SAP’s Cloud Backlog Swells to €21.9 Billion, but a Cautious Outlook Keeps the Stock Under Pressure

SAP's Q1 earnings beat estimates but cautious cloud guidance and a €408M Teradata settlement weigh on shares, as a €10B buyback and European sovereignty push aim to restore confidence.

SAP is navigating a curious disconnect. The German software giant’s first-quarter results for 2026 were robust, with earnings per share hitting €1.66 — ahead of analyst expectations. Its cloud backlog, a key gauge of future revenue, swelled to €21.9 billion. Yet the market remains unimpressed. The stock has shed nearly 29% since the start of the year, closing at around €144 in late April and sliding below its 20-day moving average.

The root of investor unease lies in management’s forward guidance. Walldorf flagged that several one-off items flattered the first quarter’s growth, and it now anticipates a slower pace of cloud expansion in the second quarter. That tempered enthusiasm, even as the full-year revenue forecast was left unchanged. A €408 million cash outflow tied to a settlement with Teradata further strained free cash flow, adding to the bearish narrative.

A €10 Billion Buyback Programme Kicks In

To cushion the share price slide, SAP has deployed a hefty capital return strategy. The company completed an initial €2.6 billion tranche of share buybacks in April, part of a broader €10 billion programme. The stock is now trading perilously close to its 52-week low of €139.12, with the buyback acting as a key support level. Whether it can stem the broader downtrend remains an open question.

European Cloud Sovereignty Push

Operationally, SAP is doubling down on a strategy tailored to Europe’s strict data regulations. The company has partnered with French cloud provider S3NS to launch a platform designed for data sovereignty, with a launch slated for the second half of the year. The offering targets heavily regulated sectors such as defence and healthcare. Thales has already signed on as the first reference customer, migrating its entire ERP landscape to the new platform. This follows a similar pact with Bleu in March.

Analyst Divergence and Key Catalysts

The outlook for SAP’s shares is deeply polarised on the Street. Goldman Sachs maintains a buy rating with a €230 price target, while Barclays is overweight at €220. JPMorgan sits neutral at €175, and the DZ Bank is bearish, setting a target of just €130. The wide spread reflects uncertainty over how quickly the cloud transition and AI monetisation will translate into sustained earnings momentum.

Two upcoming events could provide fresh direction. On 5 May 2026, the virtual annual general meeting will vote on the appointment of René Obermann to the supervisory board, with a view to him becoming chairman in 2027. Shortly after, management will present at the Sapphire conference in Orlando, where investors expect more detail on the rollout of AI-powered solutions and a shift toward consumption-based pricing models.

M&A to Bolster AI Capabilities

SAP is also moving to strengthen its data infrastructure through acquisition. The planned takeover of US-based Reltio, expected to close by mid-2026, is currently under regulatory review. The deal is designed to enhance SAP’s AI platform and data management capabilities, aligning with the broader push into intelligent enterprise solutions.