SAP Shares Post Steepest Decline since 2020 after Weak Cloud Backlog Update

Weaker cloud contract momentum rattles investors, marking the German software giant SAP’s steepest stock drop in years.

SAP shares suffered their sharpest fall since 2020 after the company reported slower-than-expected growth in its cloud contract backlog for the fourth quarter, shaking investor confidence in the software firm’s cloud transition.

The German technology company saw its stock drop by as much as 16%, marking its biggest single-day decline since October 2020. The sell-off pushed SAP’s shares to their lowest level since mid-2024.

At the center of the market reaction was SAP’s cloud backlog, a key measure of future cloud revenue. The company reported that its current cloud backlog rose 16% year over year to €21.1 billion, well below earlier market expectations of around 26% growth. Analysts said the slower pace was a clear disappointment for investors who had been expecting stronger momentum.

SAP explained that several large, long-term transformation deals affected the figures. “Large transformational deals with high cloud revenue ramps in outer years and termination for convenience clauses required by law negatively impacted fourth quarter constant currency current cloud backlog growth,” the company said.

Despite the setback, Chief Executive Officer Christian Klein struck a confident tone, saying the cloud backlog built in the final quarter of the year had created a “strong foundation” for revenue growth through 2027. However, SAP also cautioned that cloud backlog growth is expected to slightly slow in 2026.

Financially, SAP reported fourth-quarter revenue of €9.7 billion, up from €9.4 billion a year earlier, while operating profit rose to €2.6 billion. Investors are also weighing the impact of artificial intelligence on traditional software providers. Addressing these concerns, Chief Financial Officer Dominik Asam said, “What is clear is that one of the killer applications of AI is to completely transform the way companies develop code.”

As SAP continues its shift from on-premise software to cloud and AI-driven services, markets will be watching closely to see whether the company can regain momentum and reassure investors about its long-term growth story.