Shares of German software company SAP fell sharply on Thursday after the company reported weaker-than-expected growth in its cloud contract backlog for the fourth quarter, unsettling investors and triggering its steepest one-day decline in more than four years. The stock dropped as much as 16% during the session, marking its largest daily fall since October 2020, when the company suffered a sharp sell-off following disappointing quarterly results. By the close of trading, SAP shares were at their lowest level since mid-2024.
The decline followed the company’s disclosure that its current cloud backlog rose 16% year-on-year in the fourth quarter to 21.1 billion euros, equivalent to about $25.3 billion. While the increase reflected continued demand for SAP’s cloud-based offerings, the growth rate fell short of market expectations. Analysts had previously anticipated an expansion closer to 26%, and the lower figure raised concerns about the pace of SAP’s transition toward cloud-driven revenue.
In its earnings statement, SAP attributed the slower growth partly to the structure of large transformation deals signed during the quarter. The company said that contracts featuring higher cloud revenue contributions in later years, along with termination-for-convenience clauses required under certain regulations, reduced fourth-quarter constant-currency cloud backlog growth by approximately one percentage point. These factors, SAP noted, affected the timing rather than the overall value of future revenue.
Chief Executive Officer Christian Klein sought to reassure investors, stating that the cloud backlog achieved in the final quarter of the year provided a strong base for accelerating revenue growth through 2027. Despite the short-term disappointment, SAP maintained that its long-term strategy remains intact as it continues to shift away from traditional on-premises software licenses toward cloud-based services. However, the company also cautioned that cloud backlog growth is expected to slightly decelerate in 2026, a comment that added to market unease.
Financially, SAP posted modest revenue growth in the fourth quarter, with total revenue rising to 9.7 billion euros from 9.4 billion euros a year earlier. Operating profit increased to 2.6 billion euros from 2.0 billion euros in the same period, reflecting improved efficiency and cost discipline. While these figures demonstrated underlying profitability, they were overshadowed by investor focus on cloud momentum, which has become a key valuation driver for enterprise software firms.
The results come at a time when legacy software providers face heightened scrutiny amid rapid advances in artificial intelligence. Investors have questioned whether AI-driven tools could reduce demand for traditional enterprise software by enabling companies to develop more of their own solutions internally. Addressing these concerns, Chief Financial Officer Dominik Asam said that AI has the potential to transform how software is developed, raising questions about the future size of the market. He emphasized that SAP is working to integrate AI technologies across its research and development portfolio in order to maintain its competitive scale advantages.
Asam added that SAP is focused on becoming a leading adopter of AI, with tens of thousands of developers actively working to embed these technologies into the company’s products. Despite Thursday’s sharp sell-off, SAP continues to position itself as a key player in enterprise cloud and AI-driven software, even as investors weigh near-term growth challenges against longer-term strategic ambitions.
