SAP reported mixed quarterly results as revenues topped expectations due to a surge in newer, lower-margin cloud software.
This should have been good but it stuffed up company margins pushing down profit to the very low end of forecasts.
SAP said second-quarter operating profit, excluding special items,rose 13 percent to $1.50 billion, which was the low end of what the cocaine nose jobs of Wall Street expected.
Europe’s largest software maker reported total revenue of $5.38 billion, up 20 percent.
Operating margin dropped to 28 percent from 29.8 percent a year ago. The decline reflected increased investments in SAP’s newer cloud-based software services, where revenues from new sales come later in the form of subscription payments.
SAP is taking on Oracle, IBM and Microsoft to boost Internet-based software sales and fend off pure cloud-based rivals Salesforce.com, Workday and, less directly, industry pacesetter Amazon.com’s web unit.
Salesforce.com in May raised its revenue forecast for the full year, after the cloud software company reported a profit for the first time in seven quarters.
SAP’s cloud subscription and support revenue from continuing operations jumped 129 percent. On the same basis, revenues from its mainstay software license business rose 13 percent. Without currency effects, software licenses grew 3 percent.