SAP SE ADS

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SAP Q2 and half-year 2026 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 Dominik Asam. On this call, we will discuss SAP's second 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 uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding this 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-in-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 joining this call. Q2 was an outstanding quarter. highlighted by our flagship customer conference, SAFIRE. The event was a huge success. We saw record attendance, generated significant additional pipeline, and received very, very positive feedback on our autonomous enterprise launch. In parallel, our AI transformation is progressing well, both among our customers and our employees, reflected in growing AI consumption and tangible outcomes. This momentum contributed to our strong top-line performance in Q2. Let's look at this in detail. Current cloud backlog grew 26%, an acceleration compared to Q1. And after two quarters where our CCB was lagging behind cloud revenue growth, it was a welcome trend reversal in this important forward-looking indicator. A great result, especially given the volatile environment. AI and SAP Business Data Cloud were embedded as key pillars in more than 90% of our 50 largest deals, giving us strong confidence for the second half of the year. Cloud revenue grew 24% to 6.3 billion euros, backed by a solid execution of on-premise to cloud ERP migrations in our installed base. Total revenue was up 11% to 9.9 billion euros. This comes despite a slight decline in services revenue as we reallocate consultants to build agents and foster AI adoption. Our top-line performance translated into an operating profit of 2.7 billion euros and increase of 9%. Our indirect channel continues to be a strong growth pillar. Q2 growth again significantly outpaced direct channel cloud revenue, reflecting our successful go-to-market transformation over the last two years. As mentioned, a key highlight in Q2 was of course SAP Sapphire and the launch of the autonomous enterprise. It resonated strongly because it gets to the root of why enterprise AI is so hard and what that means for our customers. The reality for many enterprises today is that LLMs don't understand business data, processes, and governance. AI token spend doesn't mirror outcomes. Login to single frontier vendors is a growing concern. And AI sovereignty is becoming more important. At Zapfire, we explained how the combination of the Autonomous Suite and Business AI Platform will solve those challenges. The new Business AI Platform is being delivered this quarter. The Platform has three key pillars. First, the build pillar, where we offer the best experience for pro code and citizen developers to create and extend agents. With Joule Studio, you can choose from a range of leading LLMs, including Entropic, Cohere, Google, Mistral AI, OpenAI, and other open-weight models. Joule Studio is integrated with the second pillar, the context and reason pillar. This pillar provides the agents with the context and the knowledge they need to run business processes autonomously. It starts with our data foundation. SAP Business Data Cloud provides broad data access to the agents. And with our latest acquisition of Tremio and its Apache Iceberg native technology, we are bringing mission-critical SAP and non-SAP data together to become a true enterprise lakehouse. Meaning, SAP and non-SAP data can be analyzed together in real time without moving or copying it first. On top of the data foundation, we are able to build one semantic data layer for SAP and non-SAP data. By joining data products, we are creating semantic data models centered around the customer, supplier, material, and other master data objects of a company. Our acquisition, Relgeo, will govern these master data models end-to-end to ensure high data quality. And then, these semantic models are connected with our ontology layer and knowledge graphs, which we offer for every LOB and industry domain. They are the brain infused into the agents developed with Joule Studio on the new platform. Most importantly, all three layers will be extensible by partners and customers to cater for their specific business needs. Our acquisition of Viya Labs will enable agents to generate accurate tabular predictions out of the box. After providing the agents with the context, they also need to run the business with trust and high scalability. which brings me to the third pillar, run and govern. This pillar addresses another key challenge of AI adoption. Here we take the complexity off our customer's shoulders by managing and governing the agents embedded in the autonomous suite and beyond. SAP manages the agents across the complete agent lifecycle, including SAP partner and customer-built agents. Specifically in the governance layer, we will ensure the agents meet your compliance frameworks and data privacy requirements from over 130 countries. Checking all the identity and authorization rules to ensure the response is not only accurate but also compliant. Furthermore, we are able to switch between different models safely and dynamically inside customers' SAP landscapes. This means we will run the agents without any login, adhere to local sovereignty requirements, and ensure the best price-to-outcome ratio. Powered by the new platform, our autonomous suite will consist of SAP partner and customer agents, all managed by SAP. The AI Agent Hub is our command center to discover, manage and govern SAP and non-SAP agents, MCP servers and more. The AI Agent Hub gives customers transparency across a universe of agents for every LOB and every industry. And finally, this quarter, we will also launch our new end-to-end user experience, Juul Work. It's a single entry point and interface across all our portfolio solutions for all tasks where users can collaborate with our AI agents. Connected to our business AI platform, dual work dramatically accelerates outcomes for our 350 million end users. For example, a salesperson can create a complete data-rich customer pitch in just a few minutes. A finance business partner can pull together a financial analysis, including all structured and non-structured data from his or her company. After Sapphire, the beta programs for our new platform Suite and Schulwork were immediately oversubscribed and initial customer feedback has been excellent. This makes us very confident about a successful launch in Q Suite. In addition, we will release close to 50 assistants by the end of Q Suite, underpinned by more than 400 autonomous Suite agents by the end of the year. To accelerate our customers' journey to the autonomous enterprise, we are also releasing three additional ERP migration assistance with 10 underlying agents later this quarter. Let me now share some tangible outcomes from our customers. On the autonomous suite side, SAP and Amadeus, a platform for global travel, developed an AI agent that autonomously reconciles unstructured payment data, already clearing around 40,000 incorrect transactions. One example from our Business AI platform. To prepare for Business AI, North Kudrow transitioned from a legacy BW to an end-to-end data platform with BDC. This delivered significant agility, cutting BI solution build time by around 75% and accelerating report creation time by 50%. Moving on to industry AI. With entity data, Denmark's largest wholesaler for steel and technical equipment, Lembree-Müller, deployed custom AI agents to verify purchasing orders. The solution achieved over 90% touchless processing and 98% matching accuracy. For AI agents to deliver the accurate outcomes at scale that all of these companies need, a harmonized data foundation and simplified process layer is essential. That's why the modernization of legacy system landscapes is still very important. To support our customers in this transformation, we launched our new Rise and Grow with SAP offering, which has already been very well received in Q2. As part of this new offering, we are seeing a strong uptake of our AI ERP migration toolchain. Customers are achieving faster time to value and up to 30% lower ERP migration costs. A great example of this in action is Dexco, who used their Wisewith SAP migration to eliminate 97% of legacy customizations, driving a 75% faster accounting close. In parallel, our new offering also includes a firm commitment to our customers to activate and adopt AI assistants and agents within the first year of their journey. We also saw many wise deal highlights in Q2. They include Shell, Morgan Stanley, Samsonite Group, Vonovia, Eli Lilly, retailer ShopRite Group, and Electrolux. We also see great momentum around SAP Quo with companies such as Paloa, Guru Credito, Modular Data Centers, and TechM Energy Services. Turning to the AI deals, key wins included PWC, one of the world's largest professional services firms. They selected our AI to transform a complex billing process, cutting a 35-minute task to just five minutes while improving accuracy and end-user satisfaction. Travel platforms Booking.com and Goal, as well as Oki Electric Industry, selected many of our LOB and industry AI offerings in addition to PDC. Our software and cloud offerings also gained significant momentum with key wins, including companies like Airbus. Successful go-lives included Fonterra, Döhler, and Natura Cosmeticos. To deliver our AI vision, we also continue our own transformation. We are moving with full speed to turn SAP into an autonomous enterprise. In engineering and technology, we are transforming our operating model from software development to building AI at scale. We are doubling down on our ontology development with our best domain experts working on knowledge graphs for every industry and LOB. and we are accelerating innovation, targeting complete agent delivery in under three weeks. By applying tools like Cloud Code, we are also increasing overall developer productivity by up to 30%. In go-to-market, we are also evolving our operating model. The consulting AI factory is a prime example. Over 3,000 SAP consultants are driving AI adoption directly with more than 2,000 customers. Over the next few weeks, we will roll out dual work desktop internally to drive additional productivity across all funds. While we are driving significant efficiency gains with AI, we are making investments in our workforce, both by investing in world-class AI talent, as well as up and reskilling at full speed. We are rolling out a range of codecamps and in-person training offerings across our key locations, with the target of reaching more than 90% of our employees over the next few months. In addition to upskilling our people, we are focusing our hiring efforts to bring in the industry's best data scientists and AI experts. Their leading skills will complement our deep business process and domain know-how. Let me summarize. In Q2, we delivered a strong quarter with strong momentum in our business. In the age of agentic AI, SAP is leading the way. The eponymous enterprise is anchored in AI agents that can run end-to-end business processes accurately, compliantly, and cost-effectively, and always with the human in the loop. SAP successfully completed our transformation to the cloud. and we will once again successfully transform in the AI era to deliver accelerated growth and profitability. And with that, I'll hand over to Dominik.