SAP Got The Recovery I Expected (Rating Downgrade)

SAP was downgraded from Strong Buy to Hold after a 36% stock rally in two months, despite fundamentals improving. Cloud revenue rose 24% with backlog up 27%, supported by AI- and cloud-led deal momentum, while cloud gross margin stayed strong at 74.6% and free cash flow remained solid. Overall, the downgrade appears driven more by valuation/positioning than deteriorating operating performance.