By Mauro Orru

SAP is scheduled to report results for the fourth quarter on Tuesday. Here is what you need to know:

REVENUE FORECAST: The German business-software group should post total revenue of 9.12 billion euros ($9.58 billion), according to a non-IFRS consensus provided by the company. The forecast represents 8% growth on year.

Cloud and software revenue is also expected to have climbed 8% to 8.01 billion euros, while analysts anticipate a 26% jump in sales from SAP's core cloud business to 4.67 billion euros.

The company behind the Concur travel and expense management platform in October raised its 2024 guidance for cloud and software revenue, operating profit and free cash flow, all on a non-IFRS basis.

SAP, like other European software companies, presents its figures as two sets of numbers. One set is based on the International Financial Reporting Standards--an international accounting method that seeks to provide a global reporting standard--though analysts and investors tend to follow SAP's non-IFRS numbers, which exclude restructuring expenses and acquisition-related charges.

OPERATING PROFIT FORECAST: SAP is expected to report a 14% increase in operating profit to 2.25 billion euros, according to the consensus, generating a 24.6% operating margin.

Baader Helvea's Knut Woller expects SAP to report a solid finish to the year despite a challenging macro environment and the company to deliver on its 2024 promises, he wrote in a note to clients. Citi analysts also said recent conversations they had indicate continued strong momentum for SAP products, they wrote in a note to investors.

SAP shares are up more than 60% over the last 12 months.

WHAT TO WATCH:

-- GUIDANCE: SAP updated its 2025 targets in January last year, when it also announced a restructuring program that is expected to conclude in early 2025. At the time, the group guided for non-IFRS operating profit of approximately 10 billion euros, cloud revenue of more than 21.5 billion euros and free cash flow of roughly 8 billion euros.

Baader Helvea's Woller expects the company to confirm the targets, but specify them in terms of bandwidth with potential ranges. Meanwhile, Citi analysts expect SAP to raise its operating profit target to about 10.5 billion euros and free cash flow forecast to around 8.5 billion euros.

-- AI: SAP launched a restructuring program as it ratcheted up its focus on artificial intelligence. That program is expected to affect 9,000 to 10,000 positions, most of which will be covered by voluntary leave programs and internal re-skilling. Analysts and investors will be on the lookout for any remarks on the program and AI adoption.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

January 27, 2025 07:17 ET (12:17 GMT)

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