German enterprise software giant SAP is experiencing its worst trading day in over four years, with shares plunging as much as 11% Thursday after the company reported disappointing cloud contract growth for the fourth quarter. The drop marks SAP's steepest decline since October 2020, when the stock crashed 22% following another earnings miss. The selloff comes as investors digest cloud backlog growth of just 16% - far below the 26% analysts had expected - raising questions about whether the company's massive cloud transformation is losing momentum.
SAP just handed investors a harsh reminder that even enterprise software giants aren't immune to growth stumbles. The German company's stock is heading for its lowest close since mid-2024, erasing billions in market value as Wall Street digests what UBS analysts are calling a clear "disappointment."
The damage centers on SAP's current cloud backlog, which climbed 16% in the fourth quarter to €21.1 billion ($25.3 billion). That sounds impressive until you realize analysts were banking on 26% growth. The 10-percentage-point miss sent shockwaves through the enterprise software sector, with investors questioning whether SAP's multi-year push to migrate customers from legacy on-premise systems to cloud subscriptions is hitting a wall.
SAP tried to cushion the blow by pointing to what it called "large transformational deals" that involved complex revenue recognition issues. According to the company's earnings statement, these massive contracts - which include high cloud revenue ramps in later years and legally required termination clauses - shaved roughly 1 percentage point off the cloud backlog growth. But that still leaves a substantial gap between performance and expectations.
CEO Christian Klein struck an optimistic tone despite the numbers, insisting the Q4 cloud backlog has built a "strong foundation" to accelerate revenue growth through 2027. Yet the company simultaneously guided for cloud backlog growth to "slightly decelerate" in 2026, a mixed message that did little to calm nervous shareholders.
