What To Watch For In SAP’s Q3 Earnings

SAP (NYSE:SAP) fared well in the first half of the year, and we expect this trend to continue when the company reports its third quarter earnings on October 19th. We expect growth across business segments, as the company has maintained leading positions in the Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) software markets, as well as a solid position in the CRM software market. The recent addition of multiple Internet of Things (IoT) solutions to the SAP Leonardo digital innovation system highlights SAP’s renewed focus on bolstering its foothold in the IOT domain, which could drive the company’s top line in the future.

SAP’s Cloud business, aided by a phenomenal increase in new bookings, was the standout performer over the past few quarters. The company continued its dominance in the Enterprise Resource Planning (ERP) software market, with customers continuing to adopt its S/4HANA platform. Moreover, with around 80% of its customers still using the earlier platform and expected to shift to the newer one in the near future, we believe the customer count will see further improvement. We forecast around 5% growth in SAP’s ERP revenue for the full year and believe that the Q2 results will reflect similar growth.

SAP is also rapidly expanding its presence in the IoT space with new products and acquisitions. This space could drive substantial growth for SAP over the long run. Combined with its ongoing efforts to strengthen its offerings in the machine learning space, the company is expected to do well in the competitive software industry.

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