SAP Earnings: 2024 Guidance Reaffirmed As Cloud Strength Continues

We maintain our fair value estimate for narrow-moat SAP at EUR 132 per share after the firm reported a robust first quarter that topped our revenue and margin expectations. Management reaffirmed 2024 guidance and reiterated its 2025 ambition, which we believe are supported by continued strategic pivots toward the cloud and business artificial intelligence, or AI, segments. Overall, we see results as solid and a continuation of recent trends. Although we continue to expect some churn due to forced cloud migration, we maintain our belief in SAP’s strong suite of offerings and the inherent switching costs associated with core software systems. Shares already incorporate the full benefits of the cloud transition and are overvalued, in our opinion.