The digital transformation of the global economy is in full swing, and SAP’s broad solution portfolio and innovation strategy are playing a key role in this evolution. Though current macroeconomic uncertainties are holding back individual countries and sectors, the majority of enterprises is taking advantage of the latest technological developments to restructure their business models, win market share, and increase efficiency.
SAP’s innovative applications and our offerings for next-generation technologies such as machine learning, AI, blockchain, and the IoT are convincing more customers of the power and efficiency of our portfolio and our technology platform. We also offer our customers unparalleled flexibility options for using our software – on premise, in the cloud, or hybrid.
The COVID-19 crisis is an accelerator for transformation. Customers are looking to move to the cloud even faster for greater resiliency and agility. SAP is responding to these market demands by accelerating the modernization of its cloud delivery, arriving at a harmonized delivery infrastructure earlier than planned. Furthermore, SAP will increase R&D investments to help its customers’ transformation accelerate and generate growth in non-IFRS cloud revenue to more than €22 billion in 2025 and expand the share of more predictable revenue to approximately 85%.
For details on our actual results please visit the Recent Results page. For our 2022 outlook and the mid-term ambition until 2025 please visit the Outlook & Ambition page.
Our transformation to a fast-growing cloud business demands significant investments. We see operating expenses largely as investments in the future that will help secure our operating profit in the long term. Nevertheless, we continue to see the benefits from increasing efficiency of our cloud offerings, demonstrated by the increasing cloud gross margin.
The increasing customer demand for SAP Cloud solutions require additional investments that will have an impact on our operating margin in 2021 and 2022. Our expedited move to the cloud will ensure we continue our path as a cloud growth company while we remain focused on cost efficiency. These actions and our resilient business model position us well to meet our new ambition targets as uncertainty recedes.
For details on our actual results please visit the Recent Results page. For our 2022 outlook and the mid-term ambition until 2025 please visit the Outlook & Ambition page.
Our primary source of cash, cash equivalents, and current investments is funds generated from our business operations. Over the past several years, our principal use of cash has been to support operations and our capital expenditure requirements resulting from our growth, to quickly repay financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on the open market. In recent years, we were able to repay additional debt within a short period of time due to our persistently strong free cash flow.
We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our operating financing needs and, together with expected cash flows from operations, will support debt repayments, currently planned capital expenditure requirements, and capital returns to our shareholders over the near term and medium term.
The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence, and financial flexibility.
The long-term credit rating for SAP SE is “A2” by Moody’s and “A” by Standard & Poor’s, both with a stable outlook.