SAP's July 23 Earnings to Test Whether Belt-Tightening Can Offset AI's Margin Squeeze

SAP shares near technical resistance as JPMorgan warns of underestimated AI costs; buyback and cloud deals offer bullish signals, but high volatility persists.

The market is sending mixed signals on SAP. Shares closed Thursday at 142.36 euros, a level that offers neither a clear buy signal nor a convincing floor. The real debate, however, has shifted from the stock's trajectory to the fundamental question of whether the company's drastic cost-cutting can keep pace with the enormous capital demands of its AI pivot.

JPMorgan analyst Toby Ogg isn't convinced. He rates the stock neutral with a 175-euro target and warns that consensus profit estimates ignore the swelling expense of developing and running AI models. "The market is underestimating the cost of this transformation," Ogg said in a note, pointing to a global trend where software peers like Atlassian and Adobe are throttling back on model usage to prevent runaway expenses. SAP is taking the opposite tack, starving non-core divisions to feed its AI budget.

That budget is now the centrepiece of an internal restructuring dubbed "Project Fuji". By the third quarter of 2026, the company aims to deploy more than 200 AI agents across its platform. Hiring has been largely frozen outside AI roles, and business travel has been slashed. The message from management is clear: every euro saved must go toward building a next-generation business platform.

The stock's technical picture offers little relief. At 142.36 euros, SAP sits just 2.8% below its 50-day moving average of 146.46 euros, but a staggering 21.58% below the 200-day line of 181.54 euros. Its 30-day annualised volatility of 45.73% is more typical of a speculative mid-cap than a DAX heavyweight, and the relative strength index at 50.2 signals no decisive momentum in either direction. The shares have shed 44.68% from a year ago and 29.52% since January.

Yet the company is taking steps that bulls read as confidence. A buyback programme running through the end of July signals that the board considers the stock undervalued. Meanwhile, a multi-year cloud partnership with Nokia and Microsoft aims to anchor SAP's solutions on Azure and scale AI applications securely. The cloud order backlog, a key forward-looking metric, has been growing — a potential rebuttal to critics who argue the valuation correction has further to run.

But headwinds remain. The consolidation of AI governance under CEO Christian Klein and the chief operating officer, effective 1 July, can be read either as decisive leadership or an admission that previous structures were too slow to deliver. That reorganisation has already cost some senior managers their posts. SAP is also awaiting regulatory clearance for its planned acquisition of data specialist Dremio, with a review at Germany's Federal Cartel Office ongoing since 19 May. Any delay or additional scrutiny could sour sentiment further.

The stock's distance from its 52-week high of 266 euros — a 46.48% gap — underscores just how deep the correction has run. And US rival Oracle's announced multibillion-dollar AI investments add competitive pressure, raising the question of whether SAP can keep up without further margin erosion.

All eyes now turn to the quarterly report due 23 July. That release will be the first chance to see whether the new AI governance structure and the recent partnerships have begun to translate into operating results — or whether the cost discipline is simply starving the business of growth while the market waits for a clearer signal.