SAP's Cloud Growth Is Humming — But Why the Stock Is Stuck Near Its Floor

SAP's strong cloud growth and rising profits contrast with a 32% share price drop since January, driven by Oracle's massive capex, macro headwinds, and capital rotation into IPOs.

SAP’s first-quarter numbers tell a story of accelerating cloud momentum, rising profits and a bulging order book. Yet the software group’s share price tells a very different one: a 32% decline since January and a level barely above its 52-week trough. The divergence reflects forces outside the company’s control — a wall of macro headwinds, sector contagion from Oracle’s massive capex shock, and a rotation of institutional capital into new IPO names.

The immediate trigger for the latest leg lower was Oracle’s mid-June disclosure that it plans to spend between $90bn and $95bn on capital investments in its fiscal 2027, far above the $68bn analysts had penciled in. The market interpreted the news as a warning: even a strong quarter at Oracle gets overshadowed by the cost of building out AI infrastructure, and the same logic could apply to any enterprise-software heavyweight. SAP lost around 4% on the day, making it the worst performer in the DAX. The damage was compounded by a UBS downgrade of the European software sector the same week.

These external shocks layer on top of a broader capital reallocation. An estimated $185bn is flowing into large initial public offerings — SpaceX and Oracle among the high-profile names — sucking liquidity out of established tech names. SAP is not alone: Salesforce and Workday are nursing similar wounds. At the same time, the Federal Reserve is keeping its key rate at 3.50%–3.75% with a hawkish tilt, as half its members push for tighter policy — an environment that historically punishes high-valuation growth stocks.

None of this has much to do with SAP’s own performance. In the first quarter, total revenue rose to €9.56bn, while operating profit jumped 24% to €2.9bn and earnings per share came in at €1.66. The cloud business, the centerpiece of the company’s growth strategy, expanded at a currency-adjusted rate of 27%, pushing the cloud order backlog to €21.9bn — up from the roughly €22bn figure cited in earlier reports. The group’s market capitalization of around €168bn still makes it the heavyweight of Germany’s benchmark index.

That operational resilience is why Bernstein has reaffirmed its buy rating with a price target of €273 — implying upside of nearly 97% from the current level of around €136.76. JPMorgan, by contrast, stuck to a hold rating after the Oracle news without adjusting its target, reflecting the broader caution among sell-side analysts.

Technically, the picture remains precarious. The stock is trading about 26% below its 200-day moving average of €186.59 and within striking distance of its 52-week low of €135.52. The support line at €135 is considered the last line of defense; a break below it could open the door to a deeper correction. On the upside, the volume-weighted price center around €150 acts as a resistance that any near-term rebound must clear.

SAP is not sitting idle. In May, it raised €3.5bn through a seven-year euro bond to fund general corporate purposes and potential acquisitions. It also participated in a $60m funding round for London-based Conduct, a startup that helps companies modernize legacy SAP systems — a move that aligns with the looming 2027 support cutoff for the core ECC product. Big clients such as DHL and Daimler Truck are already accelerating their shifts to the S/4HANA platform.

All eyes now turn to the half-year results due on July 23. The market will focus on two metrics: the cloud backlog and the cloud gross margin. Both will reveal whether SAP’s heavy investment in AI capabilities is translating into commercial traction — or whether the cost burden is growing faster than the revenue stream. For now, the bulls and bears each have compelling data points, but the stock is caught in the crossfire.