SAP's Rally Faces a Two-Sided Equation: Overbought Signals Versus a Tightening Share Count

SAP's cloud backlog and AI deals fuel a 28% rally, but RSI above 75 signals overbought conditions. Can fundamentals sustain the surge?

The recent surge in SAP's share price has created an unusual tension on the trading floor. Technical indicators are flashing red, yet the fundamental picture keeps improving — and the company itself is quietly reinforcing the bull case through its own buyback machine.

At the heart of the debate is a question that has divided the analyst community: whether the stock's sharp recovery from its late-July lows is built on sustainable operational momentum or whether the market has simply gotten ahead of itself. The answer, as is often the case, appears to be a bit of both.

Cloud Backlog Provides the Foundation

The catalyst for the rebound came on July 23, when SAP reported second-quarter results that exceeded expectations. The current cloud backlog — booked but not yet invoiced cloud business — climbed 27 percent to €22.9 billion, or 26 percent in currency-adjusted terms. Overall cloud revenue advanced 22 percent, while the cloud ERP suite grew an even more impressive 27 percent on a currency-neutral basis. Earnings per share jumped to €1.89, up from €1.45 in the same quarter a year earlier.

That operational strength has been supplemented by two strategic acquisitions completed in quick succession. SAP closed the purchase of Dremio in early July, followed by Prior Labs, a pioneer in so-called tabular foundation models, in mid-July. The company plans to invest more than €1 billion over the next four years to build its new AI lab into a leading frontier research facility for structured data.

The deals, however, come with a near-term cost. SAP adjusted its 2026 operating profit outlook to account for a dilution effect from the acquisitions, which the company estimates at more than €100 million. The integration will temporarily weigh on margins even as it positions the company more aggressively in artificial intelligence.

A Regulatory Overhang Lifted

Adding to the positive news flow, the European Commission in early July accepted SAP's commitments to address competition concerns regarding support services for on-premises ERP software. The proceeding, opened in September 2025, concluded without any fine — though SAP must adhere to the now-legally binding commitments worldwide for ten years. For investors, the resolution removes a risk factor that had been weighing on the stock, and it did so without direct financial penalty.

The Technical Picture Tells a Different Story

The rally has been substantial — the stock gained 28.14 percent over a 30-day period, closing Monday at €179.86. Yet even with that run, the shares remain in negative territory for the year, meaning the recent advance has only partially offset earlier losses.

That pace of appreciation has pushed the 14-day Relative Strength Index to 75.9, well above the 70 threshold that traditionally signals an overbought condition. The secondary source puts the RSI at 75.4, a marginal difference in timing but the same essential message: the stock is technically stretched, and profit-taking could occur at any moment.

Analyst Divergence Reaches a Wide Spread

The buy-side and sell-side communities are clearly wrestling with how to weigh these competing forces. On Tuesday, Erste Group Bank raised its earnings estimate for the current fiscal year and reaffirmed its "Moderate Buy" rating with an average price target of $264.83. The Austrian bank now projects earnings per share of $8.19 for 2026, up from its previous $8.10 estimate and slightly above the market consensus of $8.12. For 2027, the bank is already modeling $9.61 per share.

That optimism, however, is far from universal. Goldman Sachs initiated coverage the same day with a buy rating but a price target of €215 — a far more conservative figure. At the opposite end of the spectrum, DZ Bank issued a sell recommendation with a price target slashed to €120. Barclays, meanwhile, lowered its target from €255 to €220 in late July, citing short-term cost uncertainties, while maintaining an "Overweight" stance.

The wide dispersion in price targets illustrates just how differently the market is weighing the acquisition-related costs against the robust cloud growth trajectory.

Buybacks Add a Structural Tailwind

Complicating the technical picture is the company's ongoing capital return program. According to an interim report published Tuesday, SAP repurchased approximately 2.9 million of its own shares on the Xetra exchange during the first week of August. The average daily price was €169.72, with an aggregate volume of nearly €488 million.

The buyback reduces the number of outstanding shares, which structurally supports earnings per share — the very metric that Erste Group Bank just revised upward. It also signals that management sees value in the stock at current levels, providing a counterweight to the technical overbought signal.

Adding a personal note to that conviction, CFO Dominik Asam purchased 6,000 SAP shares in late January at an average price of €169.18, an investment exceeding €1 million.

What Comes Next

The next concrete test for the stock arrives on October 21, when SAP reports third-quarter results. Until then, the market will continue to weigh the bullish signals — strong cloud metrics, a resolved regulatory issue, ongoing buybacks, and upward earnings revisions — against the bearish ones: an overbought technical condition and the margin drag from the AI acquisitions.

For short-term traders, the RSI reading is a clear warning that the easy gains may already be banked. For longer-term investors, the combination of a growing cloud backlog, a tightening share count, and analyst estimates that still trail the company's own trajectory suggests the fundamental case remains intact — even if the stock needs to catch its breath first.