The world of enterprise AI is dominated by U.S. names from Microsoft to Salesforce, but Europe has a major player that is pushing hard into the space: SAP.
In an exclusive interview with CNBC’s “Europe Early Edition,” SAP CEO Christian Klein said that AI is “the number one reason” why customers are signing deals with the firm.
“After we close Q4, actually, 80, 85% of our revenue for next year is already done. So, [a] good pipeline for Q4 and with that, when we close out the year, our customers, also our investors, can expect there’s also very positive output,” he said.
SAP’s cloud backlog rose 23% in the third quarter to 18.8 billion, the company said in an earnings statement published late on Wednesday.
“I was pretty optimistic last night, and I’m still optimistic as the pipeline looks good,” Klein said. “We actually now have our biggest quarter.”
Revenue rose 7% to 9.08 billion euros ($10.53 billion), slightly below expectations of 9.15 billion euros, according to consensus figures compiled by LSEG. However, it saw gains of 22% in its cloud revenue, with Klein citing increasing AI and data cloud market share as the reason for the revenue jump.
Deutsche Bank said the firm remains a “top pick” in the European tech and global software sector, however it noted that SAP is now guiding toward the lower-end of its forecast for cloud revenue of 21.6 billion euros to 21.9 billions euros this year.
“Against an environment of lengthening deal cycles and pushouts … SAP continues to execute very well, in our view, even if delays in deal closings have led the company to guide to the lower end of its Cloud revenue growth range for FY25,” Deutsche Bank analysts said in a note led by Johannes Schaller.
SAP’s shares were initially 2% higher at the start of the trading session on Thursday, but later pared gains to trade 2.5% lower. The stock is down 3% year-to-date.
The European Union has faced criticism for its legislative approach to AI, with some businesses calling for deregulation in efforts to catch up in the global AI race. Klein said he’s not sure if the bloc is adopting the right strategy compared with the U.S. approach of, “give me your AI, let’s test it, let’s refine it, let’s optimize it over time.”
The chief executive said he is laser-focused on creating value, explaining that it is “100%” what customers are looking for. It echoes the message of other AI firms and investors in Europe, given that the U.S. and China currently dominate the training of large language models, which is the infrastructure needed for AI. However, the general sentiment is that Europe has a chance to be a leader in putting it to use.
The training large language models is now a “commodity,” Klein said, adding that he expects the application of AI will become an increasing priority for businesses and SAP’s bet on this will be reflected in its share price in the future.
“It’s super important that we are not only selling into a hype, but that we see real adoption,” Klein said.
SAP has some exposure to China through partnerships that allow it to work “in China, for China,” due to geopolitical tensions, Klein noted. The country’s speed of AI development, low regulation and talent pool makes it hard to ignore, he said.
