Staff pay eats up profits from SAP's cloud expansion

German software giant SAP on Tuesday reported falling profits in the first quarter despite an increase in revenues, blaming the drop on higher staffing costs.

Between January and March, subscriptions to the group's cloud computing and support services grew 34 percent compared with the same period in 2016.

That helped power a 12-percent increase in revenue to 5.3 billion euros ($5.8 billion) over the first three months -- slightly higher than analysts had forecast.

But the firm's operating, or underlying profit fell 17 percent compared with the first quarter of 2016, to 673 million euros.

Meanwhile, net profit fell 7.0 percent to 530 million euros -- well short of the 608 million euros analysts had predicted.

The bottom line was "primarily impacted by an increase in share-based compensation expenses, which increased due to the strong development of SAP's share price and an increase in employee participation," the firm said in its statement.

Some 65 percent of SAP's 85,750 employees take part in the scheme.

Executives say they are confident that the drop in profits will not hold the group back from reaching its objectives for the full year.

"We're off to a good start to reach our full year targets and we are confident that we will grow our profitability in 2018 and beyond," chief financial officer Luka Mucic said in a statement.

The group aims to reach revenue of between 23.2 and 23.6 billion euros in 2017, up from 22.1 billion euros last year, with profits between 6.8 and 7.0 billion euros compared with 6.6 billion euros in 2016.

SAP only makes forecasts using non-IFRS accounting rules, which exclude certain costs.