SAP CEO Christian Klein Talks Company's Q2 Earnings

**SPEAKER_1** (0:02)
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**Anna Edwards** (0:07)
Let us talk about some of those corporate earnings then. As mentioned, SAP's cloud revenue grew at a faster pace than analysts expected. As customers move away from on-premise licenses, Europe's largest software company is facing threats to its business from AI, well-documented, of course, as it pushes clients to migrate accounts from locally-installed programs to new products in the cloud. SAP's ADRs, their American Depository Receipts, jumped following the results, and it looks as if we are expecting to see the stock pop a little higher at the start of trade. This morning, Christian Klein joins us, CEO of SAP. Christian, very nice to have you with us, lots to discuss. So the good news in your numbers, cloud revenue better than expected, your customers then migrating to the cloud, that continues to be a trend. What does that tell us about the underlying strengths of the business at this point, Christian?

**Christian Klein** (0:59)
Yeah, good morning, Anna. Yeah, I mean, we are very, very happy with our quarter. I mean, we have even seen an accelerated cloud growth compared to Q1, far ahead of the market of our competitors. And even in the cloud, 90% of the deals also had AI included, so which shows that first, the ERP is absolutely needed, as this is the brain of every company, and then the agents are built on top. And that gives us a lot of confidence with such a strong half year one, especially in such a volatile market environment.

**Anna Edwards** (1:34)
Okay, so the migration to the cloud continues, Christian, but in amongst all of that, we add on, and you've suggested this includes AI, but we add on the concerns around AI. SAP's share price down by some 38% year to date, because of concerns about the so-called SaaSpocalypse, what AI will do to companies such as yours. Do you have a much better understanding now of where the vulnerabilities lie for SAP?

**Christian Klein** (1:57)
Absolutely, Anna. I mean, first of all, it's great to see that also our customers are now turning towards SAP as they understand that the LLMs, they don't understand business process, they don't understand business data, and also they don't understand governance. I mean, you cannot just have agents doing your financial clothes, not adhering to the governance of a company. So, and that is all sitting in our ERP, and with the launch of the Autonomous Enterprise, you know, our customers have seen that SAP can deliver accurate and also compliant AI. And that, of course, also is reflected now in our Q2 numbers, and also gives us a lot of confidence for the second half, where the pipeline actually looks pretty strong.

**Guy Johnson** (2:40)
Christian, can I just pick up on that? Good morning, it's Guy. Open AI is making waves again in this space this week with its new presence model, which is causing, not your direct competitors, but people in the SaaS space to see their share prices come under significant pressure. Now, in some ways, you could argue, this software doesn't directly affect you.
But in some ways, you could argue, further down the road, it might. You've got your dual software. It sits at the integration kind of layer, the orchestration layer, which is quite a valuable space to occupy. And it's looking to target that kind of space. And I'm just wondering how worried you are, to Anna's point, about kind of understanding the risks, about how big the risk could be of OpenAI coming in and controlling that kind of integration layer, that key interaction layer that we're dealing with here. And I'm just wondering whether or not that is a threat that is emerging, a new threat that you see emerging right now.

**Christian Klein** (3:38)
Yeah, I mean, absolutely, Guy. I mean, AI is a disruption to the software industry, without any doubt. But look at SAP. I mean, we are running the world's most mission-critical business processes, complex processes. And there is a lot of domain logic sitting in the ERP.
And when you now look at our AI platform, you can choose any LLM you want. And by the way, not every frontier model is the best for every agent. You can also use open source models, where you have a much better price to outcome. But then what you find on the SAP AI platform, the business AI platform, is also the context layer. So we are building our own AI foundation, where we are building the ontology with our business data, with our business processes. Because again, the LLMs don't understand, are not trained on this logic. And when the two worlds are coming together, this is of course how SAP can really deliver accurate and also very compliant AI.