SAP Stock at a Crossroads: Record Cloud Orders Mask the Pain From Oracle’s Capex Shock

SAP's 27% cloud revenue growth and 21.9B euro backlog fail to halt stock slide after Oracle's $95B capex plan triggers sector selloff.

The disconnect between SAP’s operational strength and its stock price has rarely been starker. Europe’s largest software company reported a 21.9 billion euro cloud backlog and 27 percent cloud revenue growth in the first quarter, yet its shares have lost nearly a third of their value since the start of the year. The culprit lies 9,000 kilometers away in Silicon Valley.

Oracle triggered a sector-wide selloff on June 10 when it announced plans to spend as much as 95 billion US dollars on data centres in 2027. The news came despite a record quarterly revenue and earnings beat, sending Oracle’s own stock tumbling more than 10 percent in after-hours trading. Panic spread swiftly to Frankfurt, where SAP shed 4.4 percent in a single session and has now fallen over eight percent in the past seven days.

The rout has been compounded by a UBS downgrade of European IT stocks and a note from JPMorgan analyst Toby Ogg warning that momentum in Oracle’s cloud applications had finally slowed. “That sends a mildly negative signal for SAP’s near-term enterprise software outlook,” Ogg wrote. Investors also took fright at Oracle’s eye-watering capital expenditure plans, fearing a ruinous arms race in artificial intelligence infrastructure.

SAP’s own numbers tell a very different story. In the first quarter of 2026, cloud revenue rose 27 percent, total revenue hit 9.6 billion euros, and operating profit jumped 24 percent to 2.9 billion euros. The cloud backlog — a measure of contracted but not yet recognised orders — grew to 21.9 billion euros on a currency-adjusted basis, showing that customers continue to commit to the platform despite the macro gloom.

Yet the cost side is tightening. Goldman Sachs recently trimmed its gross margin forecast for the second half of 2026 to 72.8 percent from 73.3 percent, citing the capital intensity of AI workloads. SAP is pouring money into servers and data centres to run its generative AI features. A large customer in the Middle East is also scaling back activity, which is temporarily curbing cloud growth.

The company is fighting back on several fronts. It has completed three strategic acquisitions — Reltio for master data management, Dremio for real-time analytics in SAP Business Data Cloud, and Prior Labs for AI models on structured data. These deals aim to give SAP control over the data layer rather than merely layering AI onto existing applications. To fund the push, SAP issued a 3.5 billion euro bond in May across four tranches.

On the product side, SAP unveiled new AI tools for accounting on Tuesday, using pre-trained language models to process invoices faster. On Wednesday it is pitching its network as the central platform for digital procurement. However, the company also revealed that its Joule AI assistant will be offered free of charge until the end of 2026, suggesting that commercial monetisation of the assistant is still some way off.

The macroeconomic backdrop adds further pressure. Goldman Sachs no longer expects any rate cuts from the Federal Reserve in 2026, pushing its forecast entirely into 2027. Higher interest rates hit growth stocks hardest, and the entire tech sector has felt the sting. SAP’s shares now trade at 142.22 euros, dangerously close to the year’s low of 135.52 euros and roughly 45 percent below the all-time high set in July 2025.

All eyes are now on the half-year report due on July 23. Investors will scrutinise the cloud backlog and the cloud gross margin — two metrics that will reveal whether SAP’s AI strategy is gaining commercial traction. If the momentum from the first quarter holds, the bear case driven by external sector factors may become increasingly hard to justify.