SAP's Q3 Test: Jefferies Bets on Order Momentum While JPMorgan Stays on the Sidelines

Jefferies lifted its SAP target to EUR 220 with a Buy rating, while JPMorgan kept Neutral at EUR 175 ahead of the October 21 Q3 report.

With SAP's third-quarter report set for October 21, Wall Street is sending mixed signals about what investors should expect from the German software giant. Jefferies raised its price target on the Walldorf-based company from EUR 210 to EUR 220, reaffirming a Buy rating, while JPMorgan kept its Neutral stance intact with a EUR 175 target — a spread that captures the market's broader disagreement over whether the stock's recent run has room to continue.

Jefferies analyst Charles Brennan acknowledged that news flow through the year has been choppier than anyone would have liked, but he anticipates a calmer stretch ahead and a healthy intake of new orders in the September quarter. JPMorgan's Toby Ogg takes the opposite view on near-term potential, expecting results that merely land in line with consensus. The divergence reflects a deeper debate about valuation: bulls point to the steady migration of customers onto recurring cloud contracts, while skeptics flag macroeconomic uncertainty and stiff competition.

A Solid Foundation Beneath the Disagreement

Both camps can agree on the starting point. SAP's second-quarter numbers, covering the period through the end of June, showed cloud subscription backlog for the next twelve months climbing 27% to EUR 22.9 billion. Total quarterly revenue rose 9% to EUR 9.88 billion, and net income hit EUR 2.21 billion — roughly a quarter above the prior-year figure. Earnings per share came in at EUR 1.89, with analysts on average projecting just over EUR 7 per share for the full year.

The company is also putting its balance sheet to work. A buyback program announced in January authorizes up to EUR 10 billion through the end of 2027, and a tranche launched at the end of July covers the repurchase of up to EUR 2.6 billion in stock.

AI Ambitions Carry a Price Tag

Management is betting heavily that artificial intelligence will keep growth on track. Under the "Autonomous HCM" banner, SAP is linking HR and business processes through its "People Intelligence" platform inside the Business Data Cloud — an offering that research firm IDC recently ranked among the leading solutions for software-driven workforce planning. The company has also completed the acquisition of data specialist Dremio and, through its Prior Labs project, plans to invest more than EUR 1 billion over four years to make structured enterprise data usable for AI applications.

The catch: heavy development spending and the integration of acquisitions can weigh on margins, a risk that looms over the ambitious consensus estimates. Any stumble in new cloud bookings would quickly put those forecasts under pressure.

What the Tape Says

Shares edged up 0.4% to EUR 184.56 in the latest session, leaving the stock about 10% above its 200-day moving average. The prior day's close was EUR 183.76, a gain of 0.6%, when the premium to the long-term trend line stood at 9.8%. After the gains of previous months, investors are demanding proof that cloud growth is durable and that customers are expanding existing contracts — a bar that was raised further when several analysts trimmed their targets just over a month ago.

Whether Jefferies' optimism or JPMorgan's caution proves closer to the mark will be settled by the actual cloud orders SAP reports on October 21.