SAP Forecasts Cloud Revenue Growth, Plans Restructuring for AI Focus

Shares of German software firm SAP SE surged by 7% to an all-time high following the company’s positive forecast for cloud revenue growth and its announcement of a restructuring plan. 

SAP anticipates growth in artificial intelligence (AI)-driven business areas and plans to allocate 2 billion euros ($2.2 billion) for restructuring efforts, including reskilling employees for AI roles or offering voluntary redundancy programs.

Restructuring to Embrace AI and Cloud Transformation:

SAP is set to restructure roles for 8,000 jobs to align with its focus on AI-driven business areas and cloud transformation. 

The company aims to harness the potential of AI technologies, including OpenAI’s ChatGPT, which it has been experimenting with to embed in its products. 

SAP acknowledges the transformative impact of AI on its business and commits to investing over $1 billion in AI-powered technology startups through Sapphire Ventures.

Strategic Investments in AI and Growth Areas:

The restructuring initiative is part of SAP’s strategy to prepare for the age of artificial intelligence. The company plans to leverage GenAI to make fundamental changes to its business. 

While emphasizing the need for adjustments, SAP recognizes HR policy as a strategic opportunity and expects new possibilities to emerge. 

This move aligns with the broader industry trend of tech companies realigning their workforce towards AI software and automation.

Positive Financial Outlook and Cloud Revenue Growth:

SAP forecasts double-digit percentage growth in revenue from its key cloud business, expecting cloud revenue to increase by 24%-27% in 2024. 

The company reported a 23% growth in cloud revenue to 13.66 billion euros in 2023. Additionally, SAP predicts operating profit growth between 17% and 21% for 2024. 

The positive financial outlook and strategic investments demonstrate SAP’s commitment to advancing in the rapidly evolving technology landscape.