SAP’s Cloud Backlog Hits €22.9 Billion, but the Market Is Asking One Question

SAP shares rally 20% after strong Q2 cloud revenue, but AI acquisition costs and lowered profit guidance create a split market outlook.

SAP shares have staged a dramatic recovery over the past week, surging more than 20% in seven trading sessions to close at €157.50 on Tuesday. The rally, which saw the stock jump 4.09% in a single session to €156.90, was ignited by the company’s second-quarter earnings release last Thursday. But beneath the surface of this sharp upward move lies a tension that will define the stock’s next chapter: can the accelerating cloud business offset the costs of an aggressive AI acquisition spree?

The numbers that sparked the rally are hard to ignore. Cloud revenue climbed 22% to €6.28 billion, while the current cloud backlog — a forward-looking metric that measures contracted but not yet recognized revenue — jumped 26% on a currency-adjusted basis to €22.9 billion. Jefferies analyst Charles Brennan called the backlog the “clear highlight” of the quarter, noting it had comfortably beaten market expectations. Total revenue rose 9.4% to €9.88 billion, and IFRS earnings per share improved from €1.46 to €1.89.

Yet the picture is more complicated than the share price suggests. Operating profit under IFRS fell 11% to €2.6 billion, weighed down by restructuring costs tied to the integration of two recently completed acquisitions: data management specialist Dremio and AI firm Prior Labs. SAP responded by trimming its full-year 2026 non-IFRS operating profit guidance to a range of €11.8 billion to €12.2 billion, down from the previous €11.9 billion to €12.3 billion. The cuts are modest in absolute terms, but they signal that the cost of bolting on AI capabilities is already showing up in the P&L.

The market’s reaction has been split. On the bullish side, Goldman Sachs reaffirmed its “Buy” rating on July 27, albeit with a reduced price target of €215 (down from €230), citing the strong cloud pipeline as a counterweight to near-term cost pressure. Bernstein SocGen Group maintained its “Outperform” rating and a €273 target on July 22, well above current levels. And in a vote of confidence that caught the attention of retail and institutional investors alike, CEO Christian Klein purchased SAP shares worth €325,219 at an average price of €133.60 — a price that now sits comfortably below the current market level.

The bear case, however, has vocal advocates. JPMorgan analyst Toby Ogg described the margin development as a “negative surprise” on July 24, keeping a “Neutral” rating and a €175 target. The DZ Bank went further, slashing its fair value to €120 on Monday and maintaining a sell recommendation — a call that implies significant downside from current levels. The stock’s annualized 30-day volatility of 48.71% underscores just how nervous the market is, a level that would be extreme for any large-cap software name.

Adding another layer to the story, SAP launched the second tranche of its share buyback program on Monday, with a volume of up to €2.6 billion. The program signals management’s belief that the stock is undervalued, but it also raises the stakes: if the buyback coincides with a sustained margin squeeze, the company will be spending cash to support a stock that may not yet have found its floor.

Despite the recent rally, SAP shares remain 10.43% below their 200-day moving average and 39.10% below their 52-week high of €258.60. Over a 12-month horizon, the stock is still down 36.63%. The technical picture suggests that while the recovery has been sharp, it has not yet broken the longer-term downtrend.

The next major test comes with the third-quarter earnings report, scheduled for October 21 or 22 depending on the source. Between now and then, the cloud backlog will serve as the primary barometer. If it maintains its double-digit growth trajectory and the integration of Dremio and Prior Labs proceeds without further guidance cuts, the current rally could prove to be the foundation of a more sustained re-rating. But if margins deteriorate again — as JPMorgan and the DZ Bank already anticipate — the market may dismiss the past week’s gains as a short-lived bounce in a structurally challenged year.

For now, the stock sits at a crossroads. The cloud engine is firing on all cylinders, but the cost of fueling it with AI acquisitions has yet to be fully absorbed. Investors who bought during the July dip are sitting on gains, but the question that matters is whether those gains will hold when the next earnings report arrives.