SAP (NYSE:SAP) reported a strong second quarter for 2026, with management highlighting accelerating current cloud backlog growth, continued cloud revenue gains and rising customer interest in the company’s artificial intelligence offerings.
Chief Executive Officer Christian Klein called the quarter “outstanding,” pointing to SAP’s Sapphire customer conference, where the company launched its “autonomous enterprise” strategy. Klein said the event produced record attendance, added to SAP’s sales pipeline and generated positive feedback from customers on the company’s AI roadmap.
Cloud revenue increased 24% to EUR 6.3 billion, supported by continued migrations from on-premise ERP systems to cloud ERP. Total revenue rose 11% to EUR 9.9 billion. SAP reported non-IFRS operating profit of EUR 2.7 billion, up 9% year over year at constant currencies.
Cloud ERP and Backlog Remain Central to Growth
Chief Financial Officer Dominik Asam said SAP’s cloud ERP suite revenue increased 27% in the quarter and now represents 88% of total cloud revenue. Software license revenue declined 32%, reflecting the company’s continued shift away from traditional on-premise licensing.
Asam said cloud revenue performance was particularly strong in Asia-Pacific and Japan and in Europe, the Middle East and Africa, while the Americas delivered solid results. He cited Brazil, France, Germany, Italy, India, South Korea and Spain as having outstanding performance, with Australia, Singapore and the U.S. described as particularly strong.
Management said SAP’s indirect channel continued to grow faster than direct cloud revenue, reflecting changes in its go-to-market strategy over the past two years.
AI Strategy Focuses on Agents, Data and Governance
Klein used much of the call to outline SAP’s AI strategy, which centers on the company’s Business AI Platform, Joule Studio, SAP Business Data Cloud and a new user experience called Joule Work. He said the platform is designed to help customers build, govern and operate AI agents across business processes while maintaining data privacy, compliance and sovereignty requirements.
Klein said SAP is integrating multiple large language models into Joule Studio, including models from Anthropic, Cohere, Google, Mistral AI and OpenAI, as well as open-weight models. He said SAP’s approach is intended to avoid customer lock-in to a single AI model and allow customers to select models based on cost and performance.
The company also discussed several recent acquisitions intended to strengthen its AI and data architecture. Klein said Dremio’s Apache Iceberg-native technology will help SAP bring SAP and non-SAP data together in an enterprise lakehouse, while Reltio will support master data governance. Prior Labs, he said, will help SAP agents generate tabular predictions using SAP and non-SAP data.
Klein said SAP plans to release close to 50 assistants by the end of the third quarter and more than 400 autonomous suite agents by the end of the year. The company also plans to launch three additional ERP migration assistants with 10 underlying agents later this quarter.
Customer Examples Highlight AI Adoption
SAP executives cited several customer examples to illustrate early AI adoption. Klein said SAP and Amadeus developed an AI agent that autonomously reconciles unstructured payment data and has already cleared about 40,000 incorrect transactions. He also said Northcote moved from a legacy BW system to SAP Business Data Cloud, cutting BI solution build time by about 75% and report creation time by 50%.
In another example, Klein said Lemvigh-Müller, working with NTT Data, deployed custom AI agents to verify purchase orders, achieving more than 90% touchless processing and 98% matching accuracy.
Klein said customers including Shell, Morgan Stanley, Samsonite Group, Vonovia, Eli Lilly, Shoprite Group and Electrolux signed RISE with SAP deals in the quarter. He also cited momentum for GROW with SAP among companies including Aloha, Gooroo Crédito, Modular Data Centers and Tecumseh Energy Services.
Profit Outlook Adjusted for Acquisitions
SAP maintained its outlook for top-line metrics and free cash flow, but Asam said the company is lowering its operating profit outlook by EUR 0.1 billion to reflect the dilutive impact of the Dremio and Prior Labs acquisitions. He said SAP still expects to offset the effect of the Reltio acquisition on non-IFRS operating income.
Asam said Reltio contributed less than one percentage point to constant-currency current cloud backlog growth in the quarter. He said Dremio and Prior Labs will have a negligible impact on revenue and current cloud backlog, but will weigh on second-half 2026 operating profit by a “very low triple-digit million euro amount.”
Free cash flow in the quarter was EUR 3 billion. IFRS operating profit rose 8% to EUR 2.6 billion, while IFRS earnings per share increased 30% to EUR 1.89. Non-IFRS earnings per share increased 6% to EUR 1.59.
Management Addresses Costs and Macro Uncertainty
During the question-and-answer portion of the call, analysts pressed management on slower operating profit growth in the quarter and the cost of AI investments. Asam said the second quarter should not be viewed in isolation, noting that first-half operating leverage remained within SAP’s framework. He cited higher research and development investments, marketing spending tied to the autonomous enterprise launch, stock-based compensation effects and acquisition dilution as factors in the quarter.
Klein said SAP is seeing productivity gains from AI, including average productivity improvements of up to 30% in development. He said the company is adjusting hiring plans as AI usage increases and is working to shift development priorities from traditional SaaS feature requests toward agentic AI development.
Management also addressed macroeconomic uncertainty, particularly the ongoing conflict in the Middle East. Asam said the situation continues to weigh on customer sentiment and decision-making, especially in affected industries and supply chains. However, Klein said SAP did not see broad-based deal delays in the second quarter, though some Middle East deals were delayed.
Asam said SAP still expects a slight deceleration in current cloud backlog growth over the course of the year, while noting that the second half typically accounts for the largest share of annual bookings. He said the company’s priorities for the remainder of the year are to sustain cloud momentum, deliver on operating leverage commitments and close the year strongly.
About SAP (NYSE:SAP)
SAP SE is a global enterprise software company headquartered in Walldorf, Germany. Founded in 1972 by five former IBM engineers, the company’s name is an acronym for Systeme, Anwendungen und Produkte in der Datenverarbeitung (Systems, Applications & Products in Data Processing). SAP develops and sells software and services that help organizations manage business processes across finance, human resources, procurement, manufacturing, supply chain and customer relationships.
SAP’s product portfolio spans on‑premises and cloud offerings, anchored by its enterprise resource planning (ERP) solutions such as SAP S/4HANA and the SAP HANA in‑memory database and platform.
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