker #1: Losing. We'll take our next question from
Speaker #2: Ben Castillo with BNP
Speaker #2: Paribas. Hi, good morning.
Christian Klein: Yes, of course, the LLMs can understand code, can find the patterns, understand how people use the code, and actually are super powerful on that. There is no business data involved. Let's use a German customer. They actually started with an LLM to build a cash flow agent. No value. Because why? The LLM would, of course, read certain emails, support tickets, and try to figure out why is this customer not paying. But what was completely missing is all the business data, the inventory data, the financial bank statements, and the other data on the customer side is there's still a deal ongoing. Maybe that's blocking actually the payment of this customer. So actually, what we did is we used this LLM. We brought it together with our AI foundation and our knowledge graph.
Yes, of course, the LLMs can understand code, can find the patterns, understand how people use the code, and actually are super powerful on that. There is no business data involved. Let's use a German customer. They actually started with an LLM to build a cash flow agent. No value. Because why? The LLM would, of course, read certain emails, support tickets, and try to figure out why is this customer not paying. But what was completely missing is all the business data, the inventory data, the financial bank statements, and the other data on the customer side is there's still a deal ongoing. Maybe that's blocking actually the payment of this customer. So actually, what we did is we used this LLM. We brought it together with our AI foundation and our knowledge graph.
Speaker #6: Thanks for having me on. Note the positives in here—lots of large deals in the mix, either solving cloud opportunity. The high volume of AI in the backlog, record TCB.
Speaker #6: So, that all sounds optically very encouraging, and if we were to pair that against, we ultimately still have CCB growth of sort of 25 percent in Q4 and still indicating the cloud revenues decelerate this year to come.
Speaker #6: About the changing landscape here—I guess, could you help us just think about the growing mix of large deals in the pipeline that are converting, and the longer deal ramps?
Speaker #6: How should we think about that maybe midterm trajectory of total cloud revenue growth into '27 and perhaps beyond? Just help us with how you think about that pace of cloud revenue growth, either deceleration or scope for stabilization.
Speaker #6: Thank you.
Speaker #3: Yeah, I mean, good question. And for sure, when I'm looking back to October, there is definitely, I mean, honestly also a lessons learned that Q4—and we didn’t see this in the forecast—but obviously, when you are then going into a Q4, it's not unnatural, actually, that you have large deals, but you see it in the order entry.
Christian Klein: And actually, what the customer did, they removed actually over 200 predictive modules now, which they built on their own using our AI foundation. And that example, you can actually replicate to every AI agent in the business world. Second, we won a large deal with H&M. We actually built a prototype for them. I mean, and that's what they are now going to implement on AI. We showed them the personalized shopping experience in commerce, obviously also using an LLM, but we combine it again with our AI foundation to better understand what did the consumer buy in the past, to understand better patterns about what he clicked on the web page, etc. Then we went into returns claims management. Also that, we had this industry capability always in our portfolio.
And actually, what the customer did, they removed actually over 200 predictive modules now, which they built on their own using our AI foundation. And that example, you can actually replicate to every AI agent in the business world. Second, we won a large deal with H&M. We actually built a prototype for them. I mean, and that's what they are now going to implement on AI. We showed them the personalized shopping experience in commerce, obviously also using an LLM, but we combine it again with our AI foundation to better understand what did the consumer buy in the past, to understand better patterns about what he clicked on the web page, etc. Then we went into returns claims management. Also that, we had this industry capability always in our portfolio.
Speaker #3: I mean, we this time really closed many more large deals. And again, what should you do? I mean, we saw this then during the course of actually in December, where customers then said, okay, deal done.
Speaker #3: And now we are doing the phasing. And the phasing, actually—I mean, should we now incentivize our people to keep the first 12 months up?
Christian Klein: Now we are actually reimagining this industry capability with AI, making it smarter, making it more efficient when it comes to returns claims management. And that is a very good example. We closed one of these mega deals I'm personally involved in. We didn't win it actually again only because, hey, cloud clean core, that was the thing what we did a year ago. Now we are winning it because last mile delivery. Again, this customer tried to reinvent last mile delivery with an LLM. Again, they were missing business data. We brought it together. We showed them what we can build together with our AI foundation, and they were totally convinced. So to make this very clear, we are winning deals because of AI. We are not losing deals because of AI. And definitely, these deals are actually now leveraging AI to increase the win rate in Q4.
Now we are actually reimagining this industry capability with AI, making it smarter, making it more efficient when it comes to returns claims management. And that is a very good example. We closed one of these mega deals I'm personally involved in. We didn't win it actually again only because, hey, cloud clean core, that was the thing what we did a year ago. Now we are winning it because last mile delivery. Again, this customer tried to reinvent last mile delivery with an LLM. Again, they were missing business data. We brought it together. We showed them what we can build together with our AI foundation, and they were totally convinced. So to make this very clear, we are winning deals because of AI. We are not losing deals because of AI. And definitely, these deals are actually now leveraging AI to increase the win rate in Q4.
Speaker #3: That would be the wrong thing to do, because, again, it's against the nature of how these transformations work. And also, I don't want to discount the renewal base.
Speaker #3: At the end, what matters for the company, in the mid and the long term, is the renewal base, because that is what is driving the cloud revenue.
Speaker #3: And the profits actually on the long term. And so when you look into 2026, I mean, Q1, Q2, Q3, actually, we are not having this larger share.
Speaker #3: Of large deals. And that's why we actually see—we will see—a similar pattern. And about Q4, I mean, definitely, when you look into our support revenue base, there are still some larger customers.
Speaker #3: And we need to make sure that, especially when it comes to the phasing of a deal, et cetera, that we have that wide. But again, I would say you can definitely expect a similar pattern to what we have seen in 2025.
Christian Klein: Maybe to give a little bit of financial color around that kind of winning deals, I'm always a little bit nervous about how people compare our numbers to the industry. We have a constant currency disclosure, but don't forget we had a massive devaluation of the US dollar. I think over the year, it was about 13% appreciation of the euro. So our constant currency performance in SaaS, PaaS, and there's also a different strategy. I mean, we are not investing massively in infrastructure. Actually, you've seen our infrastructure business decline. Frankly, that decline might slow as these sovereign solutions become more prevalent. But still, we will largely leverage third-party infrastructure. And there's a spree of investment appetite right now in this frothy business. So we are not very concerned about lack of opportunities to leverage that infrastructure. Now, what we focus on is SaaS and PaaS.
Dominik Asam: Maybe to give a little bit of financial color around that kind of winning deals, I'm always a little bit nervous about how people compare our numbers to the industry. We have a constant currency disclosure, but don't forget we had a massive devaluation of the US dollar. I think over the year, it was about 13% appreciation of the euro. So our constant currency performance in SaaS, PaaS, and there's also a different strategy. I mean, we are not investing massively in infrastructure. Actually, you've seen our infrastructure business decline. Frankly, that decline might slow as these sovereign solutions become more prevalent. But still, we will largely leverage third-party infrastructure. And there's a spree of investment appetite right now in this frothy business. So we are not very concerned about lack of opportunities to leverage that infrastructure. Now, what we focus on is SaaS and PaaS.
Speaker #3: I mean, given what is left in the install base.
Speaker #1: Maybe on the cloud revenue in terms of what we see going forward. First of all, we guided cloud revenues now for '26. And maybe just looking back at '25, I venture to say that the accuracy of forecasts on cloud revenues is actually by now extremely high.
Speaker #1: This is also due to the extremely high share of recurring, more predictable revenues, and yes, because all the macro mess—be it tariff disputes or the kind of sovereign debate we just mentioned—we were a kind of mini $75 million away from the midpoint of the guidance at the end of '25.
Speaker #1: Against such a massive macro backdrop, I feel a half percentage point variance to the midpoints on growth is almost like forward accounting. So rest assured that our revenue guidance also for '26 is of a similar kind of confidence level.
Christian Klein: We have delivered in Q4 a whopping 27% constant currency growth for that. If you transform that into comparable US dollar numbers, that's above 30%. Now, you have seen some of our competitors, Dynamics and ServiceNow, report numbers in Q4, which are hovering around the 20s, I think 19% to 20%. You've seen our largest competitors, some of them not even reaching 10%. And so I'd say that is the evidence that we are actually winning in AI as opposed to losing. We'll take our next question from Ben Castillo with BNP Paribas. Hi, good morning. Thanks for having me on. Lots of positives in here, lots of large deals in the mix, either solving cloud opportunity, the high volume of AI and the backlog record TCB. So that all sounds optically very encouraging.
We have delivered in Q4 a whopping 27% constant currency growth for that. If you transform that into comparable US dollar numbers, that's above 30%. Now, you have seen some of our competitors, Dynamics and ServiceNow, report numbers in Q4, which are hovering around the 20s, I think 19% to 20%. You've seen our largest competitors, some of them not even reaching 10%. And so I'd say that is the evidence that we are actually winning in AI as opposed to losing.
Speaker #1: TCB forecast is always a little bit more difficult because, as we just learned, the granularity of what's exactly coming in the crystal ball is a little bit difficult.
Speaker #1: But I also want to highlight how we think about the bridge from CCB growth and cloud revenues. And if you, again, do the math for last year to calibrate your model, so to speak, it will be obvious once we publish our results. You will see the executive board compensation, that we were thinking more of a couple of percentage points decline as opposed to something bigger.
Operator: We'll take our next question from Ben Castillo with BNP Paribas.
Speaker #1: And then the two factors that weighed on us were, first, in the first half, it was this tariff debate where the bookings were slower.
Speaker #1: And then the factors Christian mentioned as a surprise towards the end. So also there, I would argue that we do have our checks under control, how it kind of translates.
Ben Castillo: Hi, good morning. Thanks for having me on. Lots of positives in here, lots of large deals in the mix, either solving cloud opportunity, the high volume of AI and the backlog record TCB. So that all sounds optically very encouraging.
Speaker #1: And when you translate the CCP of 2025 into 2026 . Please remember that the transactional , dilutive effect is becoming smaller . So it used to be close to one and a half percentage point last year , and it will be diluted to transactional dilutive effect is smaller .
Christian Klein: And if we were to pair that against, we ultimately still have CCB growth of sort of 25% in Q4 and still indicating that cloud revenues decelerate this year to come. I guess, could you help us just think about the changing landscape here, that growing mix of large deals in the pipeline that are converting the longer deal ramps? How should we think about that maybe midterm trajectory of total cloud revenue growth into 2027 and perhaps beyond? Just help us with how you think about that pace of cloud revenue growth, either deceleration or scope for stabilization. Thank you. Yeah, I mean, good question.
And if we were to pair that against, we ultimately still have CCB growth of sort of 25% in Q4 and still indicating that cloud revenues decelerate this year to come. I guess, could you help us just think about the changing landscape here, that growing mix of large deals in the pipeline that are converting the longer deal ramps? How should we think about that maybe midterm trajectory of total cloud revenue growth into 2027 and perhaps beyond? Just help us with how you think about that pace of cloud revenue growth, either deceleration or scope for stabilization. Thank you.
Speaker #1: So it, becoming, used to be close to one and a half percentage points last year, and it will be diluted to a percentage less than a point.
Speaker #1: So I think the nice thing is about also when you look at the fill rate , I mean , what percent of the cloud revenues adjusted for currency , there's always the problem .
Speaker #1: The CCP is a point value , which was an extremely high dollar change . The other values are constant currency . If you really do that , you see the coverage with CCP for next is actually quite good .
Christian Klein: Yeah, I mean, good question. And for sure, when I'm looking back to October, there is definitely, I mean, honestly, also a lesson learned that Q4, and we didn't see this in the forecast, but obviously, when you are then going into a Q4, it's not unnatural actually that you have large deals, but you see it in the order entry. I mean, we are this time really closed many more large deals. And again, what should you do? I mean, we saw this then during the course of actually in December, where customers then said, "Okay, deal done." And now we are doing the phasing. And the phasing actually, I mean, should we now incentivize our people to keep the first 12 months up? That would be the wrong thing to do. Because again, it's against the nature of how these transformations work. And also, I don't want to discount the renewal base.
Speaker #1: So that also should give you some confidence. About 26. And now, going beyond that, I already mentioned what slight, kind of reasonably means. Can then you work from there.
Christian Klein: And for sure, when I'm looking back to October, there is definitely, I mean, honestly, also a lesson learned that Q4, and we didn't see this in the forecast, but obviously, when you are then going into a Q4, it's not unnatural actually that you have large deals, but you see it in the order entry. I mean, we are this time really closed many more large deals. And again, what should you do? I mean, we saw this then during the course of actually in December, where customers then said, "Okay, deal done." And now we are doing the phasing. And the phasing actually, I mean, should we now incentivize our people to keep the first 12 months up? That would be the wrong thing to do. Because again, it's against the nature of how these transformations work. And also, I don't want to discount the renewal base.
Speaker #1: And assume further dilution of the part. So, transactionally, this is how I would think about it. So it's actually stabilizing in some way.
Speaker #2: We'll take our next question from Mohammed Mewawalla with Goldman Sachs.
Speaker #3: Thank Great . you . Morning . Morning , Dominic . My question was really on the TCB . You talked a lot about sort of delays in in recognizing business some of this into the CCB .
Speaker #3: We saw quite a steep decel in the sort CCB growth versus a year ago , almost sort of 9 to 10 points . You know , is there any I know there's kind of the law of large numbers here , but is there anything you can sort of comment on kind of going on here ?
Christian Klein: At the end, what matters for the company on the mid and the long term is the renewal base because that is what is driving the cloud revenue and the profits actually on the long term. And so, when you look into 2026, I mean, Q1, Q2, Q3, actually, we are not having this larger share of large deals. And that's why we actually see we will see a similar pattern. And about Q4, I mean, definitely, when you look into our support revenue base, there are still some larger customers. And we need to make sure that, especially when it comes to the phasing of a deal, etc., that we have that wide. But again, I would see there is definitely you can expect a similar pattern to what we have seen in 2025, I mean, given what is left in the installed base.
At the end, what matters for the company on the mid and the long term is the renewal base because that is what is driving the cloud revenue and the profits actually on the long term. And so, when you look into 2026, I mean, Q1, Q2, Q3, actually, we are not having this larger share of large deals. And that's why we actually see we will see a similar pattern. And about Q4, I mean, definitely, when you look into our support revenue base, there are still some larger customers. And we need to make sure that, especially when it comes to the phasing of a deal, etc., that we have that wide. But again, I would see there is definitely you can expect a similar pattern to what we have seen in 2025, I mean, given what is left in the installed base.
Speaker #3: Because you talked about obviously record number of larger deals . So I just want to better understand that dynamic . And as a follow up , could you update us perhaps on BDC and the momentum you're seeing ?
Speaker #3: You've signed up a flurry of many partners. How is that sort of pipeline shifting, and what sort do you expect in terms of contribution in 2026?
Speaker #3: Thank you .
Speaker #4: Yeah , I start with on the total cloud backlog . I mean , actually you said it really well . I mean , at the end the number is getting of course much bigger .
Speaker #4: When you look at the absolute growth we put on top, to Dominik's point, I don't see any other competitor producing a similar kind of numbers when it comes to the total cloud backlog.
Speaker #4: Not even close . And you this year , know , yes , there were , you know , customers coming . But larger when you look at the wise journey , when we started this four years back , of course , we started with smaller customers , midsize customers , and now there are these mega deals and that will also continue .
Christian Klein: Maybe on the cloud revenue in terms of what we see going forward. First of all, we guided cloud revenues now for 2026. Maybe just looking back at 2025, I venture to say that the accuracy of forecasts on cloud revenues is actually by now extremely high. This is also due to the extremely high share of recurring, more predictable revenues. Yes, because all the macro mess, being tariff disputes or the kind of sovereign debate we just mentioned, we were kind of mini EUR 75 million away from the midpoint of the guidance at the end of 2025. Against such a massive macro backdrop, I feel a 0.5 percentage points variance to the midpoint on growth is almost like forward accounting. So rest assured that our revenue guidance also for 2026 is of a similar kind of confidence level.
Dominik Asam: Maybe on the cloud revenue in terms of what we see going forward. First of all, we guided cloud revenues now for 2026. Maybe just looking back at 2025, I venture to say that the accuracy of forecasts on cloud revenues is actually by now extremely high. This is also due to the extremely high share of recurring, more predictable revenues. Yes, because all the macro mess, being tariff disputes or the kind of sovereign debate we just mentioned, we were kind of mini EUR 75 million away from the midpoint of the guidance at the end of 2025. Against such a massive macro backdrop, I feel a 0.5 percentage points variance to the midpoint on growth is almost like forward accounting. So rest assured that our revenue guidance also for 2026 is of a similar kind of confidence level.
Speaker #4: And they will just, you know, take a higher share in the order overall entry of what we to the cloud with are converting wise.
Speaker #4: So I'm actually super proud . Also , given that , I mean , the TCB is always then also of course dependent on the contract duration and that actually , you know , was stable .
Speaker #4: So not we are actually increasing TCB with longer contract duration . We are actually increasing it by putting real business on . And that top combined a with also lower churn , as we are closing more and more healthy business is for me , actually , a super positive sign .
Christian Klein: TCB forecast is always a little bit more difficult because, as we just learned, the granularity of what's exactly coming in the crystal ball is a little bit difficult. But I also want to highlight how we think about the bridge from CCB growth and cloud revenues. And if you again do the math for last year to calibrate your model, so to speak, it will be obvious once we publish our results. You will see the executive board compensation that we were thinking more of a couple percentage points decline as opposed to something bigger. And then the two factors that weighed on us was first, in the first half, it was the tariff debate where the bookings were slower, and then the factors Christian mentioned as a surprise towards the end.
TCB forecast is always a little bit more difficult because, as we just learned, the granularity of what's exactly coming in the crystal ball is a little bit difficult. But I also want to highlight how we think about the bridge from CCB growth and cloud revenues. And if you again do the math for last year to calibrate your model, so to speak, it will be obvious once we publish our results. You will see the executive board compensation that we were thinking more of a couple percentage points decline as opposed to something bigger. And then the two factors that weighed on us was first, in the first half, it was the tariff debate where the bookings were slower, and then the factors Christian mentioned as a surprise towards the end.
Speaker #4: Also , when it comes to the cloud revenue development , not only in 2026 , but then for also many , many years to come .
Speaker #4: And then finally , when you look into Q4 , I mean , still , it's a it's smaller business than to our compared installed base business .
Speaker #4: just last But year , I mean , overall , we won over , you know , 3000 net new customers . And that is , of course , mid-sized customers .
Speaker #4: But they will grow over time . The up and the cross-sell I mentioned of the business suite . So while you know the share of mid-sized SME business became smaller because some of the larger transactions happened and will happen , you know , still this business is going really well and we are adding a lot of new logos to SAP .
Christian Klein: So, also there, I would argue that we do have our checks under control, how it kind of translates. And when you translate the CCB of 2025 into 2026, please remember that the transactional dilutive effect is becoming smaller. It used to be close to 1.5 percentage point last year, and it will be diluted to less than a percentage point. So, I think the nice thing is about also when you look at the fill rate. I mean, what percent of the cloud revenues adjusted for currency? There's always the problem with CCB; it's a point value, which was an extremely high dollar change. The other values are constant currency. If you really de-dilute that, you see the coverage with CCB for next year is actually quite good. So, that also should give you some confidence about 2026.
So, also there, I would argue that we do have our checks under control, how it kind of translates. And when you translate the CCB of 2025 into 2026, please remember that the transactional dilutive effect is becoming smaller. It used to be close to 1.5 percentage point last year, and it will be diluted to less than a percentage point. So, I think the nice thing is about also when you look at the fill rate. I mean, what percent of the cloud revenues adjusted for currency? There's always the problem with CCB; it's a point value, which was an extremely high dollar change. The other values are constant currency. If you really de-dilute that, you see the coverage with CCB for next year is actually quite good. So, that also should give you some confidence about 2026.
Speaker #1: it's also And maybe worthwhile mentioning , if you look at the TCB , TCB , which is basically the backlog , year two and the following years , it's actually that ratio is increasing .
Speaker #1: So it gives you also more visibility in the outer years.
Speaker #2: We'll take our next question from Mark with Mortler Bernstein.
Speaker #5: Sorry , I had my mic off when it it didn't want to didn't want to cause an issue . So I'd like to make sure that we're really clear on the CCP .
Speaker #5: And I know it's been a lot of the questions, but on it, can you give some ordering to what you think was the most impactful for why the number was less than the Street might have expected?
Christian Klein: And now going beyond that, I already mentioned what slide kind of reasonably means. You can then work from there and assume further dilution of the transactional part. So this is how I would think about it. So it's actually stabilizing in some way. We'll take our next question from Mohammed Muwawala with Goldman Sachs. Great. Thank you. Morning, Christian. Morning, Dominik. My question was really on the TCB. You talked a lot about sort of delays in recognizing some of this business into the CCB. We saw quite a steep decel in the sort of CCB growth versus a year ago, almost sort of 9 to 10 points. Is there any? I know there's kind of the law of large numbers here, but is there anything you can sort of comment on that's kind of going on here? Because you obviously talked about record number of larger deals.
And now going beyond that, I already mentioned what slide kind of reasonably means. You can then work from there and assume further dilution of the transactional part. So this is how I would think about it. So it's actually stabilizing in some way.
Speaker #5: And can you also give us any sense on the economic impact of these sovereign cloud deals? Does it impact revenue, lift multiple, or margin in any way, shape, or form?
Operator: We'll take our next question from Mohammed Muwawala with Goldman Sachs.
Speaker #5: Than that, it may, other than that, take longer for the deals to close? Thank you.
Mohammed Moawalla: Great. Thank you. Morning, Christian. Morning, Dominik. My question was really on the TCB. You talked a lot about sort of delays in recognizing some of this business into the CCB. We saw quite a steep decel in the sort of CCB growth versus a year ago, almost sort of 9 to 10 points. Is there any? I know there's kind of the law of large numbers here, but is there anything you can sort of comment on that's kind of going on here? Because you obviously talked about record number of larger deals.
Speaker #4: Yeah , I mean , the one factor Mike , clearly , which changed over the course of the quarter . And again , it's it's absolutely positive for the years 20 , 20 , 2027 plus .
Speaker #4: I mean, we closed more larger deals, and then when you think facing of such a deal, I about the mean, first of all you negotiate on the business case, on the ROI, the AI use cases.
Speaker #4: You think about , okay , what are the pillars which are really important . You think about , okay , do we go supply chain first , finance first logistics , etc.
Christian Klein: So just want to better understand that dynamic. And as a follow-up, could you update us perhaps on BDC and the momentum? You're saying you've signed up a flurry of many partners. How is that sort of pipeline shifting? And what sort of do you expect in terms of contribution in 2026? Thank you. Yeah, I can start with the total cloud backlog. I mean, actually, you said it really well. I mean, at the end, the number is getting, of course, much bigger. When you look at the absolute quotes we put on top, to Dominik's point, I don't see any other competitor producing similar kind of numbers when it comes to the total cloud backlog, not even close. And this year, yes, there were larger customers coming.
So just want to better understand that dynamic. And as a follow-up, could you update us perhaps on BDC and the momentum? You're saying you've signed up a flurry of many partners. How is that sort of pipeline shifting? And what sort of do you expect in terms of contribution in 2026? Thank you.
Speaker #4: . And then during the course of the quarter , obviously you start also . Then facing those deals . And as you then have many larger deals .
Speaker #4: And this was actually a quite significant shift. We actually saw that a lot of the revenue moved out from the first 12 months to year two, three, and that was four.
Speaker #4: by far , by far the highest impact we have seen compared to October . On Sovereign Cloud . Actually , no . I mean , the deal margins are almost the same , but what Dominic already alluded to , I mean , the deal negotiation per se .
Christian Klein: Yeah, I can start with the total cloud backlog. I mean, actually, you said it really well. I mean, at the end, the number is getting, of course, much bigger. When you look at the absolute quotes we put on top, to Dominik's point, I don't see any other competitor producing similar kind of numbers when it comes to the total cloud backlog, not even close. And this year, yes, there were larger customers coming.
Speaker #4: I mean , we are running not only very mission critical ERP systems , we are running also customers in regulated industries . And they have questions .
Speaker #4: They say , hey , what is happening ? If sanctions are coming , is an export control what is coming , what is happening this AI data happening ?
Christian Klein: But when you look at the RISE journey, when we started this four years back, actually, of course, we started with smaller customers, mid-sized customers. And now there are these mega deals, and that will also continue. And they will just take a higher share in the overall order entry of what we are converting to the cloud with RISE. So I'm actually super proud also given that, I mean, the TCB is always then also, of course, dependent on the contract duration. And that actually was stable. So we are not actually increasing TCB with longer contract duration. We are actually increasing it by putting real business on top.
But when you look at the RISE journey, when we started this four years back, actually, of course, we started with smaller customers, mid-sized customers. And now there are these mega deals, and that will also continue. And they will just take a higher share in the overall order entry of what we are converting to the cloud with RISE. So I'm actually super proud also given that, I mean, the TCB is always then also, of course, dependent on the contract duration. And that actually was stable. So we are not actually increasing TCB with longer contract duration. We are actually increasing it by putting real business on top.
Speaker #4: if If there protection regulation is now redefined , etc. . So these discussions take just longer than they have been a year ago , and it's a reflection of what is happening in the world .
Speaker #4: This is not a reflection of a demand issue . Actually . It's good . Look , I mean , I always also start this conversations with , look , when it comes to regulation , trust on one thing .
Speaker #4: SAP has your back . I mean , we are spending over 1 billion on on localisation on regulations , etc. . We are running this businesses in over 120 countries .
Speaker #4: So we we we know how to adhere to all of these . Also new regulations . And I see this rather as a competitive advantage that we can clearly say , hey , look , no matter where you want to do business or where you want to expand your business , SAP will have a sovereign cloud solution for you in the different parts of the world .
Christian Klein: That combined also with a lower churn as we are closing more and more healthy business is actually, for me, a super positive sign also when it comes to the cloud revenue development, not only in 2026, but then also for many, many years to come. And then finally, when you look into grow, I mean, still, it's a smaller business than compared to our installed-based business. But just last year, I mean, overall, we won over 3,000 net new customers. And that is, of course, mid-sized customers, but they will grow over time. The upsell and cross-sell I mentioned of the business suite. So while the share of mid-size SME business became smaller because some of the larger transactions happened and will happen, still, this business is growing really well, and we are adding a lot of new logos to SAP.
That combined also with a lower churn as we are closing more and more healthy business is actually, for me, a super positive sign also when it comes to the cloud revenue development, not only in 2026, but then also for many, many years to come. And then finally, when you look into grow, I mean, still, it's a smaller business than compared to our installed-based business. But just last year, I mean, overall, we won over 3,000 net new customers. And that is, of course, mid-sized customers, but they will grow over time. The upsell and cross-sell I mentioned of the business suite. So while the share of mid-size SME business became smaller because some of the larger transactions happened and will happen, still, this business is growing really well, and we are adding a lot of new logos to SAP.
Speaker #1: And it is also, and there is this step, which is required in many countries. So we see new offerings on the infrastructure as a service for sovereign in various countries.
Speaker #1: Almost mushrooming up . I can , and say there are certain requirements in different countries . And we now really see the first country certifying these products .
Speaker #1: So we are really at the embryonic phase of what could become something really big. But it's really happening because the capital is flowing there.
Speaker #1: The certification agencies are arms around it, but getting there, it takes some time to groom and mature these projects.
Speaker #2: Our next question comes from Toby Ogg with JPMorgan.
Christian Klein: Maybe it's also worthwhile mentioning if you look at the TCB minus CCB, which is basically the backlog year two and the following years, it's actually that ratio is increasing. So it gives you also more visibility in the older years. We'll take our next question from Mark Moerdler with Bernstein. Sorry, had my mic off, and it didn't want to cause an issue. So I'd like to make sure that we're really clear on the CCB, and I know I spent a lot of the questions put on it. Can you give some ordering to what you think was the most impactful for why the number was less than the street might have expected? And can you also give us any sense on the economic impact of these sovereign cloud deals?
Dominik Asam: Maybe it's also worthwhile mentioning if you look at the TCB minus CCB, which is basically the backlog year two and the following years, it's actually that ratio is increasing. So it gives you also more visibility in the older years.
Speaker #6: Yeah . Hi . Hi , Christian . Thanks for the question . Just on the free cash flow guidance , Dominic of 10 billion .
Speaker #6: Clearly well ahead of expectations, and looks to imply a pickup in cash conversion. I know we talked through the year about cash, tax, FX, and the migration credit headwinds.
Operator: We'll take our next question from Mark Moerdler with Bernstein.
Mark Moerdler: Sorry, had my mic off, and it didn't want to cause an issue. So I'd like to make sure that we're really clear on the CCB, and I know I spent a lot of the questions put on it. Can you give some ordering to what you think was the most impactful for why the number was less than the street might have expected? And can you also give us any sense on the economic impact of these sovereign cloud deals? Does it impact revenue lift to multiple or margin in any way, shape, or form other than that it may take longer for the deals to close? Thank you.
Speaker #6: just help us Could you reconcile these headwinds with the cash flow outlook with the better free and improved cash conversion ? You're now expecting ?
Speaker #6: Thank you
Speaker #6: .
Speaker #1: sure . I Yeah , would say the upside is from two sources , partially from operational . Further improvements which we have matured to a point that we feel comfortable guiding it now , but also from the fact that the delta on stock based compensation between the PNL and cash is increasing .
Speaker #1: You've seen it already . Now , in the numbers , you will see that in 25 . So it's a little bit higher .
Speaker #1: We've always said , take the effective tax rate of the non IFRS operating profit , add back around about the billion . So now I say billion around about the plus .
Christian Klein: Does it impact revenue lift to multiple or margin in any way, shape, or form other than that it may take longer for the deals to close? Thank you. Yeah. I mean, the one factor, Mike, clearly which changed over the course of the quarter. And again, it's absolutely positive for the year 2027 plus. I mean, we closed more larger deals. And then when you think about the phasing of such a deal, I mean, first of all, you negotiate on the business case, on the AOI, the AI use cases. You think about, okay, what are the pillars which are really important? You think about, okay, do we go supply chain first, finance first, logistics, etc.? And then during the course of the quarter, obviously, you start also then phasing those deals.
Christian Klein: Yeah. I mean, the one factor, Mike, clearly which changed over the course of the quarter. And again, it's absolutely positive for the year 2027 plus. I mean, we closed more larger deals. And then when you think about the phasing of such a deal, I mean, first of all, you negotiate on the business case, on the AOI, the AI use cases. You think about, okay, what are the pillars which are really important? You think about, okay, do we go supply chain first, finance first, logistics, etc.? And then during the course of the quarter, obviously, you start also then phasing those deals.
Speaker #1: So, it is a part of that that gives upside. And the good news is that it's sustainable. So that's the new, basically, base to jump off.
Speaker #1: Now on the transformation credits . It's always the game of the overall working capital . It's not the only item there . And from that perspective , yeah .
Speaker #1: For 2026, this is the best estimate we can give today. And yeah, we also make sure we have no mortgages for that future, and we can stick to that very simplistic formula, with the noise that always will be there around the phasing of certain payments.
Speaker #1: But that's the trend .
Speaker #7: Great . Well , thank you , Dominik . And this concludes our call for today . Thank you all for joining .
Speaker #4: Thank you .
Christian Klein: As you then have many larger deals, and this was actually a quite significant shift, we actually saw that a lot of the revenue moved out from the first 12 months to year 2, 3, and 4. That was by far, by far the highest impact we have seen compared to October. On sovereign cloud, actually, no. I mean, the deal margins are almost the same. But what Dominik already alluded to, I mean, the deal negotiation per se, I mean, we are running not only very mission-critical ERP systems, we are also running customers in regulated industries. And they have questions. They say, "Hey, what is happening if sanctions are coming? What is happening if there's an export control coming? What is happening if this AI data protection regulation is now redefined, etc.?" So these discussions take just longer than they have been a year ago.
As you then have many larger deals, and this was actually a quite significant shift, we actually saw that a lot of the revenue moved out from the first 12 months to year 2, 3, and 4. That was by far, by far the highest impact we have seen compared to October. On sovereign cloud, actually, no. I mean, the deal margins are almost the same. But what Dominik already alluded to, I mean, the deal negotiation per se, I mean, we are running not only very mission-critical ERP systems, we are also running customers in regulated industries. And they have questions. They say, "Hey, what is happening if sanctions are coming? What is happening if there's an export control coming? What is happening if this AI data protection regulation is now redefined, etc.?" So these discussions take just longer than they have been a year ago.
Speaker #1: Thank you .
Speaker #2: Ladies and ladies and gentlemen . The conference is now concluded and you may disconnect your telephone . Thank you for joining and have a pleasant day .
Christian Klein: It's a reflection of what is happening in the world. This is not a reflection of a demand issue. Actually, it's good. Look, I mean, I always also start these conversations with, "Look, when it comes to regulation, trust on one thing. SAP has your back." I mean, we are spending over EUR 1 billion on localization, on regulations, etc. We are running these businesses in over 120 countries. So we know how to adhere to all of these also new regulations. I see this rather as a competitive advantage that we can clearly say, "Hey, look, no matter where you want to do business or where you want to expand your business, SAP will have a sovereign cloud solution for you in the different parts of the world." And there is also the certification step, which is required in many countries.
It's a reflection of what is happening in the world. This is not a reflection of a demand issue. Actually, it's good. Look, I mean, I always also start these conversations with, "Look, when it comes to regulation, trust on one thing. SAP has your back." I mean, we are spending over EUR 1 billion on localization, on regulations, etc. We are running these businesses in over 120 countries. So we know how to adhere to all of these also new regulations. I see this rather as a competitive advantage that we can clearly say, "Hey, look, no matter where you want to do business or where you want to expand your business, SAP will have a sovereign cloud solution for you in the different parts of the world."
Dominik Asam: And there is also the certification step, which is required in many countries. So we see new offerings on the infrastructure as a service for sovereign in various countries, almost mushrooming up, I can say. And there are certain requirements in different countries. And we now really see the first country certifying these products. So we are really at the embryonic phase of what could become something really big. But it's really happening because the capital is flowing there. The certification agencies are getting their arms around it. But it takes some time to groom and mature these projects.
Christian Klein: So we see new offerings on the infrastructure as a service for sovereign in various countries, almost mushrooming up, I can say. And there are certain requirements in different countries. And we now really see the first country certifying these products. So we are really at the embryonic phase of what could become something really big. But it's really happening because the capital is flowing there. The certification agencies are getting their arms around it. But it takes some time to groom and mature these projects. Our next question comes from Toby Ogg with J.P. Morgan. Yeah. Hi, Christian. Dominik, thanks for the question. Just on the free cash flow guidance, Dominik of EUR 10 billion, clearly well ahead of expectations and looks to imply a pickup in cash conversion. I know we talked through the year about cash tax, FX, and the migration credit headwinds.
Operator: Our next question comes from Toby Ogg with J.P. Morgan.
Toby Ogg: Yeah. Hi, Christian. Dominik, thanks for the question. Just on the free cash flow guidance, Dominik of EUR 10 billion, clearly well ahead of expectations and looks to imply a pickup in cash conversion. I know we talked through the year about cash tax, FX, and the migration credit headwinds.
Christian Klein: Could you just help us reconcile these headwinds with a better free cash flow outlook and improved cash conversion you're now expecting? Thank you. Sure. I would say the upside is from 2 sources, partially from operational further improvements, which we have matured to a point that we feel comfortable guiding it now, but also from the fact that the delta on stock-based compensation between the TNL and cash is increasing. You've seen it already now in the numbers. You will see that in 2025. So it's a little bit higher. We've always said take the effective tax rate of the non-IFRS operating profit add back round about EUR 1 billion. So now I say round about EUR 1 billion plus. So that gives us a part of the upside. And the good news is that's sustainable. So that's the new base basically to jump off.
Could you just help us reconcile these headwinds with a better free cash flow outlook and improved cash conversion you're now expecting? Thank you.
Dominik Asam: Sure. I would say the upside is from 2 sources, partially from operational further improvements, which we have matured to a point that we feel comfortable guiding it now, but also from the fact that the delta on stock-based compensation between the TNL and cash is increasing. You've seen it already now in the numbers. You will see that in 2025. So it's a little bit higher. We've always said take the effective tax rate of the non-IFRS operating profit add back round about EUR 1 billion. So now I say round about EUR 1 billion plus. So that gives us a part of the upside. And the good news is that's sustainable. So that's the new base basically to jump off.
Christian Klein: Now, on the transformation credits, it's always the game of the overall working capital. It's not the only item there. And from that perspective, yeah, for 2026, this is the best estimate we can give today. And yeah, we also make sure that we have no mortgages in the future and can stick to that very simplistic formula with the noise that always will be there around the phasing of certain payments. But that's the trend. Great. Well, thank you, Dominik. And this concludes our call for today. Thank you all for joining. Thank you. Thank you. Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.
Now, on the transformation credits, it's always the game of the overall working capital. It's not the only item there. And from that perspective, yeah, for 2026, this is the best estimate we can give today. And yeah, we also make sure that we have no mortgages in the future and can stick to that very simplistic formula with the noise that always will be there around the phasing of certain payments. But that's the trend.
Alexandra Steiger: Great. Well, thank you, Dominik. And this concludes our call for today. Thank you all for joining.
Christian Klein: Thank you.
Dominik Asam: Thank you.
Operator: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.
