New Delhi, India, October 23, 2025– SAP, the German software titan, reported third-quarter financial results on Wednesday that disappointed investors by missing revenue estimates, causing its shares to dip 3% in after-hours trading on U.S. markets. The report highlights the growing pains SAP is experiencing as it transitions its business model from traditional software licensing to cloud subscription services.
For the quarter ending September 30, SAP posted revenues of €9.08 billion ($10.59 billion), representing a solid 7% increase from the same period a year ago. However, the figure came in below analyst expectations of €9.17 billion, according to data from LSEG IBES, which weighed on investor sentiment.
The company’s cloud segment, which remains the centerpiece of SAP’s growth ambitions, expanded 22% year-over-year during the quarter. This marks the slowest rate of cloud growth since late 2023, a trend that has sparked some concern about whether SAP can sustain its cloud momentum in the face of growing competition and economic uncertainties.
SAP has been actively shifting away from its legacy business model of selling perpetual software licenses to a subscription-based approach, emphasizing cloud offerings that provide recurring revenue streams and greater predictability. The cloud push has been critical for SAP’s strategy to compete with other tech giants in the rapidly evolving enterprise software market.
Despite the top-line miss, SAP’s profitability remained a bright spot. Operating profit on a non-IFRS basis increased 14% to €2.57 billion, edging past analyst expectations of €2.55 billion. The company also reported a 5% increase in free cash flow, reaching €1.27 billion, indicating strong cash generation despite the investments required to support cloud expansion.
SAP’s Chief Financial Officer, Dominik Asam, addressed the challenges facing the company but struck an optimistic tone regarding the future. “Although the economic environment remains uncertain, our focus on cloud transformation and operational efficiency continues to drive progress,” he said. “We are confident in our ability to deliver sustainable growth and value for shareholders.”
In response to the quarter’s performance, SAP revised its outlook for full-year 2025. The firm now expects cloud revenue to be at the lower end of its previous guidance range, between €21.6 billion and €21.9 billion. Nevertheless, SAP maintained a more optimistic view on profitability, forecasting operating profit toward the high end of its projected range—between €10.3 billion and €10.6 billion. The free cash flow forecast was also raised slightly to between €8 billion and €8.2 billion.
The results underscore broader industry dynamics, where enterprise software providers must navigate a complex landscape marked by slowing growth rates, shifting customer demands, and intensifying competition from both legacy players and nimble cloud-native startups.
Industry analysts note that SAP’s experience is emblematic of the challenges faced by many traditional software companies in their cloud transition journeys. “Cloud growth is critical for SAP, but the deceleration this quarter highlights the difficult balance between maintaining legacy revenues and scaling cloud subscriptions,” said Lena Fischer, a technology analyst at Global Market Insights.
The pressure is on SAP to accelerate cloud adoption and innovation while managing costs effectively to sustain profitability. Investors will be closely watching how SAP executes on these fronts in the coming quarters.
Reuters journalists Supantha Mukherjee in Stockholm and Preetika Parashuraman in Bengaluru reported the results, with editorial contributions from Anil D’Silva.
Looking forward, SAP’s performance will be a key barometer for the health of the enterprise software sector amid ongoing economic uncertainty and rapid technological change. The company’s ability to capitalize on its cloud investments, enhance customer engagement, and maintain competitive differentiation will be critical to regaining investor confidence.
SAP’s Q3 earnings reveal the complexities of reinventing a long-established business amid a rapidly shifting technology landscape. As the company adapts to new market realities, all eyes will be on its next quarterly update for signs of renewed growth and strategic execution.
