SAP Q3 earnings report: Cloud ERP sales soar, licenses drop sharply

SAP announced its third-quarter financial results, showing continued rapid growth in its cloud business. Cloud revenue grew 27% at constant currencies, driving the overall results. Total revenue for the quarter reached EUR 9.08 billion.

The company also updated its full-year 2025 financial outlook. Management now expects non-IFRS operating profit to sit at the upper end of its forecasted range. SAP also raised its free cash flow forecast for the year.

Cloud business fuels performance

The shift to subscription-based services continues to define the company’s financial profile. Current cloud backlog, a measure of future cloud revenue, grew 27% at constant currencies to EUR 18.84 billion.

Cloud revenue for the quarter totalled EUR 5.29 billion. Cloud ERP Suite revenue, which includes core ERP, AI, and related services, saw a 31% increase at constant currencies, totalling EUR 4.59 billion.

Revenue from traditional software licenses fell sharply. Software licenses revenue decreased 43% to EUR 0.16 billion in the quarter. Overall, the share of more predictable revenue, including cloud and support, increased by 2 percentage points to 87%.

Profitability and cash flow

Non-IFRS operating profit for Q3 2025 was EUR 2.57 billion, an increase of 19% at constant currencies. This growth raised the non-IFRS operating margin by 1.8 percentage points to 28.3%.

The results reflect a disciplined focus on cash generation. Operating cash flow grew 7% to EUR 1.50 billion, while free cash flow increased 5% to EUR 1.27 billion. For the first nine months of the year, free cash flow increased by 40% to EUR 7.21 billion.

The company faced specific financial impacts during the quarter. Operating profit was negatively affected by approximately EUR 0.1 billion due to a change in tax case law. An earlier company-wide restructuring program concluded in the first quarter of 2025.