SAP's Job-Cutting Plan and Profit Boost

Shares of SAP saw a significant jump of as much as 8% on Wednesday following the announcement of the German software giant's plan to cut jobs and improve its profit outlook.

Restructuring and Job Cuts

SAP revealed that it will reduce its workforce by 8,000 jobs this year. The majority of these job cuts will come from voluntary leave programs and internal re-skilling initiatives. However, despite the reduction, the company's headcount is expected to remain at similar levels to its current 107,602 employees until 2023 due to reinvestments in strategic growth areas. The restructuring program is estimated to cost approximately €2 billion ($2.2 billion), with only a "minor" cost benefit.

Impressive Q4 Earnings

SAP reported a remarkable increase in its fourth-quarter earnings from continuing operations, which rose by 94% to reach €1.17 billion. Meanwhile, the company's revenue also experienced a 5% growth to reach €8.47 billion. Analysts had anticipated lower earnings of €1.37 billion on revenue of €8.33 billion.

Strong Cloud Backlog

SAP's cloud backlog soared by an impressive 25% to €13.7 billion, a fact that analysts at UBS found noteworthy.

Focus on 2025

While SAP's 2024 outlook garnered attention, it was the company's 2025 view that truly stood out. Although SAP adjusted its operating profit outlook to account for €2 billion of share-based compensation expenses, it also increased its profit target by €500 million due to expected efficiency gains resulting from the transformation program. Additionally, the company raised its free cash flow guidance by €500 million.

Positive Market Performance

SAP stock has already experienced a substantial increase of 15% since the start of the new year and has risen by an impressive 51% over the past 52 weeks.