SAP's AI Infrastructure Splurge Puts Cloud Migration at Center Stage, Yet Investors Hold Back

SAP’s cloud backlog hits €21.9B as AI-driven acquisitions aim to fuel growth, but stock remains 24% down YTD. Q2 earnings on July 23 key for market sentiment.

Cloud revenue at SAP accelerated 27% in the first quarter, and its order backlog swelled to €21.9 billion. But on the Frankfurt exchange, the stock has spent months clawing back from a wrenching sell-off that sliced more than half its value from the June 2025 peak of €273. The disconnect between operational momentum and market skepticism is stark — and it puts enormous weight on the second-quarter earnings due July 23.

The Walldorf-based software giant is in the midst of a three-pronged acquisition spree designed to build a complete data infrastructure for artificial intelligence. Reltio, acquired in early May, cleanses and unifies corporate data across SAP and third-party systems. Dremio, whose purchase is still under antitrust review, is slated to serve as an open data layer starting in the third quarter, meshing SAP environments with external platforms. The final piece is prior Labs, a German startup specializing in tabular foundation models, where SAP plans to invest more than €1 billion over four years, with a closing expected in the second half of 2026.

These moves underpin the "SAP Autonomous Suite" unveiled at the Sapphire conference. The vision calls for more than 50 domain-specific AI assistants — in finance, HR, supply chain and beyond — coordinating over 200 specialized software agents that can execute end-to-end processes with limited human intervention. Yet the technology's practical adoption is moving more slowly than the company would like. CEO Christian Klein acknowledged during Sapphire that while AI is being tested almost everywhere, measurable business impact often remains thin.

That gap helps explain why SAP is wielding its cloud platform as a lever. The roughly 20,000 customers still running on the legacy ECC system are being told that access to tools like the Joule copilot requires shifting at least half of their maintenance spending to the cloud. For existing customers, cloud migration has become the entry ticket to the entire AI roadmap. The company has also deepened partnerships with Anthropic, AWS, Google Cloud, Microsoft, NVIDIA and Palantir to broaden its AI ecosystem.

On the stock side, the recovery has been tepid. Shares closed Friday at €152.10, up 1.55% over the past week and 2.26% over the past month. The year-to-date loss still stands at 24.70%, and the stock remains well below its long-term moving averages. The relative strength index has moved into overbought territory, suggesting the recent bounce may be running out of steam. The dividend, raised 6.38% to €2.50 per share, offers some income support but little momentum.

Among the 27 analysts covering SAP, even the most bearish sees a target of €155 — barely above the current level. Most view the stock as undervalued given the cloud growth trajectory, but the market is demanding proof that the billion-euro AI buildout is translating into fresh cloud commitments.

That proof will have to come from the order book. In the first quarter, the cloud backlog grew 25% on a currency-adjusted basis to €21.9 billion. The second-quarter figures will be the first real test of whether customers are converting AI enthusiasm into larger cloud contracts. If the backlog maintains its double-digit clip, the argument for a sustained stock recovery gains significant force. If it falters, the disconnect between SAP's ambitious vision and its share price could persist well into the second half.