SAP's €1.5 Billion Data-Play: Inside the Twin Acquisitions Reshaping Its AI Ambitions

SAP acquires Prior Labs and Dremio for €1.5B to fuel AI-ready data, trims profit outlook, but cloud backlog grows 27%.

The software giant's latest M&A spree is a bet that structured data — not just raw computing power — will separate the winners in enterprise artificial intelligence. SAP has now closed two acquisitions in as many weeks, committing more than €1.5 billion combined to companies that help it turn corporate information into AI-ready fuel.

The larger of the two deals, Prior Labs, was finalized in mid-July. SAP plans to pour over €1 billion into the tabular foundation model specialist across the next four years, with the goal of building it into a global frontier AI laboratory focused on structured data. Days earlier, the company wrapped up its roughly €0.5 billion cash purchase of Dremio, an open data lakehouse technology provider.

Both targets serve the same strategic purpose: preparing enterprise data so it can feed directly into AI applications, a capability that slots neatly into SAP's existing Business Data Cloud offering.

The Cost of Ambition Hits the Bottom Line

Shareholders are being asked to absorb a near-term hit in exchange for longer-term positioning. SAP has trimmed its guidance for this year's non-IFRS operating margin, citing dilution from the Dremio and Prior Labs deals that will weigh on results by more than €100 million. The revised target corridor for non-IFRS operating profit now stands at €11.8 billion to €12.2 billion.

The cloud revenue outlook, however, remains untouched. SAP reaffirmed its full-year projection of €25.8 billion to €26.2 billion, representing currency-adjusted growth of 23 to 25 percent year over year.

Barclays responded to the revised guidance in late July by lowering its dollar-denominated price target on SAP's ADR shares from $255 to $242, though the bank kept its "Overweight" rating, framing the move as a response to near-term cost uncertainty rather than a fundamental concern.

Regulatory Clouds Lift

The acquisition activity unfolded alongside meaningful progress on the regulatory front. The European Commission accepted legally binding commitments from SAP addressing concerns about maintenance and support services for on-premises ERP software. Separately, Germany's Bundeskartellamt closed its preliminary investigation into the company without initiating abuse proceedings.

Those decisions remove a layer of uncertainty that had hovered over the stock in recent months, even as the company pressed ahead with its strategic agenda.

Buybacks and Backlog Tell the Growth Story

Management has also been signaling confidence through capital allocation. SAP purchased an additional 50,000 of its own shares, pushing the total volume of the ongoing buyback program past 5.12 million shares — a move that typically reflects management's view that the equity is undervalued.

The financial engine behind both the buybacks and the acquisition strategy remains the cloud business. Second-quarter figures showed the current cloud backlog climbing 27 percent to €22.9 billion, with cloud revenue up 24 percent on a currency-adjusted basis. The cloud ERP suite grew even faster at 25 percent, while total revenue advanced 9 percent.

Customer momentum continues to build as well. On August 19, SAP announced that NTT DATA had selected SuccessFactors and the Joule AI assistant for a global HR transformation — a reference deployment that underscores how the company's AI tools are moving from announcement to enterprise adoption.

A Stock Still Climbing Out of a Hole

The market's response to all this activity has been measured. SAP shares recently traded at €186.60, roughly 22 percent above their 50-day moving average of €153.39, reflecting a sharp rebound over the past month. The stock has gained about 2.7 percent over a seven-session stretch.

Yet the recovery remains incomplete. The shares still sit about 23 percent below their 52-week high of €242.00, and they're down roughly 11 percent year to date. For investors, the calculus is straightforward: accept near-term margin pressure and a muted share price in exchange for a clearer path to AI-driven growth — a trade SAP's management is evidently willing to make.