SAP AG (SAP) AI Stock Analysis

• Market Cap: $219.02B
• Dividend Yield: 1.07%
• Average Volume (3M): 3.62M
• Price to Earnings (P/E): 38.7
• Beta (1Y): 0.96
• Revenue Growth: 11.85%
• EPS Growth: 167.23%
• Country: US
• Employees: 108,187
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.93
• Shares Outstanding: 1,138,593,600
• 10 Day Avg. Volume: 3,306,999
• 30 Day Avg. Volume: 3,623,118
• PEG Ratio: 0.27
• Price to Book (P/B): 5.39
• Price to Sales (P/S): 6.55
• P/FCF Ratio: 30.37
• Enterprise Value/Market Cap: 0.89
• Enterprise Value/Revenue: 5.30
• Enterprise Value/Gross Profit: 7.18
• Enterprise Value/Ebitda: 15.31
• 1Y Price Target: $290.83
• Price Target Upside: 52.67% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 7
• EPS Forecast (FY): 8.5
• Revenue Forecast (FY): $47.72B

• Rating: 69 Neutral
• Price Target: $220.00 ▲(15.49% Upside)
• Action: Reiterated Date: 01/31/26
• Date: Action: Reiterated 01/31/26

The score is driven primarily by strong financial quality (high margins, improving profitability, conservative leverage, and solid free-cash-flow conversion) and a supportive earnings outlook (record backlog, margin expansion, and ~€10B 2026 free cash flow target plus a €10B buyback). These positives are meaningfully offset by weak technicals (price far below major moving averages with bearish momentum) and a relatively high P/E that limits valuation support.

Positive Factors

Large cloud backlog (multi-year visibility)

A EUR 77bn total cloud backlog with ~4-year average contracts provides durable multi-year revenue visibility and planning certainty. This backlog smooths top-line volatility, supports predictable subscription cash flows, and underpins multi-quarter investment and margin plans over the next 2–6 months.

Robust cloud revenue and ERP adoption

Sustained cloud growth (26%) and outsized cloud ERP adoption (+32%) shift SAP toward recurring, higher-retention revenue. Structural migration from on‑prem to cloud increases predictable subscription economics, reduces churn risk, and strengthens long‑term gross profit leverage versus one‑time license sales.

Strong cash generation and shareholder returns

High FCF generation and a committed €10bn buyback indicate robust cash conversion and capital allocation discipline. Reliable FCF supports reinvestment in cloud/AI, funds buybacks without stressing the balance sheet, and signals management confidence in sustaining investments and returns over coming quarters.

Negative Factors

Slowdown in current cloud backlog growth

A meaningful deceleration in current cloud backlog growth reduces near-term revenue recognition potential and weakens short‑term visibility into new subscription ramps. For a subscription-led model, slower backlog growth can delay recurring revenue expansion and compress expected cash flow improvements over the next several quarters.

Decline in software license revenue

A 27% drop in license revenue reflects the structural shift to cloud but also removes a historically higher‑margin, upfront cash stream. During the transition companies often face shortfalls in near-term revenue and margin mix changes, requiring sustained cloud monetization to fully offset legacy declines over time.

Large-deal mix lengthens ramps and recognition

A heavy skew to very large transformational deals creates back‑end loaded revenue and execution risk: initial deployments are small, ramps are protracted, and recognition lags. This increases near-term volatility in reported cloud revenue and requires strong implementation execution to realize forecasted multi‑year value.

SAP AG Business Overview & Revenue Model

Company Description

SAP SE, together with its subsidiaries, provides applications, technology, and services worldwide. It offers SAP S/4HANA that provides software capabilities for finance, risk and project management, procurement, manufacturing, supply chain and asset management, and research and development; SAP SuccessFactors solutions for human resources, including HR and payroll, talent and employee experience management, and people and workforce analytics; and spend management solutions that covers direct and indirect spend, travel and expense, and external workforce management. The company also provides SAP customer experience solutions; SAP Business Technology platform that enables customers and partners to build, integrate, and automate applications; and SAP Business Network, a business-to-business collaboration platform that helps digitalize key business processes across the supply chain and enables communication between trading partners. In addition, it offers SAP Signavio to help customers to discover, analyze, and understand their business process operations; SAP's industry cloud solutions that provides modular solutions addressing industry-specific functions; Taulia solutions for working capital management to help enable customers mitigate the effects of inflation by providing visibility into working capital and access to liquidity; and sustainability solutions and services. SAP SE was founded in 1972 and is headquartered in Walldorf, Germany.

How the Company Makes Money

SAP generates revenue primarily through software licenses, cloud subscriptions, and maintenance services. The company offers both on-premise and cloud solutions, with a significant shift towards subscription-based cloud services in recent years, which has become a key revenue stream. Additionally, SAP earns money from consulting and implementation services related to its software products, as well as training and education for clients. Strategic partnerships with technology companies, such as Microsoft and Accenture, enhance its market reach and contribute to revenue growth. The company's ongoing investment in research and development also supports its ability to innovate and remain competitive in the enterprise software market.

SAP AG Financial Statement Overview

Summary

Strong underlying profitability with very high gross margins (~71–73%) and a sharp improvement in net margin (~20% vs ~9% in 2024). Balance sheet leverage is conservative and improving (debt-to-equity ~0.18 in 2025), and free cash flow conversion is solid (~85–92% of net income) with strong 2025 FCF growth (~22%). Key offsets are the 2025 annual revenue decline (~-3.1%), some volatility in returns, and only moderate operating cash flow coverage of total debt (~50%).

Income Statement

Profitability is a clear strength: gross margin stayed very high (~71–73%) and the latest annual period shows a step-up in operating and net profitability (net margin ~20% vs ~9% in 2024). Revenue growth has been inconsistent, however—solid growth in 2022–2024, followed by a decline in 2025 (annual revenue growth about -3.1%), which temper the score despite strong margins.

Balance Sheet

Leverage looks conservative and improving: debt-to-equity is low (~0.18 in 2025 vs ~0.54 in 2020), supported by a sizable equity base. Returns to shareholders improved materially in 2025 (return on equity ~15.7% vs ~6.9% in 2024), though ROE has been somewhat volatile across the period, suggesting earnings consistency is not uniform year to year.

Cash Flow

Cash generation is solid and converting well to profits: free cash flow has generally tracked net income closely (free cash flow is ~85–92% of net income across years) and grew strongly in 2025 (free cash flow growth ~22.4%). The main weakness is that operating cash flow covers only about half of total debt in 2025 (and was lower in prior years), indicating debt paydown capacity is adequate but not exceptionally strong on this measure.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	36.80B	34.18B	31.21B	29.52B	26.95B
Gross Profit	27.14B	24.93B	22.53B	21.48B	19.73B
EBITDA	11.73B	7.08B	8.03B	8.28B	10.99B
Net Income	7.04B	3.12B	6.14B	2.28B	5.26B
Balance Sheet
Total Assets	70.33B	74.12B	68.33B	72.16B	71.17B
Cash, Cash Equivalents and Short-Term Investments	9.77B	11.24B	11.28B	9.86B	11.66B
Total Debt	8.07B	10.65B	8.79B	13.09B	15.15B
Total Liabilities	25.11B	28.31B	24.93B	29.31B	29.65B
Stockholders Equity	44.73B	45.44B	43.16B	40.13B	38.85B
Cash Flow
Free Cash Flow	7.94B	4.42B	5.55B	4.77B	5.52B
Operating Cash Flow	8.65B	5.22B	6.33B	5.65B	6.22B
Investing Cash Flow	-1.33B	-667.00M	906.00M	667.00M	-3.06B
Financing Cash Flow	-7.85B	-3.40B	-7.73B	-6.34B	-56.00M

SAP AG Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 190.50
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SAP, the sentiment is Negative. The current price of 190.5 is below the 20-day moving average (MA) of 199.14, below the 50-day MA of 215.45, and below the 200-day MA of 258.90, indicating a bearish trend. The MACD of -5.52 indicates Negative momentum. The RSI at 36.34 is Neutral, neither overbought nor oversold. The STOCH value of 27.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SAP.

SAP AG Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOW	77 Outperform	$118.17B	90.88	15.42%	―	21.05%	28.67%
INTU	74 Outperform	$120.34B	50.22	22.20%	0.64%	17.14%	41.18%
CRM	71 Outperform	$183.94B	27.05	12.37%	0.63%	8.41%	22.92%
SAP	69 Neutral	$219.02B	38.71	16.82%	1.07%	11.85%	167.23%
WDAY	69 Neutral	$34.47B	66.22	7.97%	―	13.35%	-60.76%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
SNOW	60 Neutral	$60.65B	-48.84	-60.27%	―	28.48%	-19.12%