SAP’s Cloud Forecasts for 2026 Disappoint, Shares Fall 15%, Biggest Daily Loss Since 2020

German software company SAP’s 2026 cloud revenue forecast fell short of market expectations on Thursday and the company’s shares fell 15%, marking the steepest one-day drop since October 2020.JPMorgan noted that SAP’s cloud backlog and 2026 revenue expectations fell short of expectations, leading to a sell-off despite full-year performance being in line with analyst forecasts. SAP briefly became Europe’s largest company by market capitalization last March, but gave up the European crown later that year over concerns about the potential disruptive effects of artificial intelligence on its sector.

“SAP needed an overall acceleration to combat dip sentiment in the sector, and with the positive and negative results in the update, we see shares underperforming,” said Citi analyst Balajee Tirupati. By 1431 GMT, SAP shares had fallen as much as 17% to their lowest level since February 2024, wiping more than 40 billion euros from market capitalization and dragging the benchmark Frankfurt index lower in largely positive European markets. The stock was last down 15.8%, near the session low. Other software stocks in Europe were also lower, with Dassault Systemes in Paris down as much as 2.7% and Sage down more than 3% in London, both trading near multi-month lows.Software stocks in the US also took a hit, with Salesforce down 6.3%, Photoshop maker Adobe down 2.5% and cloud security company Datadog down about 5%. ServiceNow shares fell 9% despite the company’s positive expectations.

FORECAST FOR 2026 FALLS TOO SHORT

SAP expects cloud revenue to grow between 23% and 25% by 2026. More importantly, current cloud backlog growth will slow slightly in 2026 after growing 25% in 2025, although SAP expects overall revenue growth to accelerate in 2027 as more customers migrate to cloud-based solutions.

SAP’s CFO Dominik Asam said in an analyst call that this represents a larger-than-expected slowdown. Asam pinned the slowdown on customers moving to larger projects that take longer to ramp up, as well as increased demand for sovereign cloud driven by geopolitical tensions. He said these government and defense deals have longer sales cycles and often don’t show up in the backlog because of termination clauses.

JPMorgan noted that “the cloud backlog and cloud revenue growth are ultimately what investors are zeroing in on,” adding that a negative market reaction could be expected.

The disappointment comes as software stocks face headwinds in the broader sector.

Oddo BHF analyst Nicolas David said the sharp decline reflects the market’s “general distrust of software names” as investors shift capital into semiconductors. “In the current context, you can’t miss even the smallest piece,” he said.

ANNUAL RESULTS IN LINE

For the full year, cloud revenues rose 26% at constant exchange rates to €21 billion, while total cloud backlog rose 30% to €77.3 billion. CEO Christian Klein said SAP Business AI has become a growth driver, accounting for two-thirds of cloud orders in the fourth quarter.

SAP also announced a two-year buyback program worth up to 10 billion euros.

The Walldorf-based company has been moving legacy database customers to the cloud over the past year while executing a $3.2 billion restructuring program. Key customer wins in the fourth quarter included Dexco, Lockheed Martin and Rolls-Royce.

($1 = 0.8341 euros)