SAP’s €3.5B Bond Sale Underpins Growth Strategy Even as Shares Hit New Lows

SAP issues €3.5B bond to fund M&A while shares slump 35% YTD; cloud revenue grows 19% but legal challenges and analyst divergence loom.

The Walldorf-based software giant is sending a two-pronged signal to markets: borrowing €3.5 billion in fresh debt to bankroll acquisitions while its equity languishes near levels not seen in a year. The disconnect between corporate ambition and market sentiment could hardly be starker.

SAP placed a four-tranche bond in May with maturities ranging from two to seven years. The proceeds are earmarked for dealmaking, most notably the planned investment of more than €1 billion over four years into Prior Labs, a start-up that SAP intends to turn into a laboratory for structured business data and artificial intelligence. The transaction still awaits regulatory clearance.

The debt issuance runs parallel to an aggressive share buyback programme that has so far failed to stem the stock’s decline. Under the second tranche, launched in February, SAP plans to spend up to €2.6 billion on its own shares by the end of July. The first tranche concluded in April, with 16.3 million shares repurchased at an average price of €161.16. The overall programme, sized at up to €10 billion, runs through 2027. Yet the stock on Thursday touched a fresh 52-week low of €130.80 and currently trades around €131.78 — roughly 35% below where it started the year and well under its 50-day moving average of about €148.

Legal headaches are compounding the pressure. In the United States, SAP must defend itself against an antitrust lawsuit filed by process-analytics provider Celonis. A federal judge allowed the unfair-competition claims to proceed, and a trial is scheduled for 7 December 2026, with extensive discovery already ordered. Meanwhile, the European Commission is examining whether SAP restricts customers from switching to rival maintenance providers, a concern the company disputes, saying the issue is limited to specific policies in its legacy business, not its cloud offerings.

Those cloud operations remain the bright spot in SAP’s narrative. First-quarter cloud revenue rose 19%, and the cloud order backlog swelled to €21.9 billion, a 20% increase. But the company itself has warned that one-off effects boosted the first quarter, and a slowdown is expected in the second quarter. Full-year guidance calls for cloud revenue between €25.8 billion and €26.2 billion, non-IFRS operating profit of €11.9 billion to €12.3 billion, and free cash flow of around €10 billion.

Analyst opinion is sharply divided. The mean price target from nine recent estimates is €221.25, implying more than 65% upside from current levels. Berenberg sticks with a “Buy” and a €215 target, while UBS also maintains a buy rating, citing cloud growth and stable subscription income. JPMorgan is more cautious, holding a “Neutral” with a €175 target, noting that momentum in US rivals’ cloud apps has faded — a slightly negative signal for SAP’s near-term enterprise prospects. A broader consensus of 66 analysts points to an average target of about €247.

With the company now in its quiet period ahead of second-quarter results on 23 July, the market is starved for fresh catalysts. The cloud order backlog will be the critical gauge: if it confirms that the deceleration stays within the full-year forecast, the stock may find a floor. If it undershoots, the wide gap between analyst optimism and market reality could widen further.