SAP AG (NYSE:SAP) is due to announce its quarterly earnings report on July 24, 2012. It has released its previewed Q2 results showing strong double-digit growth due to its HANA database products and synergy from the SuccessFactors acquisition. This is the 10th consecutive quarter where SAP has had a double digit revenue growth. SuccessFactors which was acquired in 2011 provides cloud based human capital management software and has strengthened SAPs move to the cloud and mobile. 
Highlights of Q2 2012
- SAP Q4 Preliminary Earnings: Top-Line Surges Across The Board; S/4HANA Adoption Picked Pace
- SAP’s Successful Run in Cloud Continued in Q3, Future Growth Rests on Broader Product Portfolio
- SAP Q3 Preliminary Earnings: Cloud Business Continues to Expand But at a Slower Pace
- SAP’s Profit Takes a Beating Even as Cloud Business Continues to Grow
- Currency Tailwinds Expected to Lift SAP’s Q2 Results, But Tough Times Lie Ahead?
- SAP Kills Two Birds With One Stone, Integrating Predictive Analytics with Big Data & IoT
Total revenue grew by 18% y-o-y to Euro 3.9 billion (~$4.8 billion). Software Revenue Increased 26% y-o-y to Euro 1,059 Million ( ~$1,323 million ) driven by double-digit growth in all regions. Software and Software-Related Service Revenue Increased 21% to Euro 3.14 billion ( ~$3.85 billion ). Operating profit increased by 15% to Euro 1.17 Billion (~$1.43 billion).
Cloud, Mobile and HANA to drive 2012
SAPs increasing focus on the mobile, cloud and HANA businesses is already paying off as these are the divisions that have been driving revenue growth. These divisions are likely to drive revenues for the rest of 2012 as it diversifies its business and moves to the cloud. SAP has already announced that it is targeting revenue from HANA to be at least Euro 320 million ($ 422 million) for 2012 and mobile revenues of about Euro 220 million ($ 290 million). This will put it in direct competition with Salesforce.com which is the leader in cloud based CRM.
The cloud business is likely to see early adoption by small and medium size businesses as the SaaS model makes it cheaper to adopt and deployment on the cloud makes it easy to integrate. Absence of legacy ERP and CRM systems makes the cloud model more viable as there are no integration issues. Larger businesses would take much longer to fully move to the cloud as this would involve migrating legacy systems. So we can expect revenues coming in from large businesses in the longer run and revenues are likely to be exponential. Large businesses prefer to keep a mix of both systems, with critical systems still being maintained in house and not on the cloud. The mobile services are likely to be driven by the bring-your-own-device movement as employees demand access to business data on their mobile devices and there is a large opportunity to tap the existing customer base.
We expect HANA to be the largest growth opportunity for SAP. It is a platform on which analytics applications can be built to process large amounts of data faster than the current systems. Its in-memory computing is the key innovation and data can be processed at a much faster rate than traditional methods. It is also cheaper as it runs on inexpensive hardware and is SAP’s best bet in the analytics space. We expect this to be the biggest source for growth in the coming years.
We currently have a $71 Trefis Price Estimate for SAP which is about 10 percent more than the current market rate.Notes: