SAP Stock Sinks on Margin Fears While Sovereignty Wave Could Reshape Its Cloud Future

SAP stock drops 30% YTD despite cloud backlog and EU sovereignty push, as AI capex fears and Goldman margin downgrade weigh.

The contradiction is hard to ignore. SAP’s cloud business is humming, its order backlog is swelling, and a growing push for European digital sovereignty should play directly into its hands. Yet the stock has tumbled more than 30% since January and now trades just a few percent above its 52-week low. Investors are staring at two opposing forces — and the outcome remains unclear.

On Wednesday, shares in the German software giant closed at €139.64, down 1.75% on the day. That leaves them roughly 3% above the year’s trough of €135.52 hit on May 13. The 200-day moving average at €186.60 sits nearly a quarter above the current price, while the relative strength index of 39.4 points to a market that is weak but not yet deeply oversold.

Sovereignty push gains traction

A fresh survey underlines the strategic repositioning under way. The Bitkom Cloud Report 2026, published this week, found that 85% of 603 German companies consider their dependence on US cloud providers too high — up from 78% a year earlier. Nine out of ten respondents said they would prefer a German cloud vendor, and 64% are actively rethinking their cloud strategy because of the geopolitical climate. Notably, 37% said they would accept functional trade-offs or higher costs for a sovereign European solution.

The political backdrop is reinforcing the trend. At the G7 summit in Évian, Germany and France presented a joint definition of digital sovereignty, promoting open-source software and modular architectures within the EU. SAP is positioned as a cornerstone of that vision. Meanwhile, the US government’s weekend decision to block Anthropic’s “Fable 5” and “Mythos 5” AI models for foreign users served as a stark reminder that reliance on American AI infrastructure carries sudden access risks.

Near-term headwinds from Oracle and Goldman

But the long-term tailwind from sovereignty is colliding with acute margin anxiety. Two events in recent weeks have driven the selling. Goldman Sachs cut its gross margin forecast for SAP, citing rising hardware costs slated for the second half of 2026. Then Oracle reported record revenue and an earnings beat — yet its stock fell after hours because the company flagged capital expenditure of up to $95 billion for fiscal 2027. That number sent shockwaves through the software sector, stoking fears that AI infrastructure spending is spiraling out of control. SAP was caught in the downdraft, and a downgrade of European IT stocks by UBS added further weight.

Acquisition strategy presses ahead

Despite the share price pressure, SAP is moving forward with its growth agenda. On May 19, Germany’s Federal Cartel Office opened a merger control proceeding for SAP’s planned acquisition of Dremio, a data analytics firm that will bolster the Business Data Cloud and enable AI workloads across system boundaries. SAP expects the deal to close in the third quarter of 2026; financial terms have not been disclosed. Dremio follows the earlier Reltio purchase, which provides master data management software to help customers unify enterprise data for AI applications.

Operational strength in the numbers

The first quarter of 2026 painted a picture of robust demand. Cloud revenue jumped 27%, total revenue reached €9.6 billion, and the cloud order backlog stood at €21.9 billion — a 25% increase year-on-year. For the full year, SAP targets currency-adjusted cloud sales of €25.8 billion to €26.2 billion and free cash flow of roughly €10 billion.

The gap between those fundamentals and the stock’s trajectory is stark. All eyes are on the half-year report due July 23, when two numbers will dominate the conversation: the growth rate of the cloud backlog and, even more critically, the cloud gross margin. The margin will reveal whether SAP’s heavy investments in AI are already converting into premium subscriptions — or whether the margin squeeze will persist. For now, the sovereignty wave is a promise, not a profit line. The market wants proof.