SAP: AI-Focused Restructuring to Add €200 Million to Bottom Line

Seven months after launching an artificial intelligence (AI)-focused restructuring program, SAP said Monday (July 22) that it has raised its 2025 operating profit ambition to reflect the efficiency gains it expects to see from that program.

“We continued to execute on our transformation program with great discipline with rehiring only for the skill sets we need,” SAP CEO Christian Klein said Monday during the company’s quarterly earnings call. “As you have seen, we are increasing the volume of the program. That’s why we are able to announce an upgrade of roughly €200 million on the bottom line of our Ambition 2025.”

SAP now expects non-International Financial Reporting Standards (IFRS) operating profit of €10.2 billion (about $11.1 billion) in 2025, up from its previous forecast of €10 billion (about $10.9 billion), according to a Monday earnings release.

The enterprise application software company announced the restructuring program in January, saying that it will increase its focus on Business AI and other key strategic growth areas and will transform its own operational setup to capture AI-driven efficiencies. SAP added that it expected to see 8,000 employees either be retrained or leave the company under a voluntary leave program.

In its Monday earnings release, SAP said it now expects the restructuring to affect 9,000 to 10,000 employees as it works to ensure that the company’s skillset and resources will meet its future needs. As it reinvests in strategic growth areas — Business AI, in particular — it expects its headcount at the end of 2024 to be similar to what it had at the end of 2023.

SAP expects to complete the restructuring program in early 2025, according to the release.

Together with making progress on its restructuring, SAP made some other moves related to AI during the second quarter, per the earnings release. These include the addition of AI features to the supply chain solutions it offers its customers, an extended collaboration with IBM that includes new generative AI capabilities, and an expanded collaboration with Amazon Web Services (AWS) that includes cloud enterprise resources planning (ERP) experiences and generative AI offerings.

Klein said during the call that SAP is receiving more positive feedback than ever about its products, due to its Business AI offerings; that everyone perceives SAP as a major AI player because it can embed the technology in the operating systems of its customers; and that the company’s AI strategy played a key role in every deal it closed during the quarter.

SAP also said in the Monday earnings release that its cloud revenue grew 25% year over year during the quarter, outpacing its total revenue, which was up 10%.

“Despite the volatile environment in the software industry, our growth momentum remained strong in Q2,” Klein said during the call. “More and more customers are moving to the cloud, and our portfolio is becoming ever more attractive, thanks to SAP’s Business AI capabilities.”