[EARNINGS PREVIEW] SAP to report Q3 results on 21 October; focus on AI adoption and cloud metrics

OVERVIEW: SAP (SAP GY) will report its Q3 results on October 21 at 21:05 BST / 16:05 EDT. The analyst call thereafter will begin at 22:00 BST / 17:00 EDT. Focus for SAP will be on whether it can maintain growth in its cloud business, following on from decent acceleration in the prior quarter. Moreover, as the Co. transitions further into AI, investors will be interested in client adoption and monetisation plans. Attention will also be on how the Co. is navigating the ongoing Middle East situation, with increased risks of customers pushing back their purchases, resulting in delayed bookings. SAP shares have rallied c. 70% since Q2’s metrics, with software stocks generally rebounding from lows related to AI concerns. For reference, the iShares Expanded Tech-Software Sector ETF is up by c. 23% over the past six months. Weightings: Co. holds a 1.40% weighting in the STOXX 600; 10.7% in the DAX; 15.1% in the STOXX 600 Tech sector. Q3’26 EXPECTATIONS (EUR): Revenue: 10.13bln (prev. 9.08bln Y/Y) EPS: 1.87 (prev. 1.59 Y/Y) EBITDA: 3.23bln (prev. 2.88bln Y/Y) Gross Income: 7.39bln (prev. 6.69bln Y/Y) Cloud Revenue Growth: 24-25% (prev. 26% Q/Q) BANK COMMENTARY: Morgan Stanley writes that whilst discounting remains elevated, deal slippage has somewhat improved. It maintained an Overweight rating on the Co., with a PT of EUR 215/shr. UBS expects a moderation in cloud business growth from the prior quarter, suggesting it is “highly likely”. Analysts note that large tech companies are taking longer to implement SAP software features, as they invest in other AI infrastructure. Citi believes that SAP could guide FY cloud revenue growth to the upper end of its 23-25% guidance range. Analyst Recommendations: 7 Strong Buy, 18 Buy, 7 Hold, 1 Strong Sell; avg. PT of EUR 213/shr (vs current EUR 205/shr).