SAP's Pivot to Pay-Per-Use AI Faces Crucial Earnings Test

SAP's pivotal Q1 results test its shift to AI consumption pricing. Analysts forecast 18% cloud revenue growth as stock recovers from 52-week low.

Investors are bracing for a pivotal update from SAP this Thursday, as the software giant’s ambitious shift to a consumption-based pricing model for artificial intelligence collides with high-stakes quarterly results. The company will abandon fixed subscriptions for its AI services starting in July, a strategic gamble that promises long-term growth but introduces near-term volatility into its revenue streams.

The first-quarter figures, due after market close on Thursday, April 23, at 22:05 CEST, are expected to provide critical evidence on whether SAP’s profound transformation is gaining traction. Analysts are forecasting an 18 percent year-over-year increase in cloud revenue, with total revenue seen rising around five percent. Operating profit is anticipated to grow by approximately eleven percent.

This strategic overhaul, led by CEO Christian Klein and CFO Dominik Asam, mirrors the company’s cloud migration journey six years ago. It requires significant investment, which is temporarily pressuring margins. Concurrently, SAP is deploying dedicated developer teams to customer sites from this summer to build tailored AI solutions on-site, aiming to drastically accelerate implementation. The move away from per-user licenses reflects a technological shift where AI agents are increasingly performing tasks traditionally done by employees.

Market sentiment remains fractured. Since the start of the year, SAP’s share price has fallen by about 24 percent, though it has stabilized recently. After hitting a 52-week low of 137.54 euros in early April, the stock recovered to trade around 153 euros, closing at 153.40 euros last Friday. It remains over 40 percent below its record high.

A key metric under intense scrutiny is the cloud backlog, particularly for the Cloud ERP suite. SAP slightly missed expectations in this area in January, putting the efficiency of converting contracts into solid revenue squarely in the spotlight for this report. Any deceleration in suite momentum would be interpreted as a sign of structural stalling in the new business model.

Analyst opinions highlight the prevailing uncertainty. Barclays maintains an "Overweight" rating with a price target of 220 euros, signaling substantial upside potential. In contrast, JPMorgan rates the stock "Neutral" with a 175 euro target, citing concerns such as potential budget cuts from US customers due to new tariffs. The post-earnings conference call will be crucial for Klein and Asam to quantify the financial impact of the new pricing strategy and reaffirm growth targets for 2026.

Failure to convince the market could see the stock quickly retest its recent lows. The upcoming weeks are dense with events for shareholders. Following the earnings release, the Annual General Meeting on May 5 will decide on the profit distribution for 2025, with a dividend payment expected on May 8.