Europe’s big enterprise AI hope SAP books 85% of 2026 revenue as deals boom
The world of enterprise AI is dominated by U.S. names from Microsoft to Salesforce, but Europe has a major player that is pushing hard into the space: SAP.
In an exclusive interview with CNBC’s “Europe Early Edition,” SAP CEO Christian Klein said that AI is “the number one reason” why customers are signing deals with the firm.
“After we close Q4, actually, 80, 85% of our revenue for next year is already done. So, [a] good pipeline for Q4 and with that, when we close out the year, our customers, also our investors, can expect there’s also very positive output,” he said.
SAP’s cloud backlog rose 23% in the third quarter to 18.8 billion, the company said in an earnings statement published late on Wednesday.
“I was pretty optimistic last night, and I’m still optimistic as the pipeline looks good,” Klein said. “We actually now have our biggest quarter.”
Revenue rose 7% to 9.08 billion euros ($10.53 billion), slightly below expectations of 9.15 billion euros, according to consensus figures compiled by LSEG. However, it saw gains of 22% in its cloud revenue, with Klein citing increasing AI and data cloud market share as the reason for the revenue jump.
Deutsche Bank said the firm remains a “top pick” in the European tech and global software sector, however it noted that SAP is now guiding toward the lower-end of its forecast for cloud revenue of 21.6 billion euros to 21.9 billions euros this year.
“Against an environment of lengthening deal cycles and pushouts … SAP continues to execute very well, in our view, even if delays in deal closings have led the company to guide to the lower end of its Cloud revenue growth range for FY25,” Deutsche Bank analysts said in a note led by Johannes Schaller.
SAP’s shares were initially 2% higher at the start of the trading session on Thursday, but later pared gains to trade 2.5% lower. The stock is down 3% year-to-date.
Europe’s AI playbook
SAP briefly became Europe’s most valuable company in March, riding the tailwinds of enthusiasm and gains in the German stock market.
The European Union has faced criticism for its legislative approach to AI, with some businesses calling for deregulation in efforts to catch up in the global AI race. Klein said he’s not sure if the bloc is adopting the right strategy compared with the U.S. approach of, “give me your AI, let’s test it, let’s refine it, let’s optimize it over time.”
The chief executive said he is laser-focused on creating value, explaining that it is “100%” what customers are looking for. It echoes the message of other AI firms and investors in Europe, given that the U.S. and China currently dominate the training of large language models, which is the infrastructure needed for AI. However, the general sentiment is that Europe has a chance to be a leader in putting it to use.
The training large language models is now a “commodity,” Klein said, adding that he expects the application of AI will become an increasing priority for businesses and SAP’s bet on this will be reflected in its share price in the future.
“It’s super important that we are not only selling into a hype, but that we see real adoption,” Klein said.
SAP has some exposure to China through partnerships that allow it to work “in China, for China,” due to geopolitical tensions, Klein noted. The country’s speed of AI development, low regulation and talent pool makes it hard to ignore, he said.
The company offers cloud solutions, expenses, and supply chain management and analytics to corporates. It underwent a large restructure in 2024 and pivoted towards AI services, which is now being used across the likes of finance and supplier sourcing.
Lisa Su, chair and chief executive officer of Advanced Micro Devices Inc. (AMD), during a fireside chat at the Indian Institute of Science (IISc) in Bengaluru, India, on Thursday, Nov. 21, 2024.
Gabriela Bhaskar | Bloomberg | Getty Images
Shares of Advanced Micro Devices jumped more than 6% on a report that IBM can utilize the company’s chips to run certain quantum computing algorithms.
IBM shares gained about 8% and headed for their best day since January.
Reuters reported on Friday that a paper will publish next week showing that IBM can run a quantum error-correction algorithm on AMD’s field-programmable gate array chips.
Representatives from AMD and IBM didn’t immediately respond to requests for comment.
In August, the two companies announced an agreement to develop quantum computing capabilities and integrate technologies. IBM has also said it plans to debut a quantum computer by 2029.
The technology utilizes quantum mechanics to address problems that traditional computers are unable to solve. Technology giants such as Google, Microsoft and Amazon are also racing to develop quantum computing.
Last year, Microsoft rolled out its first quantum computing chip, while Google launched its breakthrough WIllow. A top quantum executive at the internet search company told CNBC in March that the technology was “five years out from a real breakout.”
The various announcements have brought renewed interest to the quantum space, boosting stocks like D-Wave Quantum, Rigetti Computing, and IonQ, which all climbed on Friday.
The Trump administration on Thursday refuted a report that it was negotiating stakes in quantum companies.
WATCH: Commerce Department denies it is currently in talks for stakes in quantum companies
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