Charles Brennan

Charles Brennan from Jefferies inquired about SAP's investment strategy for AI, specifically whether current R&D reallocation and efficiency gains are sufficient, or if an acceleration in investment is needed. He also asked about the accelerating decline in support revenues and its implications for Current Cloud Backlog (CCB).

Answer

CFO Dominik Asam confirmed that the accelerating decline in support revenue is a natural progression as customers adopt cloud solutions. CEO Christian Klein stated that AI investment focuses on quality over quantity of talent, with a significant shift of R&D resources towards AI developers and data scientists. Internal AI adoption also drives efficiencies, allowing for continued investment without radical shifts.

Charlie Brennan with Jefferies inquired about SAP's investment levels for AI, specifically whether required funding can be met by reallocating R&D spend and reinvesting efficiencies, or if an acceleration in investment is needed. He also asked about the accelerating decline in support revenues and the impact of total cloud backlog moving into current cloud backlog (CCB) on in-quarter deal pressure.

Answer

Dominik Asam, CFO of SAP, confirmed that the accelerating decline in support revenue is a trend SAP has anticipated. Christian Klein, CEO of SAP, stated that AI investment focuses on quality over quantity of R&D personnel, shifting developers to AI and data science roles. He noted internal AI adoption, like Joule for Developer, is driving efficiencies, allowing SAP to manage R&D investment effectively without a radical shift, while still having a strong development backlog.

Charles Brennan of Jefferies Financial Group asked why cloud revenue growth matched CCB growth, which is unusual, and inquired about the commercial model and potential materiality of the new Business Data Cloud (BDC).

Answer

CFO Dominik Asam explained that while the transactional business was dilutive to growth, its overall impact is diminishing. CEO Christian Klein stated that BDC can be sold with RISE deals, adding up to a 20-30% ACV uplift, or embedded in LOB solutions. He expects BDC to become a multi-billion dollar business within a few years.

Charles Brennan of Jefferies requested a simple explanation of how the new Business Data Cloud differs from SAP Datasphere and whether it represents an incremental product or a rebranding.

Answer

CEO Christian Klein clarified that Business Data Cloud is a significant evolution beyond Datasphere. While Datasphere focused on technical data integration, Business Data Cloud provides a semantic layer to unify all business data (SAP and non-SAP), creating a true 360-degree view of entities like customers. He noted its pipeline momentum is as strong, if not stronger, than RISE at its launch.

Charles Brennan asked if SAP faces a shortage of enterprise architects for its customers and sought clarification on how to model 2026 free cash flow based on the 2025 outlook.

Answer

CEO Christian Klein stated that SAP is not starting from zero with architects, but is actively reskilling existing staff and hiring externally, aided by the transformation program. CFO Dominik Asam confirmed the analyst's cash flow logic was sound but called it a 'prudent approach,' cautioning that the high resulting cash conversion rate would face headwinds from the tax effect on incremental profit.