Business Outlook 2021
October 21, 2021 - SAP is raising its full-year 2021 outlook, reflecting the strong business performance which is expected to continue to accelerate cloud revenue growth. The Company continues to expect software licenses revenue to decline for the full year as more customers turn to the ‘RISE with SAP’ subscription offering for their mission-critical core processes. This outlook also continues to assume the COVID-19 crisis will continue to recede as vaccine programs roll out globally.
SAP now expects:
- €9.4 – 9.6 billion Non-IFRS cloud revenue at constant currencies (2020: €8.09 billion), up 16% to 19% at constant currencies. The previous range was €9.3 – 9.5 billion at constant currencies.
- €23.8 – 24.2 billion Non-IFRS cloud and software revenue at constant currencies (2020: €23.23 billion), up 2% to 4% at constant currencies. The previous range was €23.6 – 24.0 billion at constant currencies.
- €8.1 – 8.3 billion Non-IFRS operating profit at constant currencies (2020: €8.29 billion), down 2% to flat at constant currencies. The previous range was €7.95 – 8.25 billion at constant currencies.
SAP continues to expect the share of more predictable revenue to reach approximately 75% (2020: 72%).
SAP continues to expect operating cash flow of approximately €6.0 billion (2020 €7.2 billion) and free cash flow above €4.5 billion (2020 €6.0 billion).
SAP now expects a full-year 2021 effective tax rate (IFRS) of 21.0% to 22.0% (previously: 21.5% to 23.0%) and an effective tax rate (non-IFRS) of 20.0% to 21.0% (previously: 20.0% to 21.5%).
SAP is focusing on three non-financial indicators: customer loyalty, employee engagement, and carbon emissions.
In 2021 SAP continues to aim for:
- a Customer Net Promoter Score of 5 to 10 (2020: 4)
- an Employee Engagement Index in a range of 84% to 86% (2020: 86%)
- Carbon emissions in a range of 90 to 110 kt (2020: 135 kt)
While SAP’s full-year 2021 business outlook is at constant currencies, actual currency reported figures are expected to be impacted by currency exchange rate fluctuations as the Company progresses through the year. See the table below for the Q4 and FY 2021 expected currency impacts.
Expected Currency Impact Based on September 2021 Level for the Rest of the Year (Non-IFRS)
|In percentage points||Q4 2021||FY 2021|
|Cloud revenue growth||0pp to 2pp||-4pp to -2pp|
|Cloud and software revenue growth||0pp to 2pp||-3pp to -1pp|
|Operating profit growth||0pp to 2pp||-3pp to -1pp|
The company is confirming its mid-term ambition to reflect the following factors:
- The most recent currency exchange rates (October 2020) which translates to a negative 3 to 4 percent effect on revenue and operating profit since April 2019.
- The COVID-19 pandemic which is expected to impact the demand environment, particularly in hard hit industries, through at least the first half of 2021 pushing out the achievement of key metrics such as non-IFRS cloud revenue, total revenue, and operating profit, by 1 to 2 years.
- The acceleration of customers’ move to the cloud and subsequent business transformations which drive the new ambition’s cloud revenue target of more than €22 billion by 2025. SAP expects this to negatively impact the 2023 operating margin by approximately 4 to 5 percentage points relative to the previous mid-term ambition.
- The accelerated harmonization of SAP cloud delivery which is expected to require an incremental investment in 2021 and 2022 and to drive the non-IFRS cloud gross margin to approximately 80% by 2025.
As a consequence of SAP’s accelerated cloud transition, the Company expects software licenses revenue to continue to trend lower from 2020 levels.
The combined impact of the above factors and the mechanics of the associated business model switch are expected to lead to muted non-IFRS total revenue growth as well as flat or slightly lower non-IFRS operating profit over the next two years, followed by accelerated non-IFRS total revenue and double-digit non-IFRS operating profit growth from 2023 to 2025.
By 2025, this trajectory is expected to take SAP to:
- More than €22 billion non-IFRS cloud revenue
- More than €36 billion non-IFRS total revenue
- More than €11.5 billion non-IFRS operating profit
- A significant expansion of the Company’s more predictable revenue share to approximately 85%
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