SAP stock surges amid plan to cut 8,000 jobs, boost to profit outlook

By Steve Goldstein

Shares of SAP jumped as much as 8% on Wednesday as the German software giant laid out a plan to cut jobs alongside a boost to its profit outlook.

SAP (XE:SAP) (SAP) said it will cut 8,000 jobs this year, with a majority coming from voluntary leave programs and internal re-skilling measures, but headcount will remain at similar levels to 2023's 107,602 employees owing to re-investments into strategic growth areas. SAP said the restructuring program will cost about EUR2 billion ($2.2 billion) while only providing a "minor" cost benefit.

SAP said its fourth-quarter earnings from continuing operations jumped 94% to EUR1.17 billion, while revenue rose 5% to EUR8.47 billion. Analysts polled by Visible Alpha expected earnings of EUR1.37 billion on revenue of EUR8.33 billion.

Its cloud backlog rose by 25% to EUR13.7 billion, a number analysts at UBS called "remarkable."

The big news wasn't so much its 2024 outlook but the 2025 view. Though it's changing its adjusted operating profit view to reflect a EUR2 billion of share-based compensation expenses, it's also increasing its profit target by EUR500 million due to anticipated incremental efficiency gains from the transformation program.

It also raised its free cash flow guidance by EUR500 million.

SAP stock is now up 15% so far in the new year, and up 51% over the last 52 weeks.

-Steve Goldstein

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01-24-24 0428ET

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