Alexandra Steiger: Good evening, everyone, and welcome. Thank you for joining us. With me today are CEO Christian Klein, and CFO Dominik Asam. On this call, we will discuss SAP’s First Quarter 2025 Results. You can find the deck supplementing this call as well as our quarterly statement on our Investor Relations website. During this call we will make forward-looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results and outcome to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to, the Risk Factors section of our annual report on Form 20-F for 2024.

Unless otherwise stated, all numbers on this call are non-IFRS and growth rates and percentage point changes are non-IFRS, year-on-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. Before we begin, I’d like to call your attention to our upcoming Financial Analyst Conference, which will take place on May 21st as part of our Sapphire event in Orlando, Florida. If you’re interested in joining us in person, please reach out to our Investor Relations team for more information. For those who can’t attend on-site, a live stream will be provided on our website. And with that, over to you, Christian.

Christian Klein: Yeah, thanks, Alexandra, and a warm welcome to everyone on the line. Q1 was a very fast-paced start to the year. Given the macroeconomic environment, I’m very happy to say that SAP did really well in the quarter. Thanks to our transformation, SAP ended the current phase of the world economy with greater resilience than ever. Our current cloud backlog expanded 29% to €18.2 billion in Q1. Our quarterly cloud revenue is now close to the €5 billion mark, showing a 26% increase. Overall, the share of more predictable revenue is now at 86%. Our very large cloud backlog and high recurring revenue share will be the foundation for double-digit total revenue growth in 2025 and for many years to come. Operating profit was up 58% in Q1 and our stellar cloud gross margin improved by 2.6 percentage points to 75%.

Thanks to the diligent execution of SAP’s transformation, also, our operating profit will grow double-digit in 2025 and the years to come. Just last week, IDC and Gartner released new reports underlining our market momentum. IDC’s update on software market share for the full year 2024 confirms SAP as the worldwide #1 enterprise application software vendor. And in cloud, according to IDC, SAP experienced the strongest year-over-year growth among the top 10 enterprise application SaaS companies. As for Gartner, in their WW Enterprise Software Report, SAP is the #1 by revenue in 2024 for overall ERP. Of course, no one can really predict how the global economy will develop throughout 2025. Without any doubt, uncertainty in the market remains high.

However, several factors make us confident that SAP remains on track towards our 2025 outlook ranges. First, I just mentioned SAP’s highly resilient business and financial model and our excellent market position. Second, our pipeline for the year continues to look very solid. Third, no other tech company can offer a solution portfolio which is more relevant in times of new regulations, tariffs, and business uncertainty. Our globalization team localizes SAP’s portfolio, including solutions like Global Trade Services Management that enables our customers to manage every single global transaction in real-time and fully compliant in over 130 countries. To steer the company through uncertain times, our customers can run real-time financial simulations based on internal and external data with SAP Business Data Cloud.

To adapt a company’s business plan to new market realities, SAP’s Analytics Cloud and IPP integrate in real-time sales, supply chain, HR, spend and financial planning with each other to make cross-company decisions fast and in harmony. And finally, across our portfolio, embedded AI and Joule are boosting the productivity of a company to offset financial pressure. Net-net, this means SAP’s portfolio is highly relevant. We can’t change external uncertainty, but we can help our customers like no other company to manage those challenges, compliant with high agility and empowered by AI. Now, let me share a quick summary of the quarter. The figures underline once more that SAP’s growth formula is solid. We have done our homework and we benefit from that.

Current cloud backlog kept growing with a very high pace in Q1. Cloud revenue continued to grow strongly even as the base has expanded. Total revenue growth moved further into double-digit territory. Operating profit, operating margin and cloud gross margin performance have and will heavily benefit from our transformation program. And again, about half of our cloud order entry were deals that included AI use cases. The deals in Q1 offer a compelling insight into how customers are navigating the current business environment. Let me start with an impressive series of major deals in the automotive sector. As you know, the car industry is undergoing an extensive transformation. New business models and competitors are emerging, cost pressure is increasing, sustainability continues to be a challenge, and there is the need to adapt to a changing global trade system, including tariffs.

How does the industry deal with these challenges? As our customer wins indicate, auto companies rely on SAP’s industry best practices, solutions and tools to transform their value chains by embracing the cloud and AI. In Q4, as you remember, Robert Bosch and Schaeffler signed up for their RISE journeys, and MAHLE went live. Now in Q1, others from the who’s who in the industry joined the ranks, Hyundai, Kia and Mazda, as well as the automotive supplier Webasto. Customers in other sectors rely as well on SAP’s business transformation offering RISE. In Q1, HUGO BOSS, Tyson Foods, and the chemical group SYENSQO, and Japan Railway. And in the public sector, the German Federal Employment Agency, Bundesagentur für Arbeit, as well as the police force in the state of Baden-Württemberg decided to put their trust in SAP solutions and sovereign cloud technology.

For all customers on their RISE journeys, we have been accelerating time to value while reducing the implementation costs of SAP projects with excellent AI tools such as Joule for Developer, Joule for Consultants, and business transformation tools like Signavio, LeanIX and WalkMe. As for GROW with SAP, two-thirds of our deals in Q1 were net new customers, which underlines the attractiveness of our offering for fast-growing companies in the mid-market. One example is Gymshark, a fitness brand who selected us over a competitor. What convinced them to choose SAP was the scalability and broad functionality of our suite offering, as well as our industry-specific solutions for retail. Other examples include the sustainable steel company, Stegra, as well as VFS, a global provider of visa application services, selecting our end-to-end business suite applications.

Finally, some Q1 customer examples from our lines of businesses. In supply chain management, we won KION GROUP, a global leader in supply chain and logistics solutions. In human capital management, we won the travel company Booking and Axpo Services, the largest electricity provider in Switzerland, went live on SuccessFactors. In business networks, we won the media company, Times Group, India, and the mining firm, Amman Mineral. And the chocolate company, Alfred Ritter, home to the famous brand Ritter Sport, celebrated a go-live in our network. Last but not least, BASF Coatings went live in Q1 on our sustainability portfolio. All these customer stories show how we are winning with our modular business suite and our transformation offerings RISE and GROW with SAP, capturing every customer size and industry.

Let me now summarize what happened in Q1 in terms of product innovation, commercials and simplification. First, let me start with product innovation. In February, we presented one of SAP’s most exciting innovations ever and the greatest opportunity since RISE, SAP Business Data Cloud. Business Data Cloud is the new center of gravity for business data. It unifies and governs all data, SAP and non-SAP, structured and unstructured. It builds a strong semantical layer with the context, connections and meaning of data. And thanks to our new partnership with Databricks, Business Data Cloud will become the #1 offering in the data analytics market. Thanks to the Business Data Cloud’s strong value proposition, the pipeline for the coming quarters is building up very nicely.

In Q1 alone, we closed 20 deals including KION GROUP, Villeroy & Boch, the pharma company Ferring, and the metals manufacturer Tibnor. Business Data Cloud is not only groundbreaking in how it brings together data, it is also a pillar for high-performing end-to-end AI agents. Why? Because it takes three things to build truly powerful AI agents. First, access to a harmonized data layer with strong semantics; that’s SAP’s Business Data Cloud. Second, a smart AI stack toying on the best GenAI modules and technologies; that is SAP Business AI. Third, fully integrated applications so agents can cover business processes end-to-end; that is our SAP Business Suite. SAP is the only company to have all three of these pillars in place, and that puts us in a unique and very strong position to win in the agentic AI space.

When we work with customers, AI adoption is more than a one-time event, it’s a journey. Take for example Standard Chartered Bank, they went live with the first AI use cases in SuccessFactors. They then released Joule to over 80,000 employees and are leveraging the GenAI hub. With all our AI customers, we systematically drive adoption from the first implementations of use cases all the way through to agentic AI. At Sapphire, we will make exciting announcements about our AI capabilities. Continuing now on the topic of innovation, we are also evolving our commercials. We are updating our RISE offering with enhanced packages. They now include the solutions for business transformation management, solutions well integrated into our business suite portfolio to accelerate time to value and cut SAP project costs.

And with the flexible cloud addendum, we make it easier for customers to switch from private to public cloud within the existing contracts. Besides innovation, we continue to focus on our own productivity in this turbulent times, and we are transforming the company along the way. We are fully on track to deliver the internal AI efficiencies for this year. Let me share some examples with you. Our consultants save up to 90 minutes per day with Joule for Consultants. Joule helps them, for instance, to find and use best practices, analyze unfamiliar code and prevent suboptimal design and implementation errors. And with AI tools such as Joule for Developers, our coders are 30% more productive, accelerating our innovation pace. Finally, in addition to the internal use of AI, we are rolling out a standardized and automated cloud contract starting this quarter, reducing the time from the quote to provisioning a system to under 24 hours.

All-in-all, our productivity gains help us to decouple top-line growth and costs. They also give us flexibility to hire less than originally planned. And when we hire, we can focus on growth areas with targeted job profiles, for example, in AI. Now, let me conclude, we delivered a strong Q1. Customers seek our advice and solutions in uncertain times, and we have laid a very strong foundation for a resilient company, and we will continue to do so through product innovation, simplification and an even better go-to-market setup. It is difficult to make projections for the entire year, but all the aspects I just mentioned make us confident for the longer term. We are in the right place, we are doing the right things, and this will pay off. At Sapphire, in May, we will go deeper into these areas and look at the next chapters of SAP’s growth story.

I would be delighted to see you all there. And with that, over to you, Dominik.

Dominik Asam: Thank you very much, Christian, and thank you all for joining us this evening. We kick-off 2025 on a high note, driven by the continued acceleration of total revenue and a whopping increase in operating profit in the first quarter. Our current cloud backlog remains healthy despite the volatile and challenging macro environment. This performance reflects the strength of our strategy, the momentum of the cloud ERP suite and the impact of our strict cost discipline, which renders our profitability and free cash flow more resilient. With the 2024 transformation program now concluded, we are well positioned to execute on our priorities this year, including focused investments as we expand our suite-first, AI-first approach throughout our portfolio.

Across industries and organizations of all sizes, from the world’s largest enterprises to growing businesses looking to scale quickly, we continue to see high customer engagement as companies turn to us for end-to-end business transformation. Now, let me provide more details around our financial highlights. Current cloud backlog reached €18.2 billion, up 29%. Cloud revenue grew by 26% year-on-year, supported by the strong performance of the cloud ERP suite, which maintained its high growth momentum with a 33% increase in Q1. It accounted for 85% of total cloud revenue in the first quarter, underlying its strengthening position as a key contributor to our growth. As cloud bookings were again very back-end loaded in the fourth quarter of last year, some cloud contracts which entered current cloud backlog as of year-end 2024, were provisioned only later during the first quarter, so they will only be visible in cloud revenues for a full quarter in Q2.

And the deterioration in macroeconomic conditions continue to weigh on transactional cloud revenues. Software licenses turned out to be surprisingly resilient and decreased by only 10%, but given that Q1 tends to be a small quarter for software licenses, I would caution you not to extrapolate too much from that. Finally, total revenue came in at €9 billion, up 11%. So, now let’s take a brief look at our regional performance. In the first quarter, SAP’s cloud revenue performance were particularly strong in APJ and EMEA and robust in the Americas region. Brazil, Chile, Germany, India, Italy, South Korea, and Spain had outstanding performances, while Canada, China, France, Japan, Singapore, and the US were particularly strong. Now, moving down the income statement, our non-IFRS cloud gross margin for the quarter continued its upward trend and expanded by 2.6 percentage points to 75%, driving cloud gross profit up by 30%.

IFRS operating profit increased to €2.3 billion in the quarter, positively impacted by a restructuring expense decline of €2.2 billion in the context of the 2024 transformation program. In the first quarter, non-IFRS operating profit was up 58% to €2.5 billion, way above the 26% to 30% growth rate we have guided for the full fiscal year 2025, a highly welcome head start to derisk our bottom-line guidance in times of environment, which, I trust you will all agree, has become much more risky. Both IFRS and non-IFRS operating profit growth benefited from the operational efficiencies realized through successful execution of the 2024 transformation program. The IFRS effective tax rate in Q1 was 27.2%, and the non-IFRS tax rate was 29.4%. Operating cash flow in the first quarter was up by 31% to €3.8 billion, and free cash flow increased by 36% to €3.6 billion.

The increase was mainly attributable to the higher operating profit. Finally, basic IFRS earnings per share increased to €1.52, and non-IFRS earnings per share increased to €1.44. So, moving on to the outlook. As you’ve likely seen in the quarterly statement published a little bit earlier today, we decided to leave our 2025 outlook across all metrics unchanged. While our pipeline remains healthy, conversion rates could be negatively affected by further deceleration of current trade disputes. Needless to say that the rapid unwinding of decades of productivity gains driven by the benefits of globalization in the context of an escalating trade war would likely result in a severe global recession. I want to stress that our outlook is not based on such an adverse scenario, but rather assumes conversion rates consistent with prior quarters and years.

In light of the risk of escalation, we remain fully focused on disciplined execution and safeguarding both our bottom-line and free cash flow by prudent cost management and other elements within our control. In summary, Q1 reflects a strong start to the year, highlighted by continued total revenue acceleration and standout profitability. The momentum we continue to see in the cloud ERP suite provides a certain degree of visibility and reinforces our confidence in SAP’s long-term success. As macro-uncertainty persists, we are more focused than ever on disciplined execution, protecting our bottom-line and free cash flow throughout the remainder of the year. Before we move on to the Q&A, I would like to say that we are very much looking forward to welcoming as many of you as possible to our Financial Analyst Conference in May.

As Alexandra mentioned already, and Christian, too, it will take place again in conjunction with Sapphire in Orlando. It is a unique opportunity to do some serious tire kicking of our solution portfolio and ecosystem, and the team and I are very much looking forward to meeting you there in-person.

Alexandra Steiger: All right, thank you, Dominik. And with that, we will now take your questions. I would like to kindly remind you to only ask one question when prompted. Operator, please open the line.

Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from the line of Michael Briest with UBS. Your line is now open.

Michael Briest: I guess I’ll start — thank you. I guess I’ll start with a question on sort of current trading. Some other companies have talked about some disruption at the end of the quarter. Obviously, we’re nearly through April as well. You said your assumption is that historical close rates continue. Is that valid given what you’ve seen in the last few weeks? I know you called out the automotive examples of success. Is there anything else you can give us to underpin the confidence on the cloud revenue guidance, especially given the transactional business, as you mentioned, Dominik?

Christian Klein: Yeah, Michael, I can start, and then please, Dominik, comment as well. I mean, look, I just did travel to the United States, I was in Australia, I was in Korea, Seoul. And when you talk to our customers, also after all the new regulations hit the market, I mean, the conversation really centers around how can we help to gain resiliency in supply chain? How can we help to manage tariffs? I mean, all these, especially the multi-nationals, they have to run a compliant business everywhere in the world. On the sourcing side, how can we pick the right suppliers given all the tariffs which are in place? And then, obviously, what can we do on with the Business Data Cloud you just released which landed extremely well in the market to simulate and to adjust our plans to the new market reality?

So, that actually gives me the confidence. I mean, Michael, what, of course, also came up is the cost for an SAP project. And there we are targeting also with Joule for Developers, Joule for Consultants, which are also again we’re getting really, really good feedback about how can we cut costs in implementing our business suite? How can we accelerate the faster time to value? These are not the days where you can come to a customer and lay down several hundred million dollar project without having also some instant value in the business case. And that actually has resonated really well in the last weeks. The pipeline, also, for the year, as I mentioned, remains intact. We really see that we have solid, really good pipeline for the year. And so far, also not in April, we have not yet seen that there is any deterioration of conversion rates in the pipeline.

But of course, Michael, I mean, who has a crystal ball these days? We are watching the geopolitics very closely and, of course, also observe what is coming.

Operator: The next question is from the line of Ben Castillo with BNP Paribas. Your line is now open.

Ben Castillo: Good evening, and thanks very much for taking my question. Just on the cloud revenue growth decelerated a little from what we saw at Q4, how much of that deceleration was caused by, you mentioned, the later timing of some cloud deals that you signed in Q4? How much of that came from maybe some delayed ramp-ups from some deals? Or how much came from the transactional apps? If you could just help us break apart that slight deceleration? And I guess, as a follow-up, you need a bit of an acceleration here to get back to that guidance growth range for cloud revenue. When can we expect that to come back? Is that something that can come back in Q2 as those Q4 deals start to ramp up, or is that something that needs to happen later in the year? Thank you.

Dominik Asam: Maybe this is also a good opportunity to also answer the transactional revenue question, which has been also raised in the prior question. So, indeed the transactional revenues in Q1 were back to a slight decline. You recall in Q4 we were actually going up a little bit slightly up. So, indeed here, given that this is the most exposed business to macro, not surprisingly, it has also seen a relatively weak performance in the first quarter. On the back-end loading of the transactions, there is a certain lead time for provisioning these cloud deals. So, it’s very clear that when you embark these deals in the backlog at the very end of the quarter in Q4, that maybe January, February, they are not fully effective in revenues, and you then have a step-up in Q2 when it’s full quarter effective.

So, that’s a meaningful delta and has been a little bit of that effect also seen in Q1s of prior years, but not to the same extent as this year. We do think that also in Q2, we’ll see a certain acceleration again because the comps are frankly easier. Let’s not forget that any single quarter in cloud revenue can always be a little bit distorted by what happened in the prior years and quarter in terms of maybe some de-booking. So, for instance, in Q2 last year, we had a hit with a customer that went into a financial distress situation that we stopped booking cloud revenues on, and that, of course, makes then the comps for Q2 easier. So, still, we believe that the CCB is a good indicator of how the next four quarters will look. It’s the kind of contractually committed rolling four quarters ahead.

Yes, we have to take the haircut from transaction revenues, which is maybe a little bit higher than what we had initially expected. And then, it also leaves a question about the macro, which we discussed in the prior question. I mean needless to say that before the upper half of our guidance range to materialize on cloud revenues, we would need to see a pretty benign outcome of these trade disputes, that actually we would need to see some resolutions on these disputes quite quickly and to a large extent, in an adverse scenario, of course, it’s anyone’s guess, as Christian mentioned, what type of GDP impact that might be and I think also that is premature now to try to forecast. So that is a little bit the color I want to give around that. So, not an easy environment, but as Christian mentioned, we are solidly in track.

The fundamental pillars of our growth are stable and customers are grappling for productivity gains and trying to reduce costs with our tools.

Operator: The next question is from the line of Toby Ogg with JPMorgan. Please go ahead.

Toby Ogg: Yeah, hi, and thanks for the question. Perhaps just on the current cloud backlog, so 29% in the quarter stable versus the 29% exit rate in tracking, I know it’s just Q1, but tracking above the current full year guidance for a slight deceleration. Has the current cloud backlog tracked above your expectations in Q1? And if so, what was the driver of that? And then, could you also just give us a sense for what you’re seeing under the surface in the backlog, particularly in March and April across various end markets and customer groups? Are you seeing any different dynamics because of all the tariff uncertainty, with some verticals potentially holding back a bit but others perhaps moving a bit quicker? Or are you seeing very similar trends to what you’ve been seeing over the past few quarters despite all the incremental tariff uncertainty? Thank you.

Dominik Asam: Okay. Maybe on the CCB, it was actually expected because the same technical effect I described with the provisioning lead times is also affecting CCB. If you have these late quarter end closings, they are of course in the backlog, but for the CCB, they might not be for 12 months in the backlog, but maybe for 10 months or 11 months. And then, when you roll it forward to end of March, they are actually in the backlog for a full 12 months plus the ramps included in these deals. So, that was clearly something we’d expected. So, it’s a little bit kind of an artifact I’d say from that back-end loading of the seasonality of Q4 which will normalize. So, we are still fully in line with the guidance we’ve given to a slight deceleration. Also, recall that towards the end of the year, the CCB boost by the acquisition of WalkMe will also fade out. So, we’re very much on track, I’d say.

Christian Klein: Maybe on the…

Operator: The next question is from the line…

Christian Klein: Yeah. On the industry question, do we see differences now in industry, how the pipeline and the conversion rates now unfold, no, I mean you see that in Q1, we signed many auto companies. And to Dominik’s point, in these conversations with the auto companies, I mean, oftentimes the business case is built around supply chain, is built around productivity with AI. It’s also about the change of the business model around order to cash. So, it’s not right to say these industries, which are maybe hit hard now short-term by tariffs now buy less software. No, we are not seeing this correlation yet in the pipeline.

Operator: The next question is from the line of Charlie Brennan with Jefferies. Please go ahead.

Charlie Brennan: Hi there. Thanks for taking my question. Understandably a lot of questions there on the macro and visibility in the business, but can we just touch on product innovation for a moment? There’s, obviously, a lot of focus on the Business Data Cloud. Can you just give us a very simple explanation to how that differs from the original SAP Datasphere? And how do we think about that being incremental to what you’re doing as opposed to just a rebranding of original data strategy? Thank you.

Christian Klein: Happy to do so, Charles. I mean, look, Datasphere was really centered around — by the way, many other offerings in the market were centered around optimizing the technical integration between SAP, our business warehouse, HANA and non-SAP data lakes to avoid replication of data which is costly, cost performance and also imposes a security risk. So, Datasphere was definitely a good step in the right direction. Now, Business Data Cloud is much, much more, and it’s also playing a little bit with the strategy what SAP had in the past around data. In the on-premise world, in BW, we never shared our data module. The data module is actually the holy grail of SAP, our treasure. Now, what we are doing with Business Data Cloud, we are saying, if you are now a retailer and you have consumer data sitting in an SAP order, you have consumer data sitting in the supply chain, in the logistics module, in many places, in CX, commerce, et cetera, but you, for sure, also have consumer data in non-SAP systems, marketing data, other data, social media data, et cetera.

And it was for every single company around the world, a big challenge, how can we match those data? How does it really fit to really come to one customer’s 360, the same is for material, the same for a supplier, the same for an employee. And now, what we are saying is we are sharing our data module, for example, for a customer, and what we are doing with Databricks is we are allowing now customers to match all their customer data that they have semantically. And what does this do? Suddenly, you understand more about your customer end-to-end. This is a real 360 and that doesn’t require an army of IT people, data scientists to make mean of your data. And then, when you think about Business Data Cloud, I mean, obviously, it’s a pure value if you can steer your business and if you can delight your customers with a true understanding of their data.

But then what you can do on AI, I mean we are seeing this in many AI use cases we are building, I mean AI is great technology but what you need — what you also need is high data quality. And now suddenly Joule and our AI agents are not only building and can consume SAP high-quality data, now they consume data products which are combining also semantically non-SAP data. So, I guess you see the strong, strong value. And I have to tell you when we launched RISE, I mean, of course, we saw some momentum at the beginning. When I compare this now to Business Data Cloud, I mean we see at least an equal, if not stronger momentum with regard to pipeline buildup.

Operator: The next question is from the line of Mohammed Moawalla with Goldman Sachs. Please go ahead.

Mohammed Moawalla: Great. Thank you. Hi, Christian. Hi, Dominik. I just had a question, I mean, around, kind of, the number of deals over, kind of, €5 million in the order entry continue to tick up despite the environment. I think it was 54% versus 52% a year ago. When you think of — you talk about close rates, but when you think of perhaps some of these larger deals, are you seeing anything from the conversations with customers that they kind of still want to kind of proceed as planned in terms of size and scope of projects, but when we tend to see some uncertainty, often there can be some shifting and elongation there? So, I’d be keen to kind of get your perspective on whether this is kind of sustainable. And if I could fit in a follow-up just on the FX? Dominik, you’ve assumed $1.08, current rates are $1.14. Any specific reason why you are sort of using the $1.08? Thank you.

Christian Klein: I mean, I can start on the large deals. And indeed, you see a tick up and to also further secured those large deals also in the quarters to come. I mean, we, of course, running an extremely diligent account planning process where we really want to understand the value of a deal, I mean, at quantified value, not only blah, blah, but really quantified value. What does it deliver? Not only TCO, but also ROI. Second, to which C level we are connected? Is the CFO in the loop? Is the CEO in the loop? Is the head of supply chain in the loop? Who is in the loop? IT is great, but we also need the lines of businesses, especially in times like that. And then, when you look into some of the larger deals, I mean, you see it actually every time when we report our total cloud backlog, you see there is a phasing in there.

So, these €5 million plus deals, they are not hitting OpEx wise and right away in the P&L, there is a phasing. And this phasing is natural given the mission-critical nature of SAP projects. You need time for the architects to finalize the architecture, the way how to move to our business suite. You need time to work with the business on the business processes. It’s more than only a commodity business where you move to a new hardware, I mean it’s really about business transformation. And that ramp is, of course, then also then good in times like that where customers, of course, want to see with the ramp of the subscription fee, of course, in the same way the value we are delivering, especially to those large customers. Dominik?

Dominik Asam: On ForEx, of course, a weaker dollar is a headwind for us in the mid to long term, but we have, as you know, a methodology of forecasting at constant currencies. We had $1.08 last year as average exchange rate. So that is what we’ve guided for 2025. Now, with the weaker exchange rate, of course, then the revenues and operating profit would decline. The hedges we are implementing are effective on free cash flow. They are basically below the line on non-IFRS operating profit. And this is why we need that kind of constant currency methodology. But for free cash flow, we’ve actually hedged a large part of the exposure already at much higher rates. So, that’s reasonably protected. The sensitivities are such that for [$0.01] (ph) of euro dollar exchange rate because of the revenue mix and assuming a certain correlation, you would see about €30 million decline in revenues for the full year.

And that’s the total revenues. And on cloud, it’s a little bit more than half of that 55% cloud revenues. And the mix US dollar cloud revenue versus total revenue is not so different. It’s a little bit higher in cloud revenues than in total revenues. And then, OpEx — but OpEx would also kind of decline because of the dollar expenses. We have close to 40% of all expenses in US dollar. So, it’s not a huge exposure, but while we are protected on free cash flow for 2025 to a certain degree, 2026 is more difficult than — because then we would suffer really from the decline in the exchange rate. But I mean, this is why we guided on constant currencies in the past on free cash flow, because it’s really embarking. Also the hedges, it doesn’t make sense anymore.

So, that kind of currency impact will hit us in a lagged fashion once the hedges basically expire.

Operator: The next question is from the line of Adam Wood with Morgan Stanley. Please go ahead.

Adam Wood: Hi. Good evening, Christian. Good evening, Dominik. And congratulations on the first quarter. Maybe just first of all, I think Dominik, you’ve been reasonably clear that there’s a willingness to protect both the profitability and cash flow of the business. Could you maybe, I mean, just actually reiterate that, but also more importantly, maybe just give us a little bit of a feeling for how much flexibility there is there? You obviously come into this year in a great position with headcount down slightly year-on-year and kind of flattish versus the fourth quarter, and how far you’d be willing to go in terms of protecting that if the top-line were to weaken further? And if I could sneak in just a cheeky follow-up on Charlie’s question on the Business Data Cloud?

I mean, we’ve talked about maintenance payments of a [notional €20 million] (ph) going up by 2x to 3x. I mean, in that context, could you give us a feel for how big those Business Data Cloud sales could be if a customer was also to add that into the contract as well as the other things they’re upgrading when they go to RISE? Thank you.

Dominik Asam: Maybe on the profitability, yes, indeed, we are pretty low on headcount. I mean, we’ve seen about 3,000 people leave. We’ve rehired some people, but currently, we probably are looking for a little bit of more back-end loading to see how the situation on the trade dispute will evolve. So, yes, we are talking about, I’d say, a cushion of several thousand employees we can play with without having any major impact now. But at some point in time, we want to invest in important topics like AI, like Business Data Cloud, like the further integration of our portfolio. So, we will make sure that we balance the kind of near-term pressure versus the mid-to-long-term needs to be futureproof. There’s also some more discretionary spending on marketing and topics like that.

But again, I mean, for the time being, I would not see that we throw all that in. We have to watch what’s happening. It’s very unpredictable. But we just want to make the comment there are some levers and we are currently a little bit prudent on how we are going to phase these expenses to make sure that we have some room for maneuver should the situation deteriorate.

Christian Klein: Yeah. And just to close this out, I mean, Dominik is absolutely right. And then, of course, we’re also not running out of ideas business-wise. I mean, when you look at the cloud gross margin, when you look at the TCO of our solutions, the harmonization of the technical stacks, now we are working hard to also further harmonize our delivery, our life cycle management around those solutions. So, we further optimize our HANA cloud database, which by the way, is developing really well, not only underneath our solutions but always also in terms of extensions to our business suite with regard to Clean Core and then obviously also for analytical scenarios. So, we are not running out of operational levers to further improve our cost ratios.

And then, on the Business Data Cloud, look at them, I mean that can really differ a lot. I mean, the first really important lever for big deal sizes is does a customer have a BW system? These BW instances are very, very large, a lot of data, and similar often times to an ERP system. Now, if a customer is convinced not only to lift and shift those BW systems now to the cloud, but really what differentiates Business Data Cloud is the semantic layer. If they go that way, deal sizes can be pretty significant. But we also have other customers, like net new customers. We have customers who didn’t use the BW, and they start rather smaller. They start with our data warehouse, they’re integrating it with our apps, with our business suite. They are trying out two or three data products on the semantical side, and then we go from there.

But in such accounts, obviously, what is great that we are now — can position ourselves in the stack where we probably without Business Data Cloud would have never ever have a chance to land. And then, when you hopefully going to visit us at Sapphire, you’re going to see how we are now building a real marketplace around these data products. I mean, we are not only developing those semantics with our own workforce, we are inviting customers, partners to build those data products and then we, of course, then can also then, of course, increase the footprint in already existing BDC customers over time with these kind of data products.

Operator: The next question is from the line of Jackson Ader with KeyBanc Capital Markets. Please go ahead.

Jackson Ader: Great, thank you. Thanks for taking our questions guys. In the event that there would be some potential disruption from the macro environment in the pipeline conversion rates, do you guys think that it would be maybe cloud migrations or it would be net new activity that would have maybe a bigger impact? I guess, asked in a different way, is there any part of your pipeline that you feel is better insulated from a potential macro disruption than another part of your pipeline? Thank you.

Christian Klein: I mean, as Dominik already shared, I mean, Q1, you saw some factors in the cloud revenue which had a lot to do with the heavy boost in order entry we have seen in Q4 and the time it takes to provision. Now, what Dominik also said is in Q2 you can assume already a slight acceleration of cloud revenue given the strong Q4 which we had on the CCB side. It’s rather the other way around. I mean, obviously, this is now a large, large installed base Q2. It’s also not volume-wise, our biggest quarter. And now for the rest of the year, when you look at the kind of uncertainty we see, obviously, still Q2, partly Q3 will matter for our Q4 cloud revenue performance. Q4 itself will not have a big impact anymore on this year’s guidance because the revenues will come in the next year.

So, the good piece is when you read into this, I mean, there is not now a large swing on cloud revenue and total revenue, still obviously, we assume conversion rates like last year, like the last quarters, and still we are seeing this also happening. Now, with regard to, is it then more net new or installed base? Look, I mean, when I mentioned some net-new customers, I mean, VFS extremely successful. They have outgrown their current ERP by a lot. In order to now reach the next step they have to have a suite which allows them to scale their business. So, in this case customers will buy software. And also in the installed base, I mean it really depends on where does the customer sit. If you are sitting on a very outdated ERP, I mean the time and the value of moving now, I mean, is in my eyes so big that still that the business cases should really actually make sense even if the macro now gets worse.

Now, of course, how much does it get worse? I mean, are we walking into a recession? I mean, then, we are talking about all kinds of scenarios which will, at some point of time, impact every business in the world. But this is hard to predict what we said and this is why given what we see right now, the pipeline, the relevance of our portfolio, we actually remain confident for the rest of the year.

Operator: The next question is from the line of Frederic Boulan with Bank of America. Please go ahead.

Frederic Boulan: Hey, Christian and Dominik. Thanks for taking the question. If I can touch on EBIT and free cash flow, a very strong Q1. If you can discuss some of the moving parts into the rest of the year? Any phasing to bear in mind? We saw strong improvement in cloud margin. Any specific driver there in terms of mix or in private cloud in particular improvement there? And maybe as it leads to free cash flow, you significantly accelerated the buyback in April. You’ve reached more than 90% of the €5 billion plan now. So, what’s next in terms of potentially further expanding your program considering your very healthy balance sheet? Thank you.

Dominik Asam: Maybe on the margin composition, it was quite broad, if you look at the expansion we have achieved. You mentioned the gross profit expansion, which was quite favorable, but also the selling expenses to sales ratio improved massively, the R&D ratio improved and even the G&A ratio which is already quite low and further improved because we could leverage some new technology and really contain headcount growth. Now, in terms of — sorry, the second question was the — okay then, when we went to the free cash flow, well on the free cash flow, yes, we also did very well. But again, I mean I think we can all agree that it would not be prudent to touch the guidance upward, so to speak, on any of these parameters, given the uncertainty we currently see.

Yes, we are going to complete our €5 billion share repurchase program, no doubt about that. And yes, we have to think post end of this year what we’re going to do. You could also say maybe it’s an opportunity when valuations come under pressure that we gobble up one or the other asset, but then we have to see what sellers already adjust their price expectation to a reasonable level. If there is no M&A of any magnitude, then we still have some firepower to launch a new program. So, we don’t see that the cash generation capability of the company is fundamentally changing, and that makes us confident for further capital returns program absent any major M&A moves.

Operator: The next question is from the line of Mark Moerdler with Bernstein Research. Please go ahead.

Mark Moerdler: Thank you very much, and congratulations on the strong start to the year and the reiteration of the guidance. I’d like to look at the question of tariffs more generally, how you think about that impacting your business? And more specifically, given the tariffs that are right now on hardware and servers and data center components, do you see that impacting your cloud gross margins? Is that something that you could pass along to the clients? Any color would be appreciated.

Christian Klein: Yeah, good question, Mark. I mean our strategy is mainly based on a four plus one strategy. So, what do we have? We have four hyperscalers plus our own converged cloud. And with these hyperscalers, I mean, you see the success we are having in the cloud. Obviously, we have closed multi-year contracts which give us some price security. And obviously, given that we are consuming really heavy volume still also today we feel we are really in a solid position when it comes to extending those contracts. And again, we are having four plus one. We also have our own converged cloud. And actually when we are looking at AI and the chips, I mean what we actually seeing is now, of course, before tariffs that the cost for the hardware became, of course, materially cheaper with many new open source modules, with the technology becoming more mature, I mean that helped.

And so, that’s why net-net plus the TCO improvements what I mentioned, I mean all our product owners are incentivized to further bring down the TCO. We have more ideas to come. So, we first of all believe that especially on the hardware side, I mean, we are not purchasing hardware directly so much, we are consuming it oftentimes via the hyperscalers, there we have some kind of price security. We have our own converged cloud, smaller from a volume perspective. And then last but not least, we are not planning now short term. I mean, obviously, everything to be seen under the different macro environment that we have to increase now prices for our customers because of tariffs. We are not seeing this right now.

Dominik Asam: And let’s not forget that the supply chain for data center equipment is largely outside the US. I mean, the components are manufactured outside the US, the assembly of the semiconductors, the assembly of the PCBs. So — but of course, if that escalates and basically there’s trade barriers globally more and more, but let’s not catastrophize at this point in time. We would have a little bit of a small impact in the US because we have also some equipment like smartphones and PCs for employees locally in the US, which would need to be imported from that non-US supply chain into US, but that is not a meaningful number that would kind of change our guidance. So, for the time being, we can cope with this.

Operator: The next question is from the line of Sven Merkt with Barclays. Please go ahead.

Sven Merkt: Great. Good evening. I have a follow-up question on your own infrastructure business. I know you have de-emphasized this a few years ago, but given recent geopolitical events, have you received increased client [interest] (ph) in your own infrastructure offering? And are there perhaps any considerations to revitalize this somewhat or work with additional partners? Thank you.

Christian Klein: Yeah, very good question. And look, I mean, now we have so far not seen existing SAP customers changing the infrastructure because of geopolitical tensions or tariffs. Of course, there are customers now reaching out in one or the other country and saying, “Hey, what would be the cost of moving to a SAP infrastructure or if to any kind of sovereign cloud offerings what we have?” But again, we are not seeing right now that really customers are now taking action, and the outreaches we get are rather few, not many. Now, on sovereign cloud and building up world-class data protection and data security offerings. I mean, you have seen in our Q1 we have signed a few deals, large deals in the public sector, and in Germany, we have NS2, in the United States, a fully independent company of SAP and with a dedicated sovereign cloud offering, which we are heavily investing into for the United States, we have in Australia, Japan, et cetera.

And so, we are building up these capabilities. But you also have to always educate our customers on, especially in the public sector, what sovereignty really means. I mean, sovereignty can mean a lot. You can have data location sovereignty, you have — can have sovereignty when it comes who is touching the data. You can have sovereignty with regard to access of networks to global networks. And so, we are offering different levels. And so far, what we also have seen even in the public sector that it doesn’t always need to have the highest degree of sovereignty. And so that is also a very positive sign that we oftentimes can also use our own data centers or hyperscaler data centers to offer sovereign cloud capabilities.

Operator: The next question is from the line of Keith Bachman with BMO. Please go ahead.

Keith Bachman: Good evening, and thank you very much. I wanted to return to the Business Data Cloud if I could. Is there a way, if you think about a normalization of trends over the next three years of what an average uplift on a client relationship or payments would be? Is it 10%, 20%, something higher? The second part of the question, is there a risk that the Business Data Cloud crowds out or replaces other areas of spend that might be otherwise dedicated to SAP, or is this in your mind purely an additive activity of creating this additional data lake to support the broader ecosystem? And the final part of the question is, is there anything you can speak to on the Business Data Cloud associated with margins? Obviously, Databricks is the underlying engine to the data cloud.

Is it — therefore, is this business really ramps, is it dilutive to margins? And that’s it for me. And congratulations on what I suspect will be a very solid software report relative to a lot of other competing and similar software companies over the next few weeks. Thank you.

Christian Klein: Yeah. So, Business Data Cloud, let’s start from the beginning. Will Business Data Cloud replace other assets in our portfolio? No, we actually in the last years already removed in our legacy stacks, in our acquired stacks a lot of the data warehouse capabilities with our Data Warehouse cloud offering. And so, we are in the process of doing so. But there is now not replacement happening of SAP software because of BDC. Now, obviously, what will happen in the BW space when customers running these large systems, I mean, they are paying maintenance for that. So, similar to the RISE journey of the ERP, I mean, it will — a lot of it will depend on how high the multiples are from on-premise support to cloud revenue.

And there we are pretty confident because we believe the value proposition is strong and we can price this asset with a good margin. Now, on the gross margin, the margin overall of BDC, I mean, obviously, it’s fair to say that Databricks gets a fair share of these deals. Now, that is an okay margin, but not a great margin. Now, the margin of this offering will come via the data products. So, what we are doing underneath the semantic layer is what we did with Datasphere, that is okay, that is delivering value. But what we want to price with a premium is definitely then the semantics, the data products. And there we actually expect to have a very healthy margin of this offering in the years to come, obviously, correlating with the value, what our customers get out of it.

And then last but not least, on your question of BDC, what is the percentage uplift? I mean, look, we are now just starting to deliver the data products. I mean, the technical integration is there, the integration with Databricks is there. Now, what we are now building are the data products. And you can look at our roadmap. So, definitely there will be an uplift. Is it now 10% to 20%? Look, I mean, it’s hard, hard to say. I will definitely say there is absolutely uplift in — uplifting and the data products will become richer per se over the time and then we will have more. So, there is absolutely an uplift in upselling and cross-selling. Now, will this be 10%? Will this be 20%? Really, really hard to say at the point right now. What we can definitely say, the pipeline is developing really well, and the multiples look really healthy.

Alexandra Steiger: Great. Thank you, Christian. And this concludes our call for the day. Thank you for joining us.

Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

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