SAP's cloud business grew steadily in the first quarter, with Wall Street expressing optimism.

European software giant SAP (SAP.US) did not disappoint Wall Street's high expectations in the first quarter. SAP stated that despite the ongoing trade war, there may be "increasing uncertainty and decreasing visibility" in the 2025 fiscal year, but the company still expects full-year cloud and software revenue to be between 33.1 billion and 33.6 billion euros. Cloud revenue is expected to be between 21.6 billion and 21.9 billion euros. Jefferies Financial Group Inc. maintains a "buy" rating on the stock with a target price of 280 euros. The analyst team led by Charles Brennan stated that in the context of a weak stock price and uncertain macroeconomic outlook before the earnings report, the strong growth, as expected data, and unchanged performance guidance shown in the first quarter of 2025 should provide a comforting guarantee. The analysts stated, "There are few other companies in the industry that can achieve a continuous growth of 13% in cloud and software business, we reiterate our buy rating." The analysts pointed out that the performance guidance is based on the assumption that the win rate remains unchanged and there are no major economic disruptions. "We expect most companies to make the same assumptions in this earnings season," the analysts added. Brennan and his team added that the progress of the rehiring plan was slower than expected at the beginning of the year, which is beginning to create some cushion space for earnings before interest and taxes (EBIT) guidance (at least as calculated at fixed exchange rates). Bank of America Corp Securities reiterated a "buy" rating and raised the target price from 302 euros to 303 euros (ADR target price from 331 USD to 344 USD). Frederick Braun and his team at Bank of America Corp stated that after the "solid earnings report", they reiterated their buy rating on SAP. The analysts pointed out that SAP is their preferred large software stock for 2025, one of their "2025 25 stocks," and is on their list of top European stocks. The analysts added that the first quarter performance exceeded expectations, with stable cloud backlog orders (CCB), organic growth of 28%, strong cloud business profit margins driving earnings before interest and taxes (EBIT) surpassing expectations by 10% (up 58% year-on-year), strong free cash flow performance, and reaffirmed 2025 performance guidance. Braun and his team stated that the slightly lower-than-expected 1% growth in cloud business was the only drawback. Despite significant macroeconomic uncertainty, SAP stated that its business is in good shape and able to withstand the current macroeconomic uncertainty. Looking ahead, the analysts predict that the organic CCB growth rate in the second quarter will slow to a still healthy 27.5%, with revenue growth of 10.7%. This is expected to translate to revenue growth of 10.3%, EBIT growth of 28%, and basic free cash flow growth of 21% in 2025. The analysts also noted that SAP repurchased 1.5 billion euros worth of stock between March 29 and April 8, sending a clear signal in the face of significant market uncertainty. The company has now mostly completed its 5 billion euro buyback plan, paving the way for increased cash returns.