Q4 Results Reward SAP’s Pioneering Walk in the Cloud

SAP broke its record for growth in 2011. And it broke that record again in 2012, which is a wonderful way to celebrate a 40th anniversary.

Keeping the ball rolling, SAP released Q4 earnings Wednesday, showing the company enjoyed its 12th consecutive quarter of double digit growth in software and related revenue. Specifically growth was up 13 percent in the final quarter of 2012.

The results were stratospheric, thanks to exceptional performance in cloud computing. Revenue from software and cloud subscriptions increased 21 percent to €5 billion in 2012, and the annual cloud revenue run rate approached €850 million.

Critics attributed a slide in SAP’s share price earlier this month to missed Wall Street forecast or a perceived slow growth in American software revenue, as InformationWeek reported last week. But these numbers didn’t account for increased cloud computing uptake, a space in which the United States is at the forefront.

Rolling with the Punches
“So we are now reporting our revenues based upon the software that companies consume both in the cloud and on premises,” SAP Co-CEO Bill McDermott told Canada’s Business News Network on Wednesday. “When you add those two numbers together in the fourth quarter, the U.S. grew by 24 percent.”

The market will have to adjust to customers buying and using software however they choose, according to McDermott. SAP has already done so, accounting for the company’s momentum in double-digit worldwide growth over the past three years.

Q4 revenue was up 12 percent to €5.06 billion quarter-over-quarter, and profit rose 10 percent to €1.96 billion.

On A Roll
“One thing to note in SAP results is operating margins, which fell to 31.7 percent in the fourth quarter, down from 37.1 percent a year ago,” ZDNet wrote, adding that SAP’s workforce jumped by 16 percent in the past year to 64,422 employees. “Its operating profits took a hit due to investments in the cloud business and ‘go-to-market activities.’”

In short, you’ve got to spend money to make money. And some had seen the overall rosy picture from a distance.

“We believed that SAP would show an in-line quarter and are therefore positively surprised by the outperformance on the license side, and in particular with the real-time solution HANA,” DZ Bank analyst Oliver Finger said in Reuters.

SAP HANA contributed €392 milllion to SAP’s software revenue in 2012. And Q1 of 2013 started well with the announcement this month that SAP Business Suite will also run on HANA.

“If you look at the 2012 numbers, it’s very, very clear that we’ve started a new era of enterprise computing with our software innovations,” SAP Co-CEO Jim Hagemann Snabe told Bloomberg on Wednesday. “The outlook for 2013 is one of keeping this momentum.”

Let the Good Times Roll
SAP’s top priorities in 2013 include:

  • Driving customer centricity
  • Expanding partner innovation
  • Accelerating new business models

“I think that’s very realistic because we have now become a major cloud player,” Snabe said. “And we have reinvented the database to be in real time now, so we can help companies predict the future and react faster to changes in market demand.”

Related Media:
SAP’s Software Revenue on the Rise” on BNN’s The Street
SAP Taking ‘Massive Market Share,’ Snabe Says” in Bloomberg
SAP beats forecasts with Q4 profit rise” in Reuters

This post originally appeared on SAP Business Trends.