SAP's Buyback Machine Keeps Humming, But Barclays Cuts Its Price Target

SAP shares rally on buyback and strong cloud growth, while Barclays trims target to €220 citing AI integration costs.

The German software giant's share price has been on a tear, but the enthusiasm isn't universal. While SAP's stock has climbed nearly 29 percent over the past month, Barclays analysts have trimmed their price target from 255 to 220 euros — a 13.7 percent reduction — even as they reaffirmed an "Overweight" rating on July 28. The note of caution stems from near-term cost uncertainties, a curious counterpoint to a stock that closed Friday at 178.46 euros.

That tension between analyst caution and market momentum traces back to two recent acquisitions in the artificial intelligence space. SAP finalized its purchase of Dremio, a data lakehouse platform provider, in early July, followed days later on July 17 by the closing of the Prior Labs deal — a pioneer in tabular foundation models. The company has pledged to invest more than one billion euros over the next four years to develop Prior Labs into a leading frontier AI laboratory for structured data.

The financial impact of these deals is already baked into guidance. SAP estimates the dilution from Dremio and Prior Labs on its 2026 non-IFRS operating income at more than 100 million euros, prompting an adjusted outlook. For shareholders, that means integration costs will weigh on operating results in the near term, even as the strategic bet on structured data and agentic AI is expected to pay off further down the road.

The market, however, appears to be looking past those integration expenses. The stock surged 3.46 percent on Friday to 178.66 euros, marking a multi-month high and making SAP both the most-traded and best-performing stock in the DAX that session. Notably, the rally wasn't triggered by any fresh corporate announcement — the catalyst was a footnote regarding the ongoing buyback program.

On August 4, SAP disclosed a new tranche of its existing share repurchase initiative, a program originally announced in January 2026 with a total volume of up to 10 billion euros running through the end of 2027. The second tranche kicked off July 27, with plans to buy back shares worth up to 2.6 billion euros by January 27, 2027. In the first tranche, SAP acquired roughly 16.3 million shares at an average price of 161.16 euros apiece — well below the current trading level, meaning the company is now buying back stock at a premium to its earlier purchases.

The buyback isn't the only pillar supporting the rally. Second-quarter cloud revenues grew 22 percent, while the current cloud backlog — a key leading indicator — expanded 27 percent. Net margins also improved. SAP has also sought to address concerns about falling behind in the AI race with its AI Agent Hub, a concrete step in its artificial intelligence strategy.

Regulatory headwinds have also eased considerably. On July 9, the European Commission made legally binding the commitments SAP offered in its antitrust case concerning maintenance and support services for on-premise ERP software. The case concluded without a fine, though SAP is now bound to certain commitments worldwide for ten years. Shortly after, Germany's Federal Cartel Office closed its preliminary investigations without launching an abuse proceeding. Both decisions removed a layer of uncertainty that had been hanging over the stock.

Chart technicians, however, are waving a yellow flag. The relative strength index sits at 74.9, suggesting the stock is overbought in the short term and vulnerable to pullbacks. Through June 30, SAP had repurchased 16,280,097 shares at an average price of 161.16 euros, totaling roughly 2.6 billion euros in the first tranche that ran from February through late July.

Investors will get the next read on how the acquisition-related cost pressure is actually playing out when SAP reports third-quarter results on October 21. The market is currently modeling earnings per share of 1.83 euros on revenue of 10.09 billion euros. Until then, the buyback program remains the primary driver for the DAX heavyweight — even as analysts debate whether the stock's recent run has gotten ahead of the fundamentals.