Quarterly profits at the German business software giant have declined from a year ago as a result of higher staffing costs. But the company said its “soaring growth” in new cloud bookings had gathered momentum.
Between January and March, subscriptions to the group's cloud computing and support services grew 34 percent compared with the same period in 2016, the Walldorf, Germany-based company announced on Tuesday, powering a 12-percent increase in revenue to 5.3 billion euros ($5.8 billion) in the period.
However, the firm's operating, or underlying profit plunged 17 percent compared with the first quarter of 2016, to 673 million euros. This also drove down net profit, slumping seven percent to 530 million euros - well short of the 608 million euros analysts had predicted.
The bottom line was "primarily impacted by an increase in share-based compensation expenses," which had increased due to the strong development of SAP's share price and an increase in employee participation, the firm said in a statement on Tuesday.
Some 65 percent of SAP's 85,750 employees take part in the business software maker's remuneration scheme.
Cloud business bright
New cloud bookings - the key measure for sales success in the cloud - soared 49 per cent to 215 million euros. SAP chief financial officer Luka Mucic described this as an "outstanding achievement" which validated the company's investment and secured further growth.
S/4 HANA, its flagship suite of business software designed to help companies engage in the ‘digital economy', added 400 customers in the quarter, placing the total at 5,800.
Mucic also said SAP management was confident that the drop in profits would not hold the group back from reaching its objectives for the full year. "We're off to a good start to reach our full year targets and we are confident that we will grow our profitability in 2018 and beyond."
The group aims to reach revenue of between 23.2 and 23.6 billion euros in 2017, up from 22.1 billion euros last year, with profits between 6.8 and seven billion euros compared with 6.6 billion euros in 2016.
uhe/rd (Reuters, AFP, dpa)