SAP's Split Verdict: Two Analysts, One 175-Euro Gap, and a Cloud Story That Has to Hold

Ahead of SAP's third-quarter report, due after the U.S. close on October 21, the analyst community is sending two very different signals about the same set of numbers. TD Cowen raised its price target on the software maker from 205 to 250 U.S. dollars on Thursday, keeping a buy rating intact. JPMorgan, by contrast, reaffirmed its neutral stance with a target of 175 euros — a level that sits below the stock's current price of 200.45 euros.

That divergence is not a matter of fine-tuning within a shared view. It reflects how differently the same growth outlook can be read. The shares added 2.7% on the day, a move that fits the brighter mood JPMorgan itself acknowledges heading into the print. But a friendlier tape does not automatically mean a more attractive risk-reward setup, and that is precisely where the two houses part ways.

The Cloud Backlog Is the Number That Matters

At the close of the second quarter of 2026, SAP's short-term expected cloud backlog stood at 22.9 billion euros, a 26% increase in constant-currency terms. That figure, alongside cloud revenue, anchors the entire bull case. SAP is expanding briskly in this segment while simultaneously scaling its AI platform, which means valuation now hinges not just on the promise of additional applications but on the underlying business momentum.

For the third quarter of 2026, the analyst consensus points to cloud revenue growth of 24%. Expectations for the cloud backlog sit at an increase of 24% to 25%. A modest deceleration would not come as a shock — management had already flagged somewhat slower backlog growth compared with the prior year. What matters for investors is measuring the actual result against those expectations rather than against the headline alone.

TD Cowen sees encouraging signs. Market and partner checks, the analysts say, point to a second consecutive quarter of above-average growth in cloud migration. That is a positive indicator, though not the same thing as a reported quarterly result. If the pace holds, the target hike gains an operational foundation. If it cools, the optimistic thesis takes a direct hit.

Earnings Power Meets Acquisition Costs

The prior quarter offers a baseline: earnings per share came in at 1.89 euros in the second quarter of 2026, up from 1.46 euros a year earlier. Solid as that is, it does not substitute for fresh evidence on cloud dynamics.

Against that base, media reports suggest the acquisitions of Dremio and Prior Labs will weigh on the 2026 earnings outlook by roughly 100 million euros. SAP's guidance for adjusted operating profit stands at 11.8 to 12.2 billion euros at constant currencies. The company has also confirmed its revenue forecast. Even with robust top-line growth, then, the question is whether the expansion of the business keeps pace with the expected earnings trajectory — strong revenue would not automatically offset the drag.

There is a legal wrinkle as well. SAP lost a patent dispute against Celonis before the Munich Regional Court I, concerning Signavio Process Intelligence. The ruling is not yet final but is provisionally enforceable. Celonis can press the German usage ban by posting security totaling 900,000 euros, and intends to do so. SAP plans to appeal, is challenging the patent's validity, and aims to limit customer impact through a technical workaround. Neither a definitive resolution nor a clean bill of health has been reached.

Product Momentum on a Parallel Track

The bullish scenario starts with confirmation of the demand TD Cowen has observed. The analysts see ERP modernization and AI investment as potential additional growth drivers. Layer those impulses on top of continued strong cloud migration, and SAP could back the improved market mood with hard numbers.

Product announcements add color. SAP intends to make Joule agents and related tools generally available in October. The company also agreed on October 6 to acquire TechWolf, whose data model is slated to become the core of SuccessFactors; the deal is expected to close in the fourth quarter of 2026, subject to regulatory approval. In the best case, cloud migration, modernization, and the AI build-out reinforce one another. Availability alone, however, would not prove additional revenue — the bull case is most convincing when SAP demonstrates sustained business momentum rather than describing product progress.

What the October Print Has to Prove

JPMorgan analyst Toby Ogg frames the central question plainly: after the recovery, are investors adequately protected against the risks for the rest of 2026 and into 2027? A better mood, in his reading, is not the same as a more favorable balance of opportunity and risk. Morningstar lands far more generously, awarding four stars and a fair value of 265 euros per share — above the market price, in contrast to JPMorgan's target below it.

So long as cloud migration holds its high pace and the earnings outlook convinces, TD Cowen's optimism remains defensible, and the planned AI expansions could carry more weight as a growth story. Should cloud momentum falter, the most important operational pillar of the elevated expectations would weaken. Add acquisition-related earnings pressure or tangible fallout from the patent ruling, and JPMorgan's caution looks better supported.

When the third-quarter figures land on October 21, the combination of cloud growth and guidance will be the real test. A mere restatement of AI ambitions would carry less weight than proof that the operational trajectory is keeping up with the confidence the stock has already priced in.