SAP SE ADS

for standing by. Welcome and thank you for joining the SAP Q1 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 touch-tone 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 first quarter 2026 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 2025. 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. Before I begin, I would like to highlight our upcoming financial analyst conference at Sapphire taking place in Orlando next month. We look forward to seeing you there. For those unable to attend in person, I would like to invite you to join our webcast. And with that, over to you, Christian.

Thank you, Alexandra, and a warm welcome to everyone joining the call. I'm happy to say that we delivered a strong start to the year. Our Q1 results demonstrate the ongoing momentum across our entire portfolio and the continued success of our strategy. We achieved these results against a shifting macroeconomic environment. And while our business is very resilient, we are not completely immune to external dynamics. Uncertainty remains high, just as it does for every company. Still, we keep on delivering quarter by quarter. And we are also working on larger announcements for Sapphire, which will set us up to deliver high-value business AI at scale. We look forward to sharing more details with you in Orlando. Let's begin by looking at our Q1 performance. Our current cloud backlog increased 25% to €21.9 billion. Cloud revenue grew 27%, almost crossing the €6 billion mark. The strong performance was driven by a 30% acceleration in our cloud ERP suite revenue, bringing total revenue to 9.6 billion euros for the quarter. This was a strong increase of plus 12%. Order entry from our public cloud solutions accelerated sharply in Q1, continuing the momentum from Q4. Public cloud order entry accounted for over 70% of our quarterly volume. And with that, we keep on gaining market share, especially versus best-of-breed software vendors. Gartner Research just announced that SAP grew 15 percentage points faster versus the global enterprise applications cloud market in 2025. Our strong top-line performance translated directly into our bottom line with an operating margin of 30%, up 2.9 percentage points. As a result, our operating profit in Q1 increased by 24% to 2.9 billion euros. Finally, it's great to see that our growing partner ecosystem performed exceptionally well. Our indirect channel order entry grew significantly faster than our direct channel, accounting for almost 30% of our total order entry. Now, let me turn to the broader macro environment. Geopolitical tensions, mainly the conflict in the Middle East, have increased. The war is already having an economic impact in the region and on many energy-intensive industries. SEP is, of course, not completely immune against these disruptions and the economic uncertainty makes it difficult to predict the impact on our total year results. But we have seen many, many times in the past that customers are turning towards SEP in moments like these to invest into the resilience of their business. Our strong portfolio, together with our own resilient business model, provides a great foundation for SAP in uncertain times. We see this reflected in a very healthy pipeline coverage for 2026. Let's move on to some great customer wins in Q1. Leading companies from various industries selected rise with SAP. They included ConocoPhillips in energy, Thales in defense, Air Liquide in industrial gases, and Bristol-Myers Grip in biotech. Moreover, PayPal, as well as the European division of automaker Hyundai and Swiss automotive supplier Aptiv embarked on the right journey. Our software and cloud offerings also continue to gain traction with an important win at defense company deal. Among the net new customers selecting SAP CRO are the superfood brand Oakberry and Adesso, a leading IT service provider. On the AI and data side, we want Red Bull as well as Carl Zeiss, a global leader in optics and semiconductor manufacturing technology. In addition, a leader in building materials, German food company Hochland and Swedish manufacturer SKF selected SAP Business Data Cloud. We also saw many successful goal lives. Samsung Electro Mechanics completed the S4HANA transformation as part of their RISE journey. Alibaba Cloud and Fonterra, a New Zealand-based agribusiness, both completed their transformation journeys with RISE. We are also proud to have supported ExxonMobil with a smooth deployment of their workforce ecosystem project. This go-live on SAP success factors now supports more than 60,000 users globally. All of these customer wins demonstrate the confidence in our portfolio. This brings me to the core of our strategy, business AI. There is no doubt that AI will redefine how companies will run in the future. Here are some examples showing how SAP Business AI is already delivering significant value to our customers. At Daimler Trucks North America, SAP Business AI helped transform how the company wins contracts with lead customers. Bid win rates jumped from 10% to more than 40%, delivering a 70 million financial impact within 12 months. Queensland's Department of Transport and Main Roads uses SAP Business AI to predict road surface issues across 33,000 kilometers. Engineers can now run statewide investment optimization in a single day instead of a week. Next to the accelerated speed, this predictive AI use case also generates millions of savings. At German manufacturer Hermann, an AI assistant analyzes complex construction tenders in hours instead of weeks, reducing manual effort by up to 70%. At automotive supplier, Martua Fompac, the invoicing process was accelerated by more than 9x, and product iteration time is now 30% faster. We also see how our AI supports faster and more cost-efficient ERP migrations. For example, our partner KPMG uses Joule for Consultants to accelerate ERP migrations. Project sprints are now completed up to 20% faster. EY uses SAP Generative AI Hub to accelerate how it delivers SAP transformation projects. AI agents automate key phases from requirements through testing, reducing project delivery timelines by up to 30%. Bosch Digital equipped 1,500 developers with our AI, including SAP Joule for developers for their ERP migration. As a result, developer productivity increased by 20%, with unit test creation now 15% to 20% faster. All of these AI use cases deliver significant customer value today. At the same time, let's be honest, large scale adoption of enterprise AI is still in its early stages. Also, we at SAP are learning our lessons every day with our customers about what it truly takes to make business AI work reliably, which is key when you want the world's most mission critical and complex business processes. Agents often don't have yet the full understanding of business data and processes to deliver highly accurate outcomes. This is needed to deploy at scale and with high accuracy agentic AI use cases in the most mission-critical parts of our customers' business. But we are learning fast, and we are very confident that SAP has, compared to many other software companies, the right assets to win. very deep domain know-how about business processes and data, as well as enterprise-grade governance and security. SAP's ERP, developed over 50 years, can also be seen as the institutional brain of every company where data and process domain know-how is getting stored. The launch of SAP Business Data Cloud last year was another important step to enable our customers to further expand the SAP Semantical Data module to non-SAP data. BDC allows our customers to build an end-to-end data platform, which is key for high-value AI. At Sapphire, we plan to announce some fundamental changes to our portfolio to infuse this deep domain know-how into SAP's AI agents, and we will govern the agendic AI layer for our customers. This foundational change will enable SAP AI agents at scale to deliver highly accurate results to take actions across end-to-end processes in a secure manner. So let me address as well a question many of you have in mind. How will the AI transformation impact the financials of our company? First, SAP solutions as the institutional memory of every company will not disappear. On the contrary, we expect to continue to gain market share with our best of suite offering because now more than ever, a harmonized data and process layer is key to harnessing the power of AI. With the infusion of AI across our products and migration tools, you will see an increasing share of consumption-related cloud revenue in our P&L. But this shift will happen gradually over the next years with the expansion of business AI in our customer base. The good news is that in line with our system of records, the related subscription revenue will not disappear. Also, it is important to highlight that less than 40% of our 2025 cloud revenue was tied to named users. The remaining subscription cloud revenue is priced via non seed based metrics like revenues, memory used and other value related metrics. Let me emphasize once again that the ramp of consumption-based cloud revenue will be a gradual evolution and by no means a disruption comparable with the transition from on-prem to the cloud. At our financial analyst conference in Orlando, we are going to show you how our AI transformation will expand SAP's addressable market, as well as how both subscription and consumption-related cloud revenue will further drive SAP's growth ambition. Let's now look at how AI influences the way SAP operates itself. Our internal AI transformation starts with our people and their skills. We are executing comprehensive upskilling programs across the entire organization, so every team can confidently apply AI in their day-to-day work. Our external hiring is highly targeted, focusing on recruiting top experts in data and AI. At the same time, AI will help us to run SAP as a company more autonomously in the future. We act as our customer zero, using our own AI across engineering, support, services, and go-to-market, with a direct impact on our top and bottom line financials. Let me share with you what we have already achieved with some great examples. In our engineering teams, we are using AI to work more efficiently. With tools for up-up development and by third-party tools like Lord Code and GitHub Copilot, we are increasing developer productivity already by over 30%. With AI assistance, our service and support teams are handling significantly higher ticket volumes without a proportional increase in headcount. AI assists 100% of support cases and 20% of our tickets are even resolved by AI, fully autonomous. Thanks to these efforts, we observed 12% higher productivity in our support function. At SAP, we have more than 80,000 colleagues in services, and our consultants save with our AI one day per week by much more efficient system configuration and custom code analysis. This leads as well to faster project delivery and a huge productivity increase. For our go-to-market teams, AI improved our demand generation activities by personalizing and automating outbound campaigns tailored to customer situation. It saved over 83,000 hours and directly influenced the pipeline with additional 50 million euros of value. Even better, it helps us to target the right customers, identifying real pain points early and replacing guesswork with focused engagement up to six times more effectively. As part of our internal transformation, we have communicated a clear goal to achieve a run rate of around 2 billion euros in efficiencies by end of 2028. And we will share further details at our upcoming financial analyst conference. Let me now summarize. We delivered a strong Q1 in a challenging and uncertain business environment. Whenever tensions and crises occur, our software becomes more essential, not optional. This makes us confident for the remaining year. Finally, we are going to make significant progress with business AI in 2026. You will see this come to life at Sapphire. With that, I hand over to you, Dominic.