Yahoo Finance After Solid 2015 Performance, SAP Disappointed in 1Q16
Why SAP Posted Worse-than-Expected 1Q16 Results
After a solid performance in fiscal 2015, SAP failed to meet analyst expectations in 1Q16
After announcing its preliminary earnings on April 8, 2016, Germany-based (EWG) SAP AG (SAP) reported its fiscal 1Q16 earnings on April 20, 2016. SAP reported revenue of 4.7 billion euros and non-IFRS (International Financial Reporting Standards) EPS (earnings per share) of 0.64 euros, which failed to meet analysts’ expectations by 40 million euros and 0.03 euros, respectively. Apart from SAP, IBM (IBM), Citrix (CTXS), and Microsoft (MSFT) are some of the technology companies that announced their fiscal results in April 2016.
Cloud contributes less than 15% towards SAP’s overall revenues
On a YoY basis in fiscal 1Q16, SAP’s revenue grew by 5% while on a constant currency basis, this growth was 6%. Like SAP, IBM and Oracle (ORCL) are currently undergoing the transition to the web-based subscription model from traditional licensed software, which is expected to lead to more predictable recurring revenue. Though SAP’s Cloud Revenues reported triple-digit growth in fiscal 2015, it’s the company’s traditional software licenses and support that still form the bulk of its revenue.
SAP’s new flagship ERP (Enterprise Resource Planning) platform, the SAP Business Suite 4 SAP HANA, continued to see increased adoption in fiscal 1Q16. It now boasts of more than 3,200 customers.
Later in the series, we’ll discuss the factors that led to lower-than-expected 1Q16 results for SAP.
You could consider investing in the First Trust ISE Cloud Computing Index Fund (SKYY) to gain exposure to SAP, as the company makes up ~3.7% of SKYY. SKYY invests 50% of its holdings in the application software space.
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