SAP Still #1 in Apps Growth, but Big Backlog Slowdown

 


Welcome to the Cloud Wars Minute — your daily cloud news and
commentary show. Each episode provides insights and perspectives
around the “reimagination machine” that is the cloud.


In today’s Cloud Wars Minute, I take a closer look at SAP’s Q2
cloud performance—24% revenue growth and a 22% rise in current
cloud backlog—slower than past quarters, but still dramatically
outpacing rivals like


 


Highlights


00:13 — One of the leaders in the Cloud Wars Top
10, SAP, has been the fastest-growing enterprise apps company for
several straight quarters, far outperforming all of its
competitors, which include Oracle, Workday, Salesforce, and
Microsoft Dynamics 365. And they reported recently—SAP did—a very
strong Q2. But there were a couple wrinkles in there.


01:02 — The cloud revenue was up 24% to $6
billion. But in Q1, the growth rate was 25%, so a slight dip in
the growth rate in Q2. Current cloud backlog in Q2 was 22%; that
22% is well down from Q1’s 28%. It expected the backlog growth to
moderate through the rest of the year. But this is a pretty big
drop. It saw a re-emergence of uncertainty in the market in the
second quarter.


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02:08 — He noted in the U.S., in the public
sector, the DOGE impact has slowed things down a little. On the
flip side, Klein said, Now, we’ve got some mega deals that are
out there. He said, I don’t think they’re going to
disappear, but they have been postponed . . . There’s a little
more rigor in getting approvals for those. But he said, I think
that will come through.


03:20 — I would also say that at the size that
SAP is at now, it’s a $24 billion run rate,r 24% growth is quite
good. And this current backlog growth of 22% in itself is also
very strong. But a couple of quarters ago, its backlog grew 32%,
then 25%, now 22%. So it’s fair to say, is a trend.


04:10 — Overall, it is an interesting time now
for buyers, I think more broadly, since some of this uncertainty
that Klein referred to around tariffs—I think a lot of that
uncertainty is going away. We just heard this announcement of the
U.S. and Japan in a $550 billion deal. I think this is going to
alleviate some of the concern that SAP customers expressed and
that Klein referred to.


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