SAP AG (SAP) AI Stock Analysis

• Market Cap: $202.37B
• Dividend Yield: 1.07%
• Average Volume (3M): 2.81M
• Price to Earnings (P/E): 34.3
• Beta (1Y): 1.00
• 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: 1,228,504,300
• 10 Day Avg. Volume: 2,793,165
• 30 Day Avg. Volume: 2,813,635
• 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: 4.88
• Enterprise Value/Gross Profit: 6.61
• Enterprise Value/Ebitda: 14.10
• 1Y Price Target: $290.83
• Price Target Upside: 65.43% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 7
• EPS Forecast (FY): 8.44
• Revenue Forecast (FY): $47.41B

• Rating: 69 Neutral
• Price Target: $193.00 ▲(9.78% 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

Cloud backlog & multi-year visibility

A €77bn total cloud backlog with ~4‑year average contract duration creates durable multi-year revenue visibility. Large, repeatable cloud orders underpin recurring subscription revenue, reduce cyclicality, and allow SAP to prioritize product investment and capacity planning across its cloud and AI roadmap.

High margins and improving profitability

Sustained gross margins (~71–73%) and a step-up to ~20% net margin signal structurally strong unit economics. Combined with expanding cloud gross margin (75%), this supports reinvestment in AI and product development while preserving operating profit and cash generation as revenue mixes shift toward cloud.

Strong cash generation and shareholder returns

Robust FCF conversion (~85–92% of net income) and an €8.2bn outturn with a €10bn target demonstrate durable cash generation. Combined with conservative leverage (debt/equity ~0.18) and a €10bn buyback, this supports capital returns while maintaining flexibility for strategic investment and balance‑sheet resilience.

Negative Factors

Decline in legacy license revenue

A 27% drop in software license revenue reflects the structural shift from perpetual licensing to subscriptions. That transition creates timing and recognition gaps; if cloud adoption or upsell doesn't fully offset legacy declines, total revenue growth and near-term cash flows can be pressured during the multi-year migration.

Large-deal ramp and back-end loaded revenue

A high share of very large transformation contracts often begin with small initial deployments and lengthy rollouts. That back‑loaded revenue pattern lengthens time to value, raises execution risk, and reduces near-term revenue visibility, making quarter-to-quarter cash and margin delivery more volatile over the coming 2–6 months.

Geopolitical and regulatory complexity lengthening cycles

Rising sovereign, regulatory and data-sovereignty requirements are structurally extending sales and implementation cycles, particularly for public-sector and regulated customers. These constraints increase compliance costs, slow global rollouts, and can materially delay recognition and scaling in affected markets over time.

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 primarily makes money by licensing and delivering enterprise software and related services, with revenue generated through several main streams: (1) Cloud subscriptions and support: recurring subscription fees for SAP cloud applications and platform services (e.g., ERP and line-of-business applications delivered as SaaS/PaaS), typically priced per user, per module, per consumption/usage, and/or by contract scope, plus associated cloud support offerings. (2) Software licenses (on-premises/perpetual or term, depending on contract): upfront or term-based fees that grant customers rights to use SAP software installed in customer-controlled environments; these deals are often large and tied to enterprise-wide deployments. (3) Maintenance and support: recurring fees (historically significant for on-premises customers) for software updates, security patches, and technical support, commonly structured as a percentage of license value or via support plans. (4) Services: professional services for consulting, implementation, systems integration support, training, and custom development; SAP also earns indirectly when customers buy implementation work from ecosystem partners that drives SAP software adoption. Additional factors that support earnings include SAP’s partner ecosystem (global systems integrators, resellers, and technology partners) that helps sell, implement, and extend SAP solutions; marketplace and platform-related monetization where partners build and sell extensions; and long-term enterprise contracts that create high switching costs and recurring renewal revenue.

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: 175.80
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

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 175.8 is below the 20-day moving average (MA) of 194.06, below the 50-day MA of 208.84, and below the 200-day MA of 255.43, indicating a bearish trend. The MACD of -7.02 indicates Positive momentum. The RSI at 27.65 is Positive, neither overbought nor oversold. The STOCH value of 5.10 is Positive, 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	$115.46B	90.88	15.42%	―	21.05%	28.67%
INTU	73 Outperform	$125.99B	50.22	22.20%	0.64%	17.14%	41.18%
CRM	71 Outperform	$180.34B	27.05	12.37%	0.63%	8.41%	22.92%
SAP	69 Neutral	$202.37B	34.25	16.82%	1.07%	11.85%	167.23%
WDAY	69 Neutral	$34.94B	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	$57.50B	―	-60.27%	―	28.48%	-19.12%

SAP AG Corporate Events

SAP SE Issues 2025 Integrated Report Highlighting Strong Cloud Growth and AI-Led Transformation

SAP SE has published its Integrated Report 2025, combining financial statements and detailed environmental, social and governance disclosures for fiscal year 2025, which covers SAP SE and its controlled subsidiaries and was released on February 26, 2026. The report, prepared under IFRS, German accounting rules, ESRS and the Greenhouse Gas Protocol and assured by BDO, highlights strong cloud-led growth, governance and sustainability reporting architecture, and underscores the centrality of Business AI and SAP’s own software in running and disclosing its operations.

The company reported that 2025 marked an inflection point as Business AI became essential for enterprises, driving demand for SAP’s cloud offerings and AI-enabled platforms. SAP met or exceeded its 2025 financial outlook, with 30% growth in total cloud backlog to €77 billion, 11% total revenue growth and a 31% rise in operating profit at constant currencies, while nearly doubling free cash flow to €8.2 billion and proposing a higher dividend and new share buyback despite a 13% share-price decline.

Non-financially, SAP’s customer Net Promoter Score missed its target, but employee engagement improved to 76%, carbon emissions fell and a new Business Health Culture Index came in at 81%, reflecting a broader cultural focus. Strategically, the group advanced its AI portfolio with offerings such as SAP Business Data Cloud, the Joule AI copilot and the SAP RPT-1 model, reinforcing its positioning as a leader in business-focused AI and integrated data platforms at a time of macroeconomic and geopolitical uncertainty.

The most recent analyst rating on (SAP) stock is a Buy with a $322.00 price target. To see the full list of analyst forecasts on SAP AG stock, see the SAP Stock Forecast page.

SAP Posts Strong 2025 Cloud Growth and Profit Surge, Launches €10 Billion Buyback

On January 29, 2026, SAP SE reported its fourth-quarter and full-year 2025 results, highlighting a strong acceleration in its cloud business and a marked improvement in profitability. For 2025, cloud revenue rose 23% year-on-year to €21.0 billion (26% at constant currencies), driven by a 28% increase in Cloud ERP Suite revenue to €18.1 billion and contributing to a 9% rise in cloud and software revenue and an 8% increase in total revenue to €36.8 billion. IFRS operating profit more than doubled, up 111% to €9.83 billion, while non-IFRS operating profit climbed 28% (31% at constant currencies), supported by robust cost discipline and nearly doubled free cash flow of €8.24 billion. In the fourth quarter of 2025, SAP’s total cloud backlog expanded 22% (30% at constant currencies) to a record €77 billion, with current cloud backlog up 16% (25% at constant currencies), underscoring strong demand for its cloud portfolio and SAP Business AI, which management cited as a key growth driver embedded in most new cloud orders. SAP also announced a new two-year share repurchase program of up to €10 billion, signaling confidence in its long-term cash generation and reinforcing its shareholder-return strategy as it strengthens its competitive position in the global SaaS and PaaS markets.

The most recent analyst rating on (SAP) stock is a Buy with a $223.00 price target. To see the full list of analyst forecasts on SAP AG stock, see the SAP Stock Forecast page.