SAP’s Cost-Cutting Drive Meets Skeptical AI Questions Just Before Q2 Earnings

Investors scrutinize SAP's Q2 earnings on July 23 amid sector-wide AI monetization fears, cost-cutting measures, and cloud backlog focus as stock nears 52-week lows.

Investors are heading into SAP’s second-quarter earnings report on July 23 with more than the usual set of questions. A cloud of sector-wide doubt about artificial-intelligence monetization — freshly stoked by a high-profile downgrade of Salesforce — has landed squarely on the German software giant at a moment when its own stock is trading barely above a 52-week floor.

KeyBanc analyst Jackson Ader downgraded Salesforce from “Overweight” to “Sector Weight” this week, scrapping his price target entirely. After attending numerous partner and customer events, Ader concluded that there is still insufficient evidence that the company’s AI platform Agentforce will accelerate growth anytime soon. He pointed to two recurring problems: customer data is often not clean enough for meaningful AI work, and the product itself is not yet mature. More troublingly, his surveys showed that more Salesforce customers plan to cut their budget over the next twelve months than plan to increase it.

The concerns do not stop at Salesforce’s doorstep. They echo across the enterprise-software sector, and SAP has been living with the same fear for months. Investors want to know whether the billions being poured into artificial intelligence will translate into real revenue growth — or whether AI agents will actually undermine existing license models. SAP’s shares have already paid a steep price for that anxiety. The stock has lost 31.59 percent since the start of 2026 and 47.21 percent over the past twelve months.

That is why SAP’s recent belt-tightening is drawing so much attention. Since the start of July, the company has imposed a strict hiring freeze for roles that do not directly support its core AI efforts, and it has slashed budgets for non-essential business travel. The moves are widely seen as an attempt to protect free cash flow while rivals pour billions into physical infrastructure. SAP wants to fund its planned cloud growth for 2026 without letting operating expenses spiral out of control.

At the same time, SAP has reorganised its leadership structure around AI. As of July 1, the company created two new units: the Business AI Platform, led by Philipp Herzig, which will build the technology layer for the entire portfolio; and the Autonomous Suite, under Manoj Swaminathan, which will embed AI into finance, supply chain and human resources. The goal is to speed the delivery of agentic AI features within its cloud ERP offerings. Adding to that push, Germany’s antitrust authority cleared SAP’s acquisition of Prior Labs GmbH on July 8, a deal meant to strengthen its research into AI-driven analytics.

When SAP reports its second-quarter numbers next week, analysts expect earnings per share of €1.76, up sharply from €1.46 a year earlier. Revenue is forecast to come in at roughly €9.85 billion, a year-on-year improvement of 9.08 percent. The real focus, however, will be on the cloud backlog and the operating margin. Investors want to see whether the cost cuts are already flowing through to the bottom line.

The stock closed Friday at €138.18, down 0.19 percent on the day. That leaves it just 5.64 percent above its 52-week low of €130.80, set on June 25. The gap to the 52-week high of €265.75 from July 2025 is a staggering 48 percent. The relative strength index stands at 45.4, neutral territory, but the share price sits 22.68 percent below its 200-day moving average — a clear sign of the persistent downtrend. The annualised volatility over the past month is 38.46 percent, underscoring the nervous mood around the name.

The July 23 earnings release becomes a critical test. If SAP can deliver concrete evidence that its AI investments are starting to generate measurable returns, the beaten-down stock may finally find a floor. If it cannot, the scepticism that has hammered Salesforce could just as quickly spread to Walldorf, pushing the shares toward and potentially through the €130 support level.