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Key Takeaways
- SAP ADRs jumped to a record high after the software company reported revenue that beat estimates and said it would undertake an artificial intelligence-driven restructuring plan.
- The German software company said it would spend 2 billion euros ($2.18 billion) in 2024 on restructuring costs.
- SAP said it expects about half a billion euros in incremental efficiency gains to come in 2025.
American depositary receipts (ADRs) of SAP ( SAP ) surged to a record high Wednesday and were up over 7% in intraday trading after the German software company reported revenue that beat estimates and announced an artificial intelligence (AI) -driven restructuring plan.
SAP said it will spend around 2 billion euros ($2.18 billion) in 2024 to “transform its operational setup to capture organizational synergies, AI-driven efficiencies and to prepare the company for highly scalable future revenue growth.”
While the program may only provide a “minor” cost benefit in 2024, SAP updated its 2025 outlook to reflect about half a billion euros of incremental efficiency gains.
The restructuring is expected to affect 8,000 employees, who SAP said will “be covered by voluntary leave programs and internal re-skilling measures,” with the company anticipating it could finish 2024 with around the same headcount it had at the start of the year.
SAP reported revenue of 8.47 billion euros ($9.24 billion) for the fourth quarter of 2023, up from the same period the previous year and beating analyst estimates compiled by Visible Alpha. However, operating income of 1.9 billion euros ($2.07 billion) was down from the fourth quarter of 2022 and below projections. Earnings per share (EPS) at 1.01 euros ($1.10) also missed expectations, though up from the year-ago quarter’s 0.46 euro (50 cents).
ADRs of SAP were 7.4% higher at $175.44 as of about 2:30 p.m. ET Wednesday following the restructuring news. They’ve gained over 50% over the past year, outperforming the S&P 500 and keeping pace with some of the “ Magnificent 7 ” stocks.