SAP’s Dual-Pronged Push into Government Cloud and AI Data Fails to Offset Oracle-Fuelled Selloff

SAP shares plunge 30% YTD on Oracle spending fears, even as BSI cloud certification and AI buys signal long-term growth. Key support at €135.52.

SAP’s strategic ambitions are expanding on two fronts — a rare government cloud certification and a string of artificial intelligence acquisitions — yet the market is punishing the stock with a ferocity that has left it teetering near a 52-week low. The German software giant ended last week at €141.52, down 10.45% in a single week and almost 30% below its level at the start of the year.

The immediate trigger was an external shock. Oracle announced in mid-June that it would spend up to $95 billion on AI infrastructure in its 2027 fiscal year. Investors, fearing a ruinous spending race, promptly dumped European software names, with SAP bearing the brunt of the sell-off. The stock now trades only 4.4% above its 12-month trough of €135.52.

Government doors open, but markets shrug

While the market fixates on Oracle’s capital expenditure, SAP’s management in Walldorf has been quietly notching regulatory victories. The Federal Office for Information Security (BSI) has granted the company a rare operating permit for classified data up to the level “Nur für den Dienstgebrauch” (restricted for official use) in its cloud. The approval covers data centres in Walldorf and St Leon-Rot, making SAP the sole provider with such a platform for German public-sector bodies and regulated industries — a crucial requirement for cloud migrations.

That exclusive credential sits alongside an aggressive acquisition spree. On 7 May SAP closed the takeover of data specialist Reltio. It is also pursuing deals for data?lakehouse company Dremio and AI lab Prior Labs, with more than €1 billion earmarked for the latter over four years. To fund the offensive, the company placed a €3.5 billion bond in May, a move backed by favourable ratings from Moody’s and S&P.

Shareholders are not being ignored either. A buyback programme of up to €10 billion is running through the end of 2027, with the first €2.6 billion tranche already completed.

Operating strength provides the foundation

Underpinning these investments is a solid operational base. Currency?adjusted cloud revenue jumped 27% in the first quarter, lifting the cloud backlog to €21.9 billion — a 20% year?on?year increase. Free cash flow for the quarter exceeded €3 billion. For the full year, management targets cloud sales of roughly €26 billion and free cash flow of €10 billion, though the latter is contingent on a de?escalation of geopolitical tensions in the Middle East.

The company is also expanding its sovereign cloud offering in France and has unveiled a new AI architecture designed for autonomous business processes.

Next catalysts on the horizon

Technically, the chart remains fragile. SAP’s stock is trading below its 50?day moving average, and a break below the €135.52 support could trigger further selling. On the upside, the BSI certification and the acquisition pipeline offer tangible recovery potential — if the market chooses to look beyond Oracle’s spending.

The next major test comes on 23 July, when SAP reports second?quarter results. Analysts will be looking for details on how the integrations of Dremio and Prior Labs are progressing. A positive one?off effect from the previous quarter will not repeat, which may temper the reported cloud growth rate. Ultimately, the market wants evidence that the new AI tools are translating into larger cloud contracts. Without that, the billions spent on data?acquisition deals will struggle to win back investor confidence.