SAP’s €480 Million Legal Settlement Casts a Shadow Over Cloud Momentum

SAP faces investor scrutiny at its AGM as cloud revenue surges 27% but shares drop 28% amid a costly Teradata settlement and slower Q2 outlook.

SAP heads into its annual general meeting on May 5 with a puzzle that has left investors scratching their heads: a cloud business firing on all cylinders and a share price that has shed roughly 28 percent since the start of 2026. The stock’s slide comes despite double-digit growth in the company’s most important segment and a management team that has stuck to its full-year targets.

A Dividend Hike and Board Changes

Shareholders gathering virtually for the AGM will vote on a proposed dividend of €2.50 per share, a 6.4 percent increase from last year. If approved, the payout is scheduled for May 8. The meeting also brings turnover in the supervisory board, with Pekka Ala-Pietilä, Rouven Westphal, Gunnar Wiedenfels and Gerhard Oswald stepping down from their roles.

Q1 Strength Undermined by a Costly Legal Battle

The first-quarter numbers themselves tell a compelling story. Cloud revenue climbed 27 percent on a currency-adjusted basis, while the current cloud backlog hit €21.9 billion. Non-IFRS earnings per share rose 20 percent to €1.72. But a one-off item muddied the cash flow picture: the settlement of a long-running legal dispute with Teradata cost SAP $480 million, far exceeding the provisions it had set aside. The company paid out €408 million in the quarter, weighing heavily on both operating and free cash flow. Other unresolved legal matters remain on the table, and the European Commission is still investigating SAP over alleged anti-competitive practices.

A Slower Second Quarter Is on the Cards

Management has held firm on its 2026 guidance, targeting cloud revenue of between €25.8 billion and €26.2 billion at constant currencies, with non-IFRS operating profit in a range of €11.9 billion to €12.3 billion. But the company itself has flagged that the strong first-quarter growth was flattered by one-off effects, and a slowdown is expected in the second quarter. Whether those annual targets remain achievable will be a key topic when executives address analysts at the SAP Sapphire conference in Orlando on May 13.

Sapphire: The Next Test for Investor Confidence

The Sapphire & ASUG Annual Conference, running from May 11 to 13 at the Orange County Convention Center, is shaping up as a pivotal moment. CEO Christian Klein, COO Sebastian Steinhaeuser and CTO Philipp Herzig are expected to unveil a refreshed vision for artificial intelligence, including an overhauled version of the Joule AI assistant and a roadmap for turning SAP’s vast corporate data into the foundation for AI outcomes. The stakes are high: two-thirds of all new cloud contracts now include SAP Business AI features, but those agents need a consolidated data layer to function effectively — precisely the gap that SAP aims to close with its planned acquisition of Reltio.

Reltio, Geopolitics and a Conditional Forecast

Reltio, a specialist in master data management software, is central to SAP’s plan to build out the Business Data Cloud as the engine room of its AI strategy. The deal is expected to close in the second or third quarter of 2026, pending regulatory approvals. Notably, SAP has tied its full-year guidance to two conditions: the completion of the Reltio acquisition and a de-escalation of tensions in the Middle East. A prolonged closure of the Strait of Hormuz, for instance, could disrupt supply chains in industries that count among SAP’s largest customers.

Analyst Views: A Wide Spread

The divergence in analyst opinions underscores the uncertainty. Goldman Sachs rates the stock a buy with a price target of €230, down from €260. Barclays is overweight at €220, while JPMorgan sits at neutral with a target of €175. At the bearish end, DZ Bank has a sell rating and a price target of just €130. Behind the bearishness lie two recurring themes: large enterprises are hesitating on cloud investments amid US trade policy uncertainty, and the geopolitical situation in the Middle East casts a direct shadow over the outlook.

The Sapphire conference will offer investors a chance to gauge whether SAP’s AI story is more than just slides — and whether the stock’s slide can be reversed.