Berenberg reiterates Buy rating on SAP stock amid solid Q2 results

SAP reported mixed Q2 2025 results, with non-IFRS EPS of €1.50 and operating profit of €2.57 billion surpassing consensus, though revenue was impacted by foreign exchange headwinds leading to a guidance revision. Despite a deceleration in current cloud backlog growth attributed to US tariffs, the company demonstrated resilience with 10.5% revenue growth and strong profitability, maintaining cost discipline. Analysts, including Berenberg, Bernstein SocGen, and JMP Securities, largely reiterated Buy ratings and raised price targets, highlighting SAP's strong margin improvements and continued cloud transition progress.

Analysis

SAP's second-quarter 2025 results demonstrate strong underlying operational health despite facing significant macroeconomic headwinds. The company surpassed consensus estimates with a non-IFRS earnings per share of €1.50 and an operating profit of €2.57 billion. However, a revenue miss driven by adverse USD/EUR foreign exchange movements prompted a revision to guidance. This was compounded by a deceleration in current cloud backlog growth, which management and analysts attribute to client hesitation stemming from U.S. tariff policies. Despite these challenges, SAP's fundamental strength is evident in its 10.5% revenue growth over the last twelve months and a robust gross profit margin of 73.6%. Analyst commentary is overwhelmingly positive, with Berenberg, Bernstein SocGen, JMP Securities, and KeyBanc reiterating buy-equivalent ratings and raising price targets, citing impressive cost discipline and notable margin improvements. This consensus suggests that the market is looking past the temporary, externally-driven top-line issues and focusing on the successful cloud transition and resilient profitability, which are seen as core value drivers.

Key Decisions for Investors

• Investors could consider the guidance revision a transient issue, focusing instead on the strong bottom-line beat and margin expansion, which signal robust operational efficiency.
• The primary risk to monitor is the current cloud backlog; continued deceleration in future quarters could indicate that tariff-related headwinds are more persistent than currently assessed.
• Given the broad-based analyst support and price target increases, maintaining or initiating a long position could be justified, as the market consensus points to significant upside potential driven by the ongoing cloud transition.