SAP: The Cloud Is Growing Faster Than the Maintenance Base Melts — For Now

There is an investor weakness that hits well-informed people hardest: the label effect. A company gets a new sign on its door — the "stodgy software house" becomes the "European AI champion" — and suddenly we do the maths differently. Not because the numbers changed, but because the story did. The label feels like information. It is only packaging.

SAP is a textbook case. Over the past two years the group from Walldorf has collected just about every label the market has to hand out: Europe's most valuable company, AI winner, DAX anchor. Then came the first half of 2026, and the share price fell by around €75 — that figure, in exactly those words, appears in SAP's own quarterly statement. So let us do it the other way around: leave the label on the door frame and read the filings SAP has to submit to the U.S. Securities and Exchange Commission instead. The annual report on Form 20-F of February 26, 2026, the quarterly statement of July 28, 2026, and the third-quarter statement of October 21, 2026. What sits there is a tension the market is currently pricing: the new business is growing fast — but the old one, which still carries the margin, is melting, and SAP expects it to melt faster.

Update, October 22, 2026: On the evening of October 21, 2026, SAP reported its third-quarter numbers — more than €10 billion of revenue in a single quarter for the first time, cloud revenue up 26 percent, and cloud revenue guidance moved to the top end of the range. Everything new is in the chapter "Update October 2026" and has been worked into the other chapters, including the question of what became of the tailwind from SAP's own share-price slide.

What SAP actually does — the bookkeeping of many large corporations

SAP SE, based in Walldorf, Germany, sells enterprise software. Put in everyday terms: if a large corporation had a nervous system, SAP would be the spinal cord. Every order, every invoice, every payroll run, every delivery, every booking passes through this software. It is unglamorous, invisible to the corporation's own customers — and practically impossible to replace once it runs. That is where SAP's pricing power comes from.

The core product is SAP S/4HANA, covering finance, procurement, manufacturing, supply chain and asset management. Around it sit SuccessFactors for human resources, Ariba and Concur for procurement and travel expenses, the SAP Customer Experience portfolio, and the SAP Business Technology Platform for development. Today most of it is sold as a subscription in bundles: RISE with SAP for existing customers migrating from their own data centre to the cloud, and SAP GROW for new customers who start in the cloud. On top of that sits the AI layer introduced in 2024: Joule as the conversational interface, plus so-called Joule Agents meant to execute workflows autonomously — SAP says it released 30 of them in 2025 alone.

As of December 31, 2025, SAP employed 111,397 people (110,650 full-time equivalents), of which 37,965 full-time equivalents worked in development — 34 percent of the workforce. Research and development spending reached €6,633 million in 2025, or 18.0 percent of revenue. The group is run by CEO Christian Klein and CFO Dominik Asam.

Why there is no 10-K here — and what sits at the SEC instead

One point up front, because it shapes the evidence base of this analysis. SAP is a German company but a U.S. reporting issuer: through American Depositary Receipts, each representing one SAP ordinary share, the stock also trades on the New York Stock Exchange. So SAP files with the SEC — just not in the format familiar from U.S. companies. Instead of an annual report (10-K) and three quarterly reports (10-Q), there is an annual report on Form 20-F and current reports on Form 6-K, with the quarterly numbers attached as exhibits. Accounting follows IFRS, not U.S. GAAP.

For you as a reader this changes nothing about reliability: a 20-F is signed under penalty of law too, and the litigation disclosures, risk factors and shareholder tables in it are just as verifiable. Every figure in this analysis therefore carries the note "Source: fundamental data & SEC filings (annual report 20-F, quarterly statements 6-K)". In the SEC register SAP appears under the identifier CIK 0001000184, listed with the tickers SAP and SAPGF on the NYSE and OTC. The former name "SAP AG" (until 2014) is on file there as well — the conversion into a European Company (SE) is the reason for today's name.

How the stock landed on our desk

SAP is not a chance find from a screener. It is listed in the DAX and for months was seen by many as the only European stock with a credible AI story. That is exactly why it interests us: the louder the story, the wider the gap a look at the primary filings can expose. And the trigger was concrete — SAP lost significant ground in the first half of 2026 while its business numbers kept growing. When price and numbers diverge, at least one side has priced in something the other has not yet shown.

We have already looked at benchmarks for this: our Oracle analysis, SAP's direct competitor in enterprise software, and our ServiceNow analysis, a pure cloud vendor with no legacy licence base. Both cases pose the same underlying question from two other angles: what is a software subscription worth that nobody cancels?

The numbers over the years — given honest credit

First the genuinely impressive part. SAP has pulled off a transition other software houses have found harder: the shift from one-off licence sales to recurring subscriptions, without falling into a revenue hole along the way. Cloud revenue rose from €13,664 million (2023) through €17,141 million (2024) to €21,023 million (2025) — up 23 percent in the last year. The lion's share comes from the Cloud ERP Suite, that is the core business: €18,119 million, or 86 percent of cloud revenue.

Earnings power made a jump too. Operating profit under IFRS climbed to €10,293 million in 2025, more than doubling against 2024 (€4,665 million). The reason, though, is not an operational miracle but a base effect: 2024 contained €3,144 million of restructuring expenses for a company-wide programme affecting around 10,000 positions; in 2025 the figure was €3 million. Net profit rose to €7,327 million from €3,124 million a year earlier.

Free cash flow — the money left after all investments — came in at €8.24 billion in 2025; for 2026 SAP guides to about €10 billion. And the order book is full: total cloud backlog reached €77 billion at the end of 2025, up 30 percent at constant currencies. Current cloud backlog, the portion expected to convert into revenue within twelve months, stood at €24,144 million on September 30, 2026 — 28 percent above the prior year, 26 percent at constant currencies. SAP confirmed the roughly €10 billion free cash flow target for 2026 on October 21, 2026.

Put simply: the growth story is not made up. It is in the books. Before we get to the part that is also in the books but rarely in the headlines, a look at the latest quarter.

Update October 2026: the first 10-billion-euro quarter — and what is inside it

On October 21, 2026, at 22:05 CEST, SAP published its quarterly statement for the third quarter (July 1 to September 30, 2026). The headlines are strong: revenue rose 13 percent to €10,270 million — more than €10 billion in a single quarter for the first time in the company's history. Cloud revenue grew 26 percent to €6,668 million (up 25 percent at constant currencies), of which €5,924 million came from the Cloud ERP Suite (up 29 percent). Operating profit rose 18 percent under IFRS to €2,930 million and also 18 percent under SAP's own measure (non-IFRS) to €3,030 million; the non-IFRS operating margin widened from 28.3 to 29.5 percent. IFRS earnings per share climbed 14 percent to €1.96, free cash flow 36 percent to €1,718 million.

The other direction sits in the same tables. Software support revenue fell 5 percent to €2,434 million, licence revenue 9 percent to €147 million, and the consulting business (services revenue) 4 percent to €1,021 million. Cloud gross margin slipped from 74.6 to 73.9 percent (IFRS). After nine months SAP stands at €29,703 million of revenue (up 10 percent), €18,911 million of cloud revenue (up 23 percent) and €7,968 million of free cash flow (up 11 percent).

Three things belong in the assessment, and all three are in SAP's own statement. First, cloud growth had help from one-off effects — mainly catch-up revenue from customers that had been in financial difficulty:

"Cloud revenue growth was positively impacted by several quarter-specific effects, mainly a multi-quarter revenue catch-up from customers returning from financial distress."

— SAP SE, Q3 2026 quarterly statement of October 21, 2026, section "Supplementary Information", page 3

On the conference call that evening, CFO Dominik Asam put the effect at about one percentage point of growth. Second, the 18 percent operating profit gain is measured against a weak prior-year quarter: in the third quarter of 2025 a change in case law in a tax dispute and a workforce transformation each weighed on the result by about €0.1 billion. Strip out those roughly €0.2 billion and non-IFRS operating profit grew by roughly 10 percent — solid, but no leap. Third, the year's three acquisitions (Reltio, Dremio, Prior Labs) cost profit in the quarter: they added €49 million of revenue and reduced IFRS operating profit by €59 million.

SAP raised its outlook, but only at the top: cloud revenue and cloud and software revenue for 2026 are now expected at the upper end of the ranges of €25.8–26.2 billion and €36.3–36.8 billion respectively (at constant currencies). Unchanged are non-IFRS operating profit of €11.8–12.2 billion, free cash flow of about €10 billion and the expected slight deceleration in current cloud backlog growth. That growth rate was 26 percent at constant currencies in the third quarter, the same as in the second. The earlier assumption of a near-term de-escalation in the Middle East has disappeared from the outlook; the backlog outlook now rests on the assumption of a stable macroeconomic environment in the fourth quarter.

That fourth quarter is exactly where the CFO built in a brake himself on the call. According to The Motley Fool's transcript, Asam reminded listeners that the final quarter brings around half of annual bookings, and said:

"Given the continued political and macroeconomic uncertainty we face today, this could weigh on Q4 bookings, and as a result, our 2027 trajectory."

— Dominik Asam, CFO of SAP SE, third-quarter 2026 conference call on October 21, 2026 (transcript by The Motley Fool)

Asam also said SAP will deliberately use its consulting business to drive adoption of its AI solutions, which "will likely put more downward pressure on billable hours and services revenue also next year." And because the strong third quarter raises the bar, he said the total revenue acceleration SAP has promised for 2027 becomes more challenging, even though SAP is still planning for it.

Two more figures from the statement: the buyback programme of up to €10 billion had acquired 25,205,983 shares at an average of €164.79 by September 30, 2026, about €4.2 billion. And the workforce kept growing, to 113,076 full-time equivalents on September 30, 2026, from 110,730 a year earlier. Bottom line: the quarter is good, but on a cleaner reading less spectacular than the "up 18 percent" headline suggests — and the company itself calls the fourth quarter the real test.

What the filings say — the uncomfortable truths

Uncomfortable truth no. 1: SAP itself expects support revenue to erode faster

Alongside the cloud, SAP has a second large revenue stream almost nobody talks about: software support. Customers who bought SAP software as a licence years ago and run it on their own servers pay annual maintenance fees for updates, bug fixes and technical support. This business is old, it does not grow, it costs SAP almost nothing in development any more — and that is precisely why it is exceptionally high-margin. In 2025 it brought in €10,525 million, around 29 percent of group revenue.

Those revenues are shrinking. €11,496 million (2023), €11,290 million (2024), €10,525 million (2025) — and another 9 percent lower in the first half of 2026, from €5,403 million to €4,908 million. After nine months the decline stands at 8 percent to €7,342 million (down 6 percent at constant currencies). The reason is logical and uncomfortable at the same time: every customer who moves from their own data centre into SAP's cloud stops paying maintenance fees — and starts paying subscription fees. The cloud success eats part of the installed base. SAP writes this into its July 28, 2026 outlook with remarkable candour — and repeats the sentence word for word in its October 21, 2026 quarterly statement:

"Constant currencies software support revenue decline rate to accelerate in the coming years as a consequence of an acceleration of customers transforming to the cloud."

— SAP SE, Form 6-K filed July 28, 2026, exhibit 99.1 (Q2 2026 quarterly statement), section "Outlook"

Why this is more than a footnote: a euro of support revenue and a euro of cloud revenue are not the same thing. Cloud gross margin in the third quarter of 2026 was 73.9 percent (IFRS) — high, but it carries the running cost of data centres, operations and support. With maintenance those costs largely disappear because the customer runs the software. So when a customer migrates, SAP replaces high-margin installed-base revenue with somewhat lower-margin new revenue — and has to grow just to stand still. That is exactly why group revenue rose 8 percent in 2025 while cloud revenue rose 23 percent.

And the cloud margin is even edging down: it slipped from 74.7 to 74.3 percent in the second quarter of 2026 and from 74.6 to 73.9 percent in the third (both IFRS). On the October 21, 2026 call, CEO Christian Klein cited one-off items, investment and higher hardware prices. The non-IFRS operating margin fell from 28.5 to 27.8 percent in the second quarter and rose from 28.3 to 29.5 percent in the third — against a prior-year quarter with special charges. This is not a collapse. But for the cloud margin it is the opposite direction from what the "high-margin AI group" narrative suggests.

Uncomfortable truth no. 2: a third of the first-half increase was paid for by SAP's own share-price slide — and in the third quarter the wind turned

Now it gets arithmetically interesting — and this is the finding we least expected from this analysis. SAP pays a large share of compensation in stock. Accounting rules require that expense to be remeasured continuously: if the share price rises, the promise gets more expensive and the expense goes up. If the price falls, it gets cheaper — and the expense goes down. SAP explains the effect itself:

"The decrease in share-based payment expenses is mainly due to a reduction in the SAP share price of around €75 in the first half of 2026, as compared to an increase in the first half of 2025 of around €20."

— SAP SE, Form 6-K filed July 28, 2026, exhibit 99.1, section (K) "Share-Based Payment Expenses"

Let us do the maths. Share-based payment expenses fell from €949 million to €753 million in the first half of 2026 — a relief of €196 million. Over the same period, operating profit under SAP's own measure (non-IFRS) rose from €5,024 million to €5,609 million, an increase of €585 million. €196 million out of €585 million is roughly one third of the increase. And this item genuinely sits inside the measure: unlike restructuring or acquisition-related expenses, SAP does not strip share-based payments out of its non-IFRS result.

The quarterly cross-check gives the same picture: in the second quarter of 2026 alone the line fell from €529 million to €468 million (€61 million of relief) while operating profit (non-IFRS) rose by €175 million — again roughly a third. So this is not a rounding artefact of a single quarter.

Put in everyday terms: imagine your employer reports a profit jump, and a third of it comes from the fact that the employee equity it promised has become less valuable. That is accounting-correct and even economically real — less money genuinely flows out. It is simply not an achievement of the business, and it reverses as soon as the share price recovers. For context: in 2024, when SAP's share price rose by more than €95, this line climbed to €2,385 million for the full year; in 2025, with a decline of more than €25, it fell to €1,695 million. Remember: when earnings breathe with a company's own share price, an earnings jump in a weak price year is not proof of operational strength.

The third quarter of 2026 put this to the test. SAP writes in its October 21, 2026 quarterly statement:

"The decrease in share-based payment expenses is mainly related to SAP’s share price reduction of around €25 in the first nine months of 2026, as compared to a reduction of around €10 in the first nine months of 2025."

— SAP SE, Q3 2026 quarterly statement of October 21, 2026, section (K) "Share-Based Payment Expenses", page 21

Minus €75 after six months became minus €25 after nine — arithmetically the stock recovered about €50 during the third quarter. Promptly the quarterly expense rose from €429 million to €474 million; the tailwind became a €45 million headwind. Over nine months a relief of €152 million remains (€1,227 million versus €1,379 million) against a €1,049 million increase in non-IFRS operating profit — only about a seventh. The good news in that: earnings grew in the third quarter despite rising compensation expense. The sober part: some of that growth came, as described above, from a weak prior-year quarter.

Uncomfortable truth no. 3: two-thirds of equity is goodwill from acquisitions

A look at the balance sheet as of September 30, 2026. Total assets stood at €76,336 million, equity attributable to owners of parent at €45,948 million. Of that, €31,216 million is goodwill — a good two-thirds of equity.

What is goodwill? When a group buys another company for more than the individual value of its assets, the difference lands on the balance sheet as goodwill. It is the price paid for brand, customer base, know-how and expectations. Translated: it is not a machine you can sell, it is a promise that the purchase price will eventually pay off. If it does not, it has to be written down — and equity disappears without a single euro moving.

Deduct the remaining intangible assets (€2,796 million) as well, and about €11.9 billion of the €45,948 million in equity remains in tangible form (as of September 30, 2026). A software group is intangible by nature, so this is not an indictment. But it limits the safety cushion: at SAP, balance-sheet substance rests on the assumption that the acquired businesses keep working.

And SAP keeps buying. In 2026 alone three acquisitions closed: Reltio (master data management, closed May 7, 2026, consideration US$1,259 million or €1,076 million), Dremio (data platform, July 6, 2026, preliminary consideration about €515 million) and Prior Labs (AI foundation models for tabular data, July 16, 2026, about €518 million). Goodwill consequently rose from €29,014 million at the end of 2025 to €31,216 million on September 30, 2026; an agreement to acquire TechWolf, provider of an AI-powered platform for so-called work intelligence, has already been signed. Worth noting: because of the dilutive impact of Dremio and Prior Labs, SAP lowered its 2026 operating profit guidance on July 28, 2026 — from €11.9–12.3 billion to €11.8–12.2 billion. In the third quarter the three acquisitions together added €49 million of revenue and cost €59 million of IFRS operating profit — Prior Labs alone, with less than €1 million of revenue, about €24 million.

Uncomfortable truth no. 4: US$480 million to an opponent few had on their radar

The 2025 annual report shows a €387 million provision under litigation that did not exist a year earlier. The reason: database vendor Teradata sued SAP in the United States in 2018, alleging trade-secret misappropriation and U.S. antitrust violations in the development of the SAP HANA database. SAP initially got the claims dismissed in 2021; a 2024 appellate ruling reinstated them, and in October 2025 the U.S. Supreme Court declined to review the matter. A jury trial was scheduled for March to April 2026.

It never happened. At the end of February 2026 the two sides settled:

"SAP paid the full settlement amount of US$480 million (€408 million) in March 2026."

— SAP SE, Form 6-K filed July 28, 2026, exhibit 99.1, section (L) "Teradata Litigation Matter"

For a group with €10 billion of operating profit, €408 million is manageable — but it explains, for instance, why free cash flow rose only 5 percent to €6,250 million in the first half of 2026 while operating profit gained 12 percent. After nine months that gap has closed: up 11 percent to €7,968 million. And this is not the only case of its kind: process-mining vendor Celonis also sued SAP in the United States in March 2025 over alleged antitrust violations, seeking around US$70 million; since June 25, 2026, the case has also included claims that SAP obtained confidential information through a former Celonis employee. According to the half-year report of July 28, 2026, trial was set for September 13, 2027, with a parallel complaint at Germany's Federal Cartel Office. The October 21, 2026 quarterly statement gives no update on either. And the European Commission investigated SAP's rules for maintaining its classic, customer-installed software — the case was closed on July 9, 2026, through a commitment decision, meaning binding undertakings by SAP.

The connection between the three is no coincidence: all of them turn on the same question — how far may a vendor go whose software is effectively indispensable to its customers? The very market position that makes SAP so valuable is what attracts regulators and competitors.

Uncomfortable truth no. 5: the 10,000-position programme did not shrink the workforce

In January 2024 SAP announced a company-wide restructuring programme affecting around 10,000 positions, which cost €3,144 million in 2024. In press coverage that sounded like a job cut of considerable size. A look at the headcount table in the 2025 annual report shows something else: full-time equivalents rose from 109,121 (December 31, 2024) to 110,650 (December 31, 2025). Headcount climbed from 109,973 to 111,397. And the trend continues: on September 30, 2026, SAP reported 113,076 full-time equivalents, 2,346 more than a year earlier, including 805 positions from the 2026 acquisitions.

Nothing else was ever announced — SAP itself writes that the programme ran mainly through voluntary leave and internal re-skilling and served to increase "focus on key strategic growth areas, particularly business AI". So it was a reallocation, not a reduction. For you as an investor the distinction matters: a reallocation does not create a lasting cost relief, at best a different cost structure. Anyone reading the 2025 earnings improvement over 2024 as the fruit of a savings programme is reading too generously — the lion's share is simply the disappearance of a one-off restructuring charge.

The AI question: how much is really in there?

Because the "AI" label carried the share price for months, the question deserves a clean answer: does SAP genuinely sell AI, or is it marketing on top of existing products? The answer is in the annual report — and it is more concrete than one might expect:

"At the same time, we see SAP Business AI gaining momentum, with more than two-thirds of our cloud order entry containing SAP Business AI in the fourth quarter of 2025 and therefore increasing more than 20pp compared to the third quarter of 2025."

— SAP SE, Form 20-F for fiscal 2025, filed February 26, 2026, management report

That is a hard number, and it comes from a document signed under penalty of law. The product side matches: Joule as the conversational layer across all applications, 30 Joule Agents released in 2025, SAP Business Data Cloud as the data layer beneath, plus partnerships with Anthropic, Amazon Web Services, NVIDIA, Palantir, Perplexity and Google Cloud, among others. SAP frames the strategy in the annual report as "AI-First": AI is not bolted onto existing processes, product development itself is being reoriented around it.

Two caveats remain. First, "contains SAP Business AI" says nothing about how much revenue the AI features generate on their own — it only says they were part of the bundle. The filings give no separate revenue figure for Business AI. Second, the fourth-quarter 2025 news was not purely positive: current cloud backlog grew 25 percent at constant currencies, slower than expected — SAP itself calls it a "greater-than-expected deceleration" in the annual report. And for 2026 SAP expects that growth rate to decelerate slightly again — an expectation the October 21, 2026 quarterly statement confirms, even though the rate held steady at 26 percent at constant currencies in the third quarter.

The third-quarter statement does not provide an AI revenue figure either. It provides a list of customers that chose SAP's AI and data solutions in the quarter — among them Decathlon, Fraport and Henkel — and a sentence from CEO Christian Klein: “Our customers are investing in the technology behind it – from the cloud and data foundation to our Business AI.” That is plausible, but it remains a statement, not a number.

Valuation: what the market pays for the label

On October 21, 2026, a few hours before the quarterly numbers, SAP shares closed at €208.65 on Xetra — about €31 above the August 7, 2026 close (€177.96) on which the first version of this analysis was based. With around 1,150 million shares (weighted average for the third quarter of 2026) that corresponds to a market capitalisation of roughly €240 billion. That is about 6.1 times revenue over the past four quarters (€39,387 million) and about 5.2 times equity attributable to owners of parent as of September 30, 2026.

On earnings per share over the past four quarters (IFRS, €7.08: €6.28 for 2025, plus €5.50 for the first nine months of 2026 instead of €4.70 a year earlier), the price-to-earnings ratio is about 29. The dividend of €2.50 per share yields about 1.2 percent at the October 21, 2026 price, a payout of about 40 percent of 2025 earnings per share.

Is that expensive? It depends which growth rate you plug in. Use the cloud growth rate of more than 20 percent and a P/E of 29 looks lower relative to growth. Use group revenue growth of 8 percent (2025) or 10 percent in the first nine months of 2026 — that is, after deducting the shrinking maintenance base — and 29 looks sporty. That is the label effect expressed in numbers: an "AI group" gets valued on the cloud rate, a software house on the group rate. It is the same company.

SAP is giving its own share price a tailwind: in January 2026 a new buyback programme of up to €10 billion started, running to December 31, 2027. Through September 30, 2026, it had repurchased 25,205,983 shares at an average of €164.79, a volume of about €4.2 billion. Financing is solid: in May 2026 SAP placed a €3.5 billion bond in four tranches, rated A1 (stable) by Moody's and A+ (stable) by S&P Global. As of September 30, 2026, cash of €9,364 million stood against financial liabilities of €10,588 million — net debt of about €1.2 billion, small against annual operating profit of more than €10 billion. At the end of June the two lines were still level; in between came further buybacks and the purchase prices for Dremio and Prior Labs.

A word on currency, because in 2026 it explains a noticeable part of the gap between reported and "constant-currency" growth rates: SAP earns a substantial share of its money in U.S. dollars but reports in euros. At September 30, 2026 exchange rates, SAP still expects a full-year 2026 headwind of 1.5 percentage points on cloud revenue and 2.0 percentage points on operating profit; for the fourth quarter alone, currency is expected to help slightly. That is why every release carries a second set of figures "at constant currencies" — this year the friendlier one. From 2027 SAP intends to strip currency effects out of its own non-IFRS measure as well, explicitly to improve comparability with U.S. peers.

Opportunities and risks at a glance

What speaks for SAP:

• The cloud transition is working measurably: cloud revenue of €21,023 million in 2025 (up 23 percent), up another 23 percent to €18,911 million in the first nine months of 2026; more than €10 billion of group revenue in the third quarter for the first time; current cloud backlog of €24,144 million on September 30, 2026 (up 28 percent).
• High switching costs: companies rarely move their accounting off SAP, because the switch is expensive and slow. It shows in a cloud gross margin of 73.9 percent (third quarter of 2026) and a return on equity of about 18 percent.
• The AI share is quantified, not merely asserted: more than two-thirds of fourth-quarter 2025 cloud order entry contained SAP Business AI — over 20 percentage points more than the prior quarter.
• Solid finances: net debt of about €1.2 billion (cash of €9,364 million against financial liabilities of €10,588 million, September 30, 2026), ratings of A1 (Moody's) and A+ (S&P Global), and a buyback programme of up to €10 billion running to the end of 2027, of which about €4.2 billion has been used.
• Free cash flow is growing: €8.24 billion in 2025, €7,968 million after nine months of 2026 (up 11 percent); SAP confirms about €10 billion for the full year — despite the €408 million paid to Teradata in March 2026.

What speaks against it:

• SAP itself expects an accelerating decline in software support revenue (2025: €10,525 million; first nine months of 2026: down 8 percent) and reaffirmed this on October 21, 2026 — the group's highest-margin revenue stream is eroding by design.
• Earnings quality moves with SAP's own share price: in the first half of 2026 roughly a third of the earnings increase came from falling share-based payment expenses; in the third quarter the line rose from €429 million to €474 million as the stock recovered.
• The record quarter had help: about 1 percentage point of cloud growth from catch-up revenue (stated orally by the CFO) and a prior-year quarter with about €0.2 billion of special charges. Without that base effect, non-IFRS operating profit grew by roughly 10 rather than 18 percent.
• Goodwill of €31,216 million equals a good two-thirds of equity (€45,948 million as of September 30, 2026); tangible equity is about €11.9 billion.
• Three antitrust disputes turning on the same underlying question: the Teradata settlement of US$480 million (paid March 2026; Teradata had alleged trade-secret misappropriation as well as antitrust violations), the Celonis suit (trial set for September 13, 2027 according to the half-year report, around US$70 million sought, plus a Federal Cartel Office complaint) and the EU proceedings on maintenance policy, closed on July 9, 2026 through binding commitments.
• The cloud margin is pointing down (third quarter of 2026: 73.9 percent versus 74.6 percent), 2026 operating profit guidance was cut in July because of the Dremio and Prior Labs acquisitions, and the CFO warns that political and macroeconomic uncertainty could weigh on the decisive fourth quarter and thus on the 2027 trajectory.

A human conclusion

Back to the label effect from the opening. The "AI champion" label is not wrong at SAP — the annual report supplies a number you cannot argue away. But the label obscures the fact that two businesses run behind that door at the same time: a young one that grows fast and gets all the attention, and an old one that shrinks slowly and pays the bill. SAP knows this precisely and even writes it into the outlook. Hardly anyone reads it, because it sits in the dullest part of the document.

And then there is the figure that occupied us longest in this analysis: €196 million of the €585 million earnings increase in the first half of 2026 came from SAP's own stock falling. It is honestly disclosed, cleanly explained, accounting-correct — and it is still the opposite of what the headline "operating profit up 12 percent" suggests. Read only the headline and you get a success story. Read to page 21 and you get the reason.

The third quarter taught the same lesson from the other side. The stock recovered, compensation expense rose — and earnings grew anyway. That is the better news. But the new headline "up 18 percent" also tells only half the story: the other half is on page 3, where SAP itself explains that the prior-year quarter was burdened and part of the cloud growth was a catch-up. The label has changed, from fallen angel to record quarter. The work has stayed the same.

In the end that is the only skill that protects you from the label effect: reading a label takes a second, reading a quarterly statement takes twenty minutes. Those twenty minutes are the difference. What you do with that is your decision. And that is exactly as it should be.

Sources

Every primary document used in this analysis — to read for yourself:

• SAP SE — quarterly statement for the third quarter of 2026, October 21, 2026 (most recent periodic report) — not yet filed with the SEC as a Form 6-K when this update closed on October 22, 2026, so taken from SAP's investor relations site
• SAP SE — press release "SAP Announces Q3 2026 Results", October 21, 2026
• The Motley Fool — transcript of the third-quarter 2026 conference call, October 21, 2026 (third-party transcript; only passages consistent with the quarterly statement are quoted)
• SAP SE — Form 6-K filed July 28, 2026, exhibit 99.1: quarterly statement for the second quarter of 2026
• SAP SE — Form 6-K filed July 28, 2026, exhibit 99.2: half-year report 2026 — interim consolidated financial statements, notes and financial calendar
• SAP SE — Form 20-F for fiscal 2025, filed February 26, 2026 — management report, consolidated financial statements, litigation, headcount and shareholder tables
• SAP SE — Form 6-K filed April 28, 2026, exhibit 99.1: quarterly statement for the first quarter of 2026
• SAP SE — Form 6-K filed February 3, 2026, exhibit 99.1: quarterly statement for the fourth quarter and fiscal year 2025 — source for the €77 billion total cloud backlog and the new buyback programme
• SAP SE — Form 6-K filed May 8, 2026, exhibit 99.1: voting results of the Annual General Meeting of May 5, 2026
• SEC EDGAR — filing index for SAP SE (CIK 0001000184)
• Fundamental data (Xetra closing prices of August 7 and October 21, 2026); market capitalisation and valuation metrics calculated by us from share price, share count, revenue, earnings per share and equity in the Q3 2026 and Q4 2025 quarterly statements.

Transparency & disclaimer: this analysis is journalistic commentary on publicly available information. It is not investment advice, not a financial analysis in the regulatory sense and not an invitation to buy or sell securities. Equity investments carry substantial risks up to and including total loss. All information without warranty; the date of each figure is noted in the text, the first version appeared on August 9, 2026, and the overall status of this updated version is October 22, 2026. When this update closed, SAP had not yet announced a date for its fourth-quarter and full-year 2026 statement. Positions held by the operator are disclosed daily; where one exists, it appears as a notice at the top of this deep dive.