SAP stock surges amid plan to cut 8,000 jobs, boost to profit outlook

Shares of SAP jumped as much as 8% on Wednesday as the German software giant laid out a plan to cut jobs alongside a boost to its profit outlook.

SAP
SAP,
+5.70%

SAP,
+0.10%
said it will cut 8,000 jobs this year, with a majority coming from voluntary leave programs and internal re-skilling measures, but headcount will remain at similar levels to 2023’s 107,602 employees owing to re-investments into strategic growth areas. SAP said the restructuring program will cost about €2 billion ($2.2 billion) while only providing a “minor” cost benefit.

“With this program, we are planning to intensify the shift of investments to strategic growth areas, above all, business AI, and to drive new efficiencies powered by AI across the business,” said CEO Christian Klein in a call with analysts.

He said he talked with customers and other global leaders at the World Economic Forum in Davos, and that artificial intelligence was the topic in nearly all those conversations. “Generative AI is the greatest opportunity since the rise of the cloud, especially for SAP,” he said.

SAP said its fourth-quarter earnings from continuing operations jumped 94% to €1.17 billion, while revenue rose 5% to €8.47 billion. Analysts polled by Visible Alpha expected earnings of €1.37 billion on revenue of €8.33 billion.

Its cloud backlog rose by 25% to €13.7 billion, a number analysts at UBS called “remarkable.”

The big news wasn’t so much its 2024 outlook but the 2025 view. Though it’s changing its adjusted operating profit view to reflect €2 billion of share-based compensation expenses, it’s also increasing its profit target by €500 million due to anticipated incremental efficiency gains from the transformation program.

The rival of Oracle
ORCL,
+1.57%
also raised its free cash flow guidance by €500 million.

SAP stock is now up 15% so far in the new year, and up 51% over the last 52 weeks.

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