SAP's AI Push Meets a Shrug: Stock Near Lows as Oracle's Capex Shock Spills Over

SAP shares slump 31% YTD pressured by Oracle’s $95B capex and sector downgrade, but Q1 cloud revenue rose 27% and Bernstein sees 97% upside. The firm doubles down on AI with new assistants and a stake in startup Conduct.

The software giant's shares are trading at €138.38, within a hair’s breadth of their 52-week floor of €135.52. The stock has slumped more than 31% since the start of January. Yet beneath the surface, SAP is pressing ahead with a dual-pronged AI strategy: internal product launches and a fresh bet on a London-based startup.

The latest leg of the sell-off has little to do with Walldorf. On 11 June, Oracle unveiled capital expenditure plans of $90 billion to $95 billion for fiscal 2027, well above the $68 billion analysts had expected. The market interpreted the news as a warning that even strong quarterly results from Oracle were being punctured by massive infrastructure costs — and that the same pressure could weigh on other enterprise software players. SAP shares lost roughly 4% that day, making it the worst performer in the DAX. The pain was compounded by UBS downgrading the broader European IT software sector.

Against this grim backdrop, Bernstein remains emphatically bullish. The research house has reiterated its buy rating on SAP with a price target of €273.00, implying upside of nearly 97% from current levels. JPMorgan, however, stuck with a hold rating after the Oracle numbers, without raising its target. The contrast highlights the growing divide between the company's operational momentum and the sentiment-driven market.

Operationally, the first quarter told a healthier story. Cloud revenue climbed 27% on a currency-adjusted basis to just under €6 billion. Total revenue reached €9.6 billion, while operating profit rose 24% to €2.9 billion. The cloud order backlog swelled to €21.9 billion. These figures underpin Bernstein's conviction that the stock is being undervalued.

To fund its strategic ambitions, SAP issued a €3.5 billion euro-denominated bond at the end of May, with maturities of up to seven years. The proceeds are earmarked for general corporate purposes and potential acquisitions. One such target has already emerged: London-based AI startup Conduct, which closed a $60 million Series A round led by Index Ventures and ICONIQ. SAP participated in the round. Conduct, founded by former Palantir employees, has built an AI operating system designed to help businesses modernise legacy software. For SAP, the technology could accelerate the migration of customers still running the old ECC system, whose standard maintenance ends in 2027, onto its cloud platform.

At the same time, SAP is rolling out its own generative AI assistants. The Joule agents, due to launch in June, will automate routine tasks in human resources, supply chain management and finance. The push is a direct response to intensifying competition, particularly from US rivals ploughing billions into new infrastructure — a dynamic that is squeezing near-term profit margins across the industry.

Investors will get a clearer picture on 23 July, when SAP publishes its half-year report. Two numbers will be scrutinised above all: the cloud order backlog and the cloud gross margin. Both will reveal whether the AI strategy is translating into commercial traction — or whether the cost of the investment is proving heavier than anticipated. The stock currently trades about 26% below its 200-day moving average of €186.59, underscoring the technical damage. With the 52-week low just a few percentage points away, the next few weeks could determine whether the floor holds — or breaks.