The Quiet Period Ends: SAP Earnings Will Determine Whether the Slide Continues or Reverses

SAP reports Q2 earnings amid 48% stock decline from all-time high despite record €77.3B cloud backlog. Analysts eye 22% cloud revenue growth as pivotal metric.

SAP enters its second-quarter earnings release on Thursday with an unusual disconnect on display. The software giant’s cloud business is booking record numbers—a backlog of €77.3 billion at the end of 2025, up 30% on a constant-currency basis—yet the stock has shed nearly half its value over the past twelve months. The shares closed Tuesday at €135.90, down 2.29% on the day, leaving them only 3.9% above the 52-week low of €130.80 and a staggering 48.43% below the July 2025 all-time high of €263.55.

That gap between operational momentum and market sentiment means Thursday’s numbers, due after the US market close, carry unusual weight. With SAP in its quiet period, investors have been trading on expectations alone, and those expectations have been deteriorating for months. The pivotal metric is cloud revenue growth: analysts are looking for a 22% year-on-year increase in the second quarter, with the cloud backlog forecast to expand at 23% to 24%. That would mark a deceleration from the 25% clip SAP delivered in 2025 and the 27% it reported in the first quarter of 2026.

The Bull Case — Valuation, Execution and a Regulatory Tailwind

Despite the stock’s slide, the analyst community remains overwhelmingly constructive. Of 18 ratings tracked, 14 are Buy, three are Hold and just one is Sell. The average price target stands at €199.57, implying roughly 45% upside from Tuesday’s close. Morningstar analyst Rob Hales assigns a fair value of €265—nearly double the current price—and gives SAP the maximum five-star rating, citing a wide economic moat and moderate uncertainty.

On the operational side, the fundamental demand story is intact. The migration wave from the legacy SAP ECC system to S/4HANA is accelerating as the 2027 mainstream maintenance deadline approaches. A study by valantic and techconsult found that more than 60% of companies in the DACH region are already on S/4HANA, either in the cloud or on-premise. SAP’s management has reaffirmed its full-year guidance, targeting cloud revenue of €25.8 billion to €26.2 billion, which translates to constant-currency growth of 23% to 25%.

A recent resolution with the European Commission, which ended a cartel probe without a fine, also provides clarity: customers are now allowed to run older on-premise systems longer than initially planned. While some analysts view that concession as a potential drag on cloud adoption, the agreement removes a regulatory overhang and gives SAP’s sales teams a stable framework to work within. The company has also committed to a share buyback program worth up to €10 billion, with the first tranche already executed—a signal that management sees value at current levels.

The Bear Case — AI Monetization Lags and Macro Risks Mount

The counterargument is equally well-founded. UBS analyst Michael Briest pointed out in July that large SAP customers are integrating AI agents more slowly than expected. Complex ERP environments are difficult to mesh with new AI tools, and that technical friction is delaying the monetization of SAP’s heavy investment in artificial intelligence. Meanwhile, the internal cost picture is tightening: Bloomberg reported during the quarter that SAP is restricting non-AI hiring and travel, reallocating resources into AI projects. Depending on interpretation, that is either disciplined capital allocation or a sign of margin pressure.

The migration itself is proving more painful than planned. A Horváth study from 2025 found that only 8% of completed S/4HANA migrations came in on time; the average project overran its schedule by 30%, and more than half exceeded their budgets. Such delays may make prospective customers hesitate, particularly as corporate IT budgets come under strain from rising hardware costs. Rising prices for storage gear are shifting attention toward infrastructure spending and away from software, a dynamic that Morningstar has labeled by pointing to IBM’s 25% share-price plunge after a profit warning as a “canary in the coal mine.”

Geopolitical risks add another layer. SAP’s customer base is heavily weighted toward manufacturing, a sector acutely sensitive to the conflict in Iran and surging energy costs. Should management report lengthening sales cycles on Thursday, it would raise doubts about the achievability of the 2026 profit forecast.

What to Watch Thursday

The stock is currently trading well below its 50-day moving average of €144.49, a level that defines the upper bound of the near-term trading range. It is even further below the 200-day moving average of €175.85, confirming that the medium-term trend remains bearish, despite a 6.12% rally over the past 30 days.

For the bulls, the key will be whether cloud growth can hold in the 22% neighborhood and whether the full-year guidance remains unchanged. A stable-to-accelerating cloud backlog, combined with the valuation support from analyst targets and the buyback, could fuel a stabilization. For the bears, any sign that cloud momentum is slipping further, or that margin pressure is intensifying, would argue that the stock has not yet found its floor. The next concrete data point arrives Thursday after the bell. Until then, SAP shares are likely to remain caught between the recent low and that 50-day resistance level.