SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP Q3 2025 Financial Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. I would now like to turn the conference over to Alexandra Steiger, Global Head of Investor Relations. Please go ahead.

Good evening, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein and CFO Dominic Assam. On this call, we will discuss SAP's third quarter 25 results. You can find the deck supplementing this call, as well as our quarterly statement on our Investor Relations website. During this call, we will make forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risk and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risk and uncertainties may be found in our filings with the SEC, including but not limited to the risk factor section of our annual report on Form 20F for 2024. Unless otherwise stated, all numbers on this call are non-IFRS, and growth rates and percentage point changes are non-IFRS, year-on-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. And with that, over to you, Christian.

Thank you, Alexandra, and a warm welcome to everyone on the line. We are already entering the final stretch of 2025, and I'm very happy to report SAP had a great Q3 and keeps delivering. Our cloud revenue growth and current cloud backlog performance have been strong. Business in the US public sector has started to pick up again. Overall, we are gaining market share as our customers are adopting solutions across the entire business suite, including business data cloud and AI at an accelerated pace. A recent IDC study shows that we grew 10 percentage points faster than the rest of the market in 2024. Looking ahead, the pipeline for Q4 and 2026 looks great as we unlocked a few key industries where business had stalled in half year one. As a result, we can confirm with high confidence our ambition to accelerate total revenue growth through 2027. And I'm very excited about that AI is becoming the key enabler of our growth. So first, let's have a closer look at the Grotto's financial results and our customer rates. In Q3, cloud revenue rose 27%. Cloud revenue has consistently grown more than 25% for five quarters in a row. And it was coming with a very solid cloud cost margin of about 75% in Q3. Total revenue growth came in, again, double digits at 11%. Current cloud backlog increased 27%, a strong performance considering that the WalkMe acquisition is now in the base. And once again, our bottom line performance was excellent. Free cash flow increased by 5%, while operating profit came in 19% higher, despite negative impacts of around 200 million, which Dominik will explain happily in a moment. The customer stories from Q3 add color to the picture. Alphabet, Ericsson, Lufthansa, the Magnum Ice Cream Company, Stihl, Syngenta Crop Protection, Tapestry. These companies are known around the world. They are industry leaders with iconic brands, and they all opted for the wise journey in Q3. But their business transformation journey doesn't stop at Cloud ERP. Ericsson, Lufthansa, Magnum, Syngenta, Steele, and Tapestry also adopted SAP Business Data Cloud and Business AI and expanded the SAP footprint with our Business Suite LOB solutions. Alphabet, for its part, selected BDC and we deepened our relationship with plans to further support our Business AI roadmap with Google Gemini. The picture is the same wherever you look. In addition to their new WISE journeys in Q3, we won JISC for CX, Jack Wolfskin for Supply Chain, Takeda for Ariba and Supply Chain, and all three customers also signed up for Business Data Cloud. Panasonic, for their part, signed up for WISE in 2022, and now in Q3, selected our complete human capital management portfolio. As you already know from the analyst conference at Sapphire, we see the potential to convert one euro of on-premise revenue into five and more euros of cloud revenue by transforming the end-to-end value chain of our customers through Rise with SAP. About half of that potential is upselling and cross-selling. The conclusion from these stories is very clear. Our strategy works. Land and expand works. And the AI-infused integrated business suite is the way forward for customers as well as for SAP. As for the growth journey, our strategy is playing out very nicely as well. Among those that embarked on their growth journeys were the AI companies Perplexity, Connecta, and Kodiak AI. It is great to see that many fast-growing tech companies built their unique growth stories with SAP's Business Suite. Next to the Q3 wins, also Bending Spoons, Top and Soleil, for example. They all embrace our growth journey because of the following reasons. They will be able to go live in a matter of weeks. They can scale our platform from small to big without any effort in over 60 countries, growing towards the IPO and beyond. And they will never have to think about upgrades again and can instead invest their IT money in continuous innovation like AI. Finally, let's have a look at our software and cloud offering. I already mentioned that business in the US public sector is picking up again. SAP NS2 was awarded a major framework contract with the US government. And we are very happy that we have already won first orders under this framework in Q3. For example, the United States Army signed a contract enabling the migration from on-premise systems to the cloud. In the US and worldwide, more and more customers are approaching us with their software needs. While some companies pursue high growth in the infrastructure business, we are sticking to our strategy. SAP will not build gigafactories. Instead, we provide software and cloud solutions together with strong cloud infrastructure partners. This allows us to offer customers the best of the best across the technology stack. And it allows us to reach great global coverage at a healthy margin without any long-term bets. Together with AWS, we recently launched software offerings for India and Europe. And with OpenAI, we launched a partnership providing German public sector customers software and access to one of the world's leading LLM. On top of that, we just introduced a game-changing new software and cloud offering for highly regulated customers and governments. We can now offer our entire cloud portfolio in a customer data center at a highly competitive cost. The offering delivers the highest levels of data, operational, technical, and legal sovereignty, while customers have access to all SAP Cloud solutions, BTP, BDC, and AI. We see tremendous customer interest in this software and cloud on-site offering and have built already strong pipeline for 2025 and 2026 within a few weeks. With regard to AI, our strategy is playing out as well. For high value AI cases in B2B, a large language model alone is not sufficient. To make it simple, no apps, no data, no AI. Only the combination of LLMs with business process and contextual data results results in high value AI use cases. That is our strategy. That is where SAP is better than anyone else. And that is where we innovate and invest. We are proud of releasing more and more AI agents. But it is not the number that counts. It is about how we automate and infuse intelligence across end-to-end business processes. It is about orchestrating AI agents across the company's value chain, something only SAP can do. That's why we are introducing AI assistance in Shul, orchestrating our agents to support specific personas and functions in a company. Imagine, for example, an AI assistant for supply chain management supporting a planner to reroute goods, optimize inventories, or connect new suppliers seamlessly. Think of these assistants as team leads who bring just the right technical agents into the conversation from a pool of hundreds. For example, bringing in a maintenance planner agent as part of the production planning process and supporting the planner to reduce downtimes of important assets significantly, increasing the productivity of the planner by up to 40%. We are currently working with customers across all industries and functions to co-develop and refine these assistance to maximize the business value. We are also releasing the tool everywhere and everything functionality to customers in Q4. Thanks to our partnership with Perplexity, our AI co-pilot can now work with both SAP and non-SAP data, and it can provide high quality answers to very complex business questions. Finally, our latest research publication on SAP's foundation module for tabular data will be a spotlight paper at one of the world's top AI research conferences this year. We are at the cutting edge of research and turning now these insights into tangible benefits for our customers. In Q4, we are going to sign wise deals initially planned in 2026 because customers want to start now using SAP Business AI. And even more important for us at SAP, AI adoption is going up significantly because end users are consuming SAP Business AI at a higher frequency and across a broader scope. Some examples, Johnson Control saves 3,000 hours annually by automating routine IT system monitoring with our IT agent. Bosch saves 2,500 hours per customer service center per year with our services agent. JK Cement from India has cut the time for purchase related processes by 50% with our sourcing agent. But we build use cases not just for the horizontal layer. Super happy to report that we are going in the meantime deep into the industry verticals as well. To give you two examples. Watsala, a manufacturing company, is infusing SAP Business AI in their mission-critical spare part quotation process. This results in a significantly higher process accuracy and a much better customer and supplier experience. And with CHS, an agriculture company, we are enabling traders to create commodity contracts in natural language with SAP Joule, with estimated efficiency gains in the tens of thousands of dollars per trader, as well as improved data integrity and accuracy. Looking at the data layer and our business data cloud offering, we are also pushing ahead. For example, with the hundreds of data products released to date and new capabilities for intelligent apps such as people intelligence and revenue intelligence, We are also strengthening our position in data with our new offering, SAP Business Data Cloud Connect, a zero-copy service to connect BDC with partner data platforms such as Databricks and also Google BigQuery. Customers receive live and secure access to Google's AI ecosystem and Gemini modules, among many other things. More exciting data partnerships will soon follow at our TechEd event in November. Internally at SAP, we are also doubling down on AI adoption. Acting as customer zero for our own solutions, we boost productivity. Some of the greatest internal levels are in development, go-to-market, customer support, pricing, and process simplification in the corporate functions, for example, in the deal approval process. SAP wants SAP. That is the guiding principle. As for Joule, our AI co-pilot answers thousands of employee questions every day, from simple tasks such as travel bookings to complex quoting support at water end. We believe that simplification and internal AI adoption will enable our headcount to grow significantly below revenue. Let me now summarize. SAP is in a very good shape. We closed a great Q3 and are ready for Q4, thanks to a very healthy pipeline. At the same time, we are building a strong position for SAP to be a leader in the AI ways, with apps, data, and AI as the winning formula. As 2025 is coming to a close, we are already looking ahead to the next chapter. Our product strategy and business model are spot on. This gives us resilience across regions and industries. AI will be the key enabler for accelerating double-digit total revenue growth through 2027. Given all that and more, I'm very much looking forward to the future. And with that, I'm now handing it over to Dominik. Dominik.