SAP's 34% Tumble: How Oracle's $95 Billion Spending Plan and a Hawkish Fed Are Overwhelming Earnings Growth

SAP shares hit €132.26 low, down 34% YTD, as Oracle's $95B capex and hawkish Fed weigh; analysts see overdone sell-off, focus on July 23 earnings.

SAP shares plunged to a fresh 52-week low of €132.26 on Friday, extending the year-to-date slide to roughly 34%. The sell-off has brought the stock to €133.84, barely above that floor, and has widened the gap to the 200-day moving average to nearly 28%. For a company that posted first-quarter revenue of €9.56 billion and earnings per share of €1.66, the market's punishment seems disproportionate — but it is driven by forces well beyond the Walldorf software giant's control.

The immediate catalyst came from across the Atlantic. Oracle unveiled capital expenditure plans of up to $95 billion for the coming fiscal year, a figure that sent shockwaves through the technology sector even after accounting for customer reimbursements of roughly $25 billion. The sheer scale of the investment triggered fears of runaway costs for next-generation AI infrastructure, prompting UBS to downgrade European IT stocks broadly. SAP, despite its cloud momentum, was swept up in the downdraft. Goldman Sachs added to the pressure by trimming its gross margin forecast for the second half, citing higher hardware costs, and lowering its operating profit growth expectation to 15%.

The macro backdrop has compounded the pain. With U.S. inflation running at 4.2%, Federal Reserve Chairman Kevin Warsh has kept interest rates elevated, and some Fed officials have hinted at potential hikes. Goldman Sachs has scrapped all rate-cut projections for 2026, pushing any loosening to 2027. For richly valued growth stocks like SAP, that environment acts as a weight on valuations. JPMorgan analyst Toby Ogg pointed to fading momentum in Oracle's cloud applications as a negative signal for SAP's enterprise business, though he maintained a €175 price target. Goldman's own target stands at €230.

Yet several analysts see the sell-off as overdone. Berenberg reiterated a "Buy" rating with a €215 target, arguing that SAP's valuation is historically low for the software sector. Analyst Nay Soe Naing noted that the market is fixated on companies with clear AI or cybersecurity profiles, often wrongly casting SAP as a laggard in that trend. UBS also held firm with a €205 target, with analyst Michael Briest expecting margin improvements to continue. He cited the ceasefire in the Middle East and the U.S.-Iran agreement that has depressed oil prices, lowering operating costs for global firms like SAP.

The first-quarter results themselves offered little reason for alarm. Revenue grew roughly 6% year on year to €9.56 billion, while earnings per share climbed to €1.66. The problem lies elsewhere: the pace of the S/4HANA migration has disappointed some market observers, sustaining selling pressure. The stock now trades nearly 50% below its year-to-date high, a chasm that reflects deep skepticism even as analysts highlight the cloud order backlog as a source of future strength.

All eyes are now on the second-quarter earnings release on July 23, 2026. The market will be looking past headline revenue to the cloud backlog commentary and any concrete guidance on cost control in AI-related spending. Goldman has already warned of a potential slowdown in cloud growth, citing a large Middle Eastern customer that is scaling back. For SAP's management, the task is clear: demonstrate that margins can expand despite the macro headwinds and that the company's AI strategy is more than a cost center. If they succeed, the 34% rout could yet prove to be an overreaction. If not, the bear case may deepen.