The meeting discussed SAP's financial performance in the second quarter of 2025, emphasizing the significant growth in cloud revenue, total revenue, and operating profit. Especially noteworthy was the continued strong performance in the cloud ERP suite. Despite uncertainties in the global market, SAP demonstrated strong market adaptability and business innovation with its powerful business modules and improved cost base, particularly in the rapid advancement of product innovation and business AI.

Alibaba and SAP announced the establishment of a strategic partnership in Q2, focusing on the comprehensive deployment of SAP Business Suite and expansion in the Chinese market for both existing and new customers. Additionally, several key customer cases within various industries were mentioned, including GSK, Balma, Delta, BMW, and L'oreal, who collaborate with SAP in ERP cloud services, digital supply chain solutions, human resources management, and financial solutions. SAP also emphasized its unique advantages in data sovereignty and control, and introduced the rapid growth and application of SAP Business Data Cloud, including deepened partnerships with Adobe and Palantir. Furthermore, SAP's AI technology has shown significant effectiveness in improving customer business efficiency.

In the past six months, we have launched 14 AI agents that are playing roles in multiple business functions, such as helping online shopping customers find the desired items more conveniently, creating quotes, resolving customer disputes, analyzing outstanding receivables, and verifying expense reports. By the end of the year, the total number of AI agents is expected to reach 40, covering various aspects such as financial management and supply chain management, for example, automatic financial planning, ensuring automatic calculation of accruing items, recommending suppliers, handling discussions in production, etc. In addition, we have announced that Joule will be fully deployed on both SAP and non-SAP systems in Q3, as well as a collaboration with Perplexity to provide data products for the business data cloud. Over 100 pre-built SAP management data products have already been released, and this number is expected to double by the end of the year, covering the entire business suite.

SAP has successfully increased operational profit and productivity through the use of internal AI applications. Specific examples include a digital sales platform, improved HR efficiency, and increased development efficiency, all benefiting from the application of AI technology. SAP is continuously enhancing its product portfolio through data and AI innovation, and undergoing a continuous transformation of its workforce to meet future company needs. Despite a market environment filled with uncertainty, SAP remains focused on long-term success strategies by leveraging AI technology to drive market transformation, streamline operations, and continuously optimize its workforce structure for the future.

In the second quarter, SAP demonstrated strong financial performance, with total revenue growth accelerating, particularly in the cloud business, with cloud revenue increasing by 28% year-on-year to 18.1 billion euros, a 28% increase. The cloud suite (cloudier P suite) contributed 86% of the cloud revenue, highlighting its core position in the cloud business. Despite challenges posed by global trade policy uncertainty, SAP ensured business resilience and cash flow stability through strict cost controls and focus on controllable factors. Software license revenue decreased as planned, but total revenue reached 9 billion euros, a 12% growth primarily driven by growth in predictable revenue. Looking ahead, SAP maintains its performance expectations for 2025, emphasizing the importance of maintaining execution discipline and cost control to address macroeconomic fluctuations and uncertainties.

The analyst inquired about the company's expected operating profit margin and EBIT growth for the second half of the year, especially considering the strong performance in the first half and the company's internal technological transformation and future investments. The company representative explained that part of the reason for the strong performance in the first half was due to improvement in stock compensation, and mentioned that the company will continue to adjust and optimize its employee structure to meet future development needs. At the same time, the representative emphasized that the full-year guidance remains stable, and the performance of cloud revenue will also impact the overall results.

SAP is planning the development for the next two years, with a focus on how to achieve business goals through Robotic Process Automation (RPA) and accelerating overall revenue growth. The company emphasizes that by leveraging cloud cost efficiencies and a large backlog of work, operational efficiency can be further improved. At the same time, AI technology, especially agents built through Joule, is expected to become a key driver of productivity enhancement in the future. In addition, SAP is actively adjusting its employee structure to adapt to the changes brought by AI and RPA, while also meeting customers' demand for AI tools rather than custom AI use cases, aiming to help customers implement these technologies to optimize business processes.

In this discussion, senior management detailed the significant improvement in margin profitability in areas such as cloud services, sales and marketing, and research and development (RMD) for the company this quarter. They emphasized that despite achieving significant cost control through large-scale structural adjustments (including layoffs), they will continue to seek ways to improve efficiency and profitability in the future, especially in investments in the field of AI. Additionally, they mentioned the company's financial guidance targets for 2026, as well as further improvement potential in research and development, general, and administrative expenses. The company expressed high confidence in the sustainability of long-term operational leverage ratios, while pointing out that the significant increase in gross margin is a result of the company's efforts to drive cloud services and transformation strategies.

Through cooperation with Alibaba, SAP aims to strengthen its cloud service capabilities in the Chinese market to meet the needs of multinational companies in China and address challenges brought about by trade conflicts. At the same time, SAP also hopes to expand its presence in the local Chinese market, including large and medium-sized enterprises, to achieve market growth. Although its business revenue in China is relatively small compared to its global revenue, the growth potential is enormous.

The discussion at this meeting focused on analyzing the growth of the company's quarterly cash flow and contract liabilities, especially the annual increase of 400 million. The discussion provided detailed explanations of the concept of "transition credits," which is how the company supports customers' business transformation and migration to public cloud through cash offsets for non-recurring project costs, and how these credits are spread and affect cash flow over the course of transactions. Additionally, strategies to enhance business attractiveness and protect subscription and cloud computing revenue through these measures were discussed, emphasizing the importance of price quarter growth and its positive impact on the company's long-term profit and margins.

In the conversation, SAP discussed its expectations for the second half of 2022 for Contract Consumption Business (CCB) demand, as well as the growth of its cloud business. At the beginning of the year, the company expected a slight deceleration in CCB, which has now become a reality. Nevertheless, the company remains confident in the business prospects for the second half of the year, noting that it has a strong sales pipeline and booking targets similar to last year. Uncertainty mainly stems from fluctuations in some large transactions and specific industries such as the U.S. public sector and manufacturing affected by tariffs. Additionally, SAP emphasized the diversity of its product portfolio and the resilience of the company in the face of market volatility. It was particularly mentioned that despite the impacts of individual transactions and external factors, SAP is still expected to achieve its goal of accelerating revenue growth. Furthermore, it was mentioned that the year-over-year improvement effect of the Walkme transaction will gradually weaken in the coming quarters, with an impact on CCB of approximately 1.5 percentage points.

The discussion focuses on the growth of the company's cloud business revenue and the role of business intelligence solutions (especially BDC) in enhancing customer value and future growth potential. Although cloud business revenue is affected by the decline in transactional business, the overall growth trend is good; and BDC not only plays a significant role in intelligent transactions, but is also integrated into all solutions, expected to contribute significantly to the company's revenue in the coming years.

In recent discussions, SAP conducted a detailed analysis of its business growth in the context of macroeconomic uncertainty. Despite facing prolonged sales cycles and stricter cost controls, especially in certain industries, SAP emphasized that it has not lost any deals and the number of orders has not decreased. The company pointed out that although the decision-making process for large transactions has lengthened, customers have shown a positive response to the solutions provided by SAP, viewing them as effective means to address their financial challenges. SAP expects the sales cycle to further extend in the third quarter, but even so, total revenue is still expected to accelerate growth. The company stressed that it has a strong sales pipeline and positive customer feedback, and is enhancing communication with customers to address the impact of macroeconomic uncertainty.

The discussion centered around the company's 40% growth in EBIT in the first half of the year, and whether this would mean a significant increase in operating expenses in the second half. Analysis was done on the impact of stock compensation and specific investment plans, especially regarding hiring plans which mentioned the need to hire thousands of employees. Possible optimization measures were also discussed, as well as the issues of layoffs and severance pay in certain regions. Additionally, a cautious attitude towards the second half of the year was mentioned, including expectations for operating profit and cash flow.

Yesterday, SAP participated in the Map initiative launched in Germany, which aims to emphasize the importance of Germany as a future investment focus area and show support for early positive actions by the new government. SAP hopes that through this initiative, it will not only bring positive financial impacts, but also strengthen Germany's position as an important investment area, with plans to invest billions of euros in the coming years.

SAP has important laboratories in Munich and Berlin, closely collaborating with technical universities in the field of supply chain AI and conducting research with HPI in the field of data AI. The company emphasizes that over-regulation in Europe has impacted competitiveness, especially disadvantaging startups. In addition, SAP is also conducting AI development in locations such as Palo Alto and India, and has noticed the disadvantages faced by European tech startups. The company also mentioned strong demand for digital transformation among defense customers in Europe, especially in the current context of high expenditures, highlighting SAP's contribution to European competitiveness in the public sector and defense industry.

In the second quarter, the Sapphire activity became a major highlight, bringing in billions of dollars in sales pipelines for the company and positively impacting the full-year performance goals. However, the company faces some challenges in the US public sector business, with decision-making cycles extending. The company is working on speeding up sales cycles in the second half of the year and hoping for positive results in the future.