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SAP Misses Q3 Revenue Estimates as Cloud Growth Slows, Shares Drop

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German enterprise software giant SAP reported third-quarter revenue slightly below analyst expectations, sending its U.S.-listed shares down 3% in after-hours trading. The company posted revenue of €9.08 billion ($10.59 billion), a 7% year-on-year increase but short of the €9.17 billion forecast by analysts, according to LSEG IBES data.

SAP’s cloud business, a key growth driver, rose 22% — its slowest pace since late 2023. CFO Dominik Asam said the company “maintained forward momentum despite an uncertain macroeconomic backdrop.” SAP has been shifting from traditional software licenses to a subscription-based cloud model, seeking more stable long-term revenue streams.

Non-IFRS operating profit grew 14% to €2.57 billion, slightly above estimates, while free cash flow increased 5% to €1.27 billion. Looking ahead, SAP expects 2025 cloud revenue to reach the lower end of its forecast range (€21.6–21.9 billion), but operating profit is anticipated at the upper end (€10.3–10.6 billion). Free cash flow guidance was raised slightly to between €8 billion and €8.2 billion.

EU Probes SAP Over Software Practices That May Hinder Competition

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The European Commission has launched an antitrust investigation into SAP, saying the German software giant’s business practices may have unfairly restricted rivals in the enterprise resource planning (ERP) market.

SAP is the global leader in ERP software, which companies use to manage finance, HR, supply chains, sales, and procurement. The probe focuses on SAP’s aftermarket practices, raising concerns that customers may be locked into its services and face higher costs.

“We are concerned that SAP may have restricted competition in this crucial aftermarket, by making it harder for rivals to compete, leaving European customers with fewer choices and higher costs,” said EU antitrust chief Teresa Ribera.

The investigation leaves SAP exposed to potential fines of up to 10% of its annual global sales.

Reuters previously reported that SAP had offered concessions to ease regulators’ concerns after complaints from European businesses about its ERP policies.

The Commission highlighted several practices under scrutiny:

  • preventing customers from switching to rival support and maintenance providers,

  • blocking customers from ending support for unused licenses,

  • extending initial on-premises ERP license terms to prevent early termination,

  • charging reinstatement and back-maintenance fees when customers return after leaving.

SAP said it does not expect any financial hit from the probe. “We do not anticipate the engagement with the European Commission to result in material impacts on our financial performance,” the company said, while adding that it was working closely with regulators.

SAP defended its policies as being based on long-standing global software standards and compliant with competition rules.

SAP offers concessions to EU in effort to ease antitrust concerns

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SAP, Europe’s largest software maker, has proposed concessions to the European Commission in an attempt to head off a potential antitrust investigation and fines, sources familiar with the matter told Reuters.

The German company dominates the enterprise resource planning (ERP) market, providing software that helps firms manage finances, supply chains, HR, and procurement. SAP has long been under scrutiny from EU regulators following complaints about complex licensing terms, the bundling of applications, and difficulties faced by companies trying to switch to rival suppliers.

According to sources, SAP has submitted a proposal aimed at addressing regulators’ concerns, though details of the remedies were not disclosed. If accepted, SAP could avoid a formal investigation and a penalty that could reach up to 10% of its annual global revenue. Both SAP and the European Commission declined to comment.

The Commission previously circulated a 2022 questionnaire to SAP customers asking about their ability to switch to rival vendors, purchase only specific support services, or migrate from on-premise ERP systems to the cloud. The inquiry also raised questions about whether SAP or Oracle had disparaged competitors.

Potential remedies could include giving customers greater flexibility to purchase individual support contracts and lowering barriers to migration between vendors.

SAP also faces antitrust pressure in the United States: in June it asked the U.S. Supreme Court to review a ruling requiring it to face a lawsuit from Teradata, which accused the company of anti-competitive practices.

The EU’s decision on SAP’s concessions will determine whether the company averts another high-profile investigation as regulators increase scrutiny of dominant software vendors.