SAP's AI Paradox: Record Cloud Backlog Fails to Silence Business Model Doubters

SAP's shares have fallen sharply as investors worry AI agents could disrupt its core ERP business, even as cloud backlog surges 20% to €21.9 billion.

SAP’s stock has been caught in a two-front war this year. While the software giant’s operational metrics tell a story of accelerating cloud momentum, investors are increasingly worried that the very technology SAP is championing could one day render its core business obsolete. The result has been a 44% slide from the June 2025 peak of €271.60, leaving the stock at €151.20 after a 2.02% dip on Tuesday — a steeper drop than the DAX’s 0.84% loss that day.

The so-called “AI fear” gripping the sector is not unique to SAP. Rivals such as Salesforce, Oracle and Adobe are also under pressure from the idea that specialised AI agents could displace traditional enterprise software and erode its pricing power. But for SAP, whose long-standing model relies on deep?rooted ERP systems and per?seat licensing, the threat strikes at the heart of the business. The market is asking whether the same technology SAP is banking on to drive growth could eventually make large parts of its standard software redundant.

SAP’s answer was laid out on 12 May at the Sapphire conference, where CEO Christian Klein unveiled the “Autonomous Enterprise” vision. The centrepiece is the SAP Business AI Platform, which will embed more than 50 domain?specific Joule assistants that orchestrate over 200 specialised AI agents. To underpin this, SAP is providing the Joule Studio development environment free of charge until the end of 2026 — a move analysts see as a smart tactic to accelerate adoption, even if new revenue streams will take time to materialise. A €100 million partner fund is also being deployed.

Yet the operational numbers offer a clear counterweight to the bearish narrative. SAP’s current cloud backlog swelled to €21.9 billion in the first quarter, a 20% year?on?year increase. Cloud revenue climbed 19%, while the cloud ERP suite jumped 23%. Overall group revenue rose 6% and the IFRS operating profit improved 17%. Those figures suggest the cloud migration is still gaining pace, even as the stock languishes.

Technically, the shares are caught in a choppy sideways range bounded roughly by €140 on the downside and €160 on the upside. With the price hovering around €151, it sits almost exactly in the middle. The relative strength index at 88.2 points to an overbought condition, hinting at the potential for a short?term bounce — though that would mark a relief rally rather than a structural shift in sentiment.

SAP is also building out its ecosystem with fresh partnerships. Ericsson is scaling its AI strategy company?wide on the SAP Business Data Fabric, while collaborations with Nvidia, Microsoft, AWS and Palantir supply the computing power and data models for the new platform. Meanwhile, the licence structure is being overhauled: away from traditional seat?based deals and toward consumption? and outcome?based models. That transition is essential for the cloud push but raises questions about margin stability and cash?flow predictability during the interim.

For now, the market remains unconvinced. The stock’s steep slide reflects a deep?seated institutional scepticism that no single conference presentation can dispel. Whether the second?quarter figures — due in the coming months — can pivot the narrative will determine if SAP’s AI bet is seen as a moat or a minefield.