SAP Q2 Backlog +26% as Ecosystem Becomes Revenue Driver

**Bob Evans** (0:00)
Hello, my friends, welcome back to Cloud Wars Minute. So SAP released its Q2 numbers last week, and a couple interesting things happening there. First of all, strong Q2 cloud revenue growth, 24%, but even higher than that was their backlog growth. Went up 26%, and CEO Christian Klein tied that specifically to the company's transformation started about two years ago to shift more and more the sales effort from direct channel to indirect channel. So fascinating things going on here as the priority for not only making the sale, but also then ensuring that rolls out into a successful AI deployment at the customer site takes hold. So this is I think a big deal here because for a long time SAP handed this primarily on its own. It had resellers whose big concern a number of years ago was, well, what margin am I going to get? What discount do I get? Today, the focus through the efforts of Chief Partner Officer Karl Fahrbach and Klein has shifted very, very much over toward, how do we get to successful outcomes? How do we ensure these AI deployments happen smoothly, rapidly and effectively at the customer site? So, quick overview of some key Q2 numbers for SAP. As I said, Cloud revenue is up 24 percent, it's about $7.2 billion.
Within that, the Cloud ERP Suite was up 27 percent to 6.4 billion, and the current Cloud backlog, that 26 percent jump pushed that to 26.3 billion. Now, that's current. At the end of the calendar year, SAP releases its total Cloud backlog, which is much, much higher than that. That's their current backlog right now. So also, an interesting number was the full year guidance that SAP gave for its Cloud revenue. They said the growth will be for full 2026, somewhere between 23 and 25 percent. I've penciled in here as 24, and that'll come in right at about 30 billion dollars. That is a significant milestone for SAP to achieve if they can get to be a 30 billion dollar Cloud business. Now, they have their traditional business on top of that, but this would be a significant marker for them. Here's what Klein said about the significance of the indirect channel, and the impact it is having there on not only sales, but also again fulfilling at the end to ensure that the customers are having successful business outcomes.
Klein said the growth for indirect channel and Q2 again, significantly outpaced our direct channel growth, and this reflects, he said, successful go-to-market transformation.
I think another mark of the impact that Klein has had, the success he's had at SAP, he has completely revised the company's leadership, its product portfolio, the impression the market has about ERP and what SAP Cloud ERP means, and now the whole notion at the highest level of the autonomous enterprise sinks in. And on top of those things, Klein has also changed how the company goes to market, how customers engage with SAP products and how customers can expect for SAP to fulfill what those customers expect with the right sort of functional expertise, technology expertise, and industry expertise, all the while wrapping it up in a very strong notion of the platform with the governance and security, so forth, rolled in there. So there's a lot that's gone on, I think, looking ahead, and I talk about this some in a detailed article I'll have later this morning on Cloud wars.com that offers more numbers and more perspective here on SAP's Q2. But, you know, SAP's clearly established itself as the growth leader among all the, what we used to conveniently call the enterprise applications vendors. Now there's enterprise applications and agents and AI and data vendors. And this growth streak that they've had in the mid-20s has been very impressive. The others are more in the mid-teens. So I think the biggest challenge that SAP has going forward will come in some form unclear right now from OpenAI and Anthropic and exactly how those companies are going to parlay their early focus on models into the whole agentic AI move in the agents and workflow space. Thanks for being with us here at Cloud Wars Minute. I hope you have a fantastic day.