Enterprise software company SAP reported third quarter earnings that beat estimates while revenue slightly missed Wall Street targets. But SAP stock rose as the company reaffirmed its outlook for cloud computing growth.
The Germany-based company reported SAP earnings late Wednesday.
Third quarter profit rose 40% to $1.53 on an adjusted basis, topping estimates by 6%. Revenue climbed 12% to $8.187 billion, missing estimates by 1%.
Cloud computing revenue rose 23% to $3.67 billion.
The business operations software giant reaffirmed guidance for 23% cloud growth to about $14.9 billion in 2023.
SAP reports its own financial metric called Current Cloud Backlog, or CCB. It refers to the amount of revenue a software company expects to recognize in the future from contracts with customers.
SAP Stock: Better-Than-Feared Quarter?
"We were cautious going into the Q3 results, but the numbers were better than feared," said Jefferies analyst Charles Brennan in a report.
He added: "Notably, cloud CCB growth came in at 25% defying our concerns that growth would fade. Similarly, cloud gross margins which improved. However, it is not all good news and cloud revenue missed consensus by 2%. And, the 23% cloud revenue growth leaves SAP stretching to meet fiscal year cloud guidance."
On the stock market today, NY-listed SAP stock climbed 4.5% to close at 133.38. SAP stock is up 29% this year.
"At a high level, we believe SAP is beginning to reap the benefits of the transformation it has undergone over the last three years as its Cloud revenue should approach ($15 billion) this year compared to software license revenue of less than $2.4 billion," Patrick Walravens, analyst at JMP Securities, said in a report. "(This) allows the company to invest in innovation rather than maintenance and makes it easier for customers to adopt those innovations."
SAP is moving away from software-licenses sales to subscription-based cloud services.
Shares in large cap, software peer Oracle rose a fraction to 108.34 on Thursday. Oracle's business is transitioning to cloud-based services, much like SAP.
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