SAP CEO Christian Klein Talks Strong Results Amid Tariff Uncertainty
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Bloomberg Audio Studios. Podcasts. Radio. News. SAP's first quarter profit topped analysts' estimates, even as the software giants closely watched cloud software revenue came in slightly below projections. Joining me now is Christian Klein, CEO of SAP. Christian, I've been looking through the analysts' notes. Broadly positive in terms of the reaction. Of course, TradeGate is flagging some pretty decent upside for the stock this morning. To what extent is the business contained today?

Going forward, given the trade tensions, given the challenging macroeconomic environment, some analysts saying there is reassurance in these results. Is that sustained through the future quarters, do you think?

Yeah, good morning, Tom. Yeah, indeed, SAP had a very, very good start into the year. We posted strong Q1 results. And look also at the resiliency behind the numbers. I mean, when you look at our current cloud backlog, it's up 29%. That gives us high predictability also for the next 12 months.

Next one is recurring revenue share is about 86% and when you have a recurring revenue share of 86% again you have high predictability how you can deliver your total revenue. And then finally operating profit up 58%. We are driving also a lot of transformation inside SAP AI.

makes us more deficient in coding software, delivering software, and that is also now paying off and this will be also impacting our total year business and that's why we confirmed our guidance for the year. Christian, the US is your most important market. What would a recession in the US mean for your business there and for your customers and clients?

Look, I was just last week in the United States and talked to many customers, which are also impacted already by tariffs. I mean, when they are talking to SAP, what they need is software to helping to manage those tariffs in sometimes over 130 countries in the world. They need software from SAP on the supply chain side to make them more resilient. That's why we see currently still also a very strong pipeline in the United States. Now, obviously, it's hard to predict what will happen

in the next 90 days. So that's why when we are moving into a recession, of course, no company is completely immune against the recession. But again, what we see in the market, what customers are telling us is that SEP is very, very relevant, especially in times like that. And so to be clear, Christian, you're not seeing evidence, significant evidence yet of customers and clients in the US or elsewhere pulling back on spending at this point.

No pullback on spending on SAP. I mean, obviously what they are telling me is, Christian, help me to drive productivity. Give me more AI on asset management, on supply chain. How can I automate several tasks in my back office functions? I mean, that is, of course, what they are now more and more asking for, given that they are under financial pressure. But what we are not seeing yet is that they are actually delaying projects or even cutting projects.

You're also a big vendor to the US government. Have you seen any impact from the cuts by Doge and Musk's team there? Has that had an impact on SAP at all in the US?

We are actually working together really well with many agencies in the United States. We are helping them actually, again, to drive more productivity, to deliver more outcome for the U.S. citizens. And so the collaboration is tight, is good. And actually what they also like is when it comes to AI and our sovereign cloud in Washington, that we are also driving a lot of investments here to help them on their agenda, again, to drive more productivity.

Christian, do you expect, personally, do you expect a recession? And if so, and if not, are you preparing? What steps are you taking to mitigate a slowdown in global growth? Tom, look, I mean, it's so hard to predict. I mean, how often did you wake up in the morning in the last weeks and thought, oh, now everything, you know, turns more to the negative side. The next day, it's actually more positive. So it's so hard to predict, you know, what

All what I can do as the CEO of SAP, we have very, very relevant technology. We need to help our customers to overcome those times of uncertainty. This is what I can focus on. And so far, so good. And we remain confident for the rest of the year.

You touched on AI and I know it's an important part of the business. You're integrating it and you're shipping it as well, Christian. Just broadly, where do you think Europe stands in the competitive race on AI versus China, versus the US?

I mean, Tom, when I see something very positive out of the last weeks, geopolitical-wise, that is definitely that Europe is coming together more strongly. Also with regard to AI, I see strong will now to cut regulations, to harmonize regulations, and that is what Europe needs. We cannot regulate before we innovate.

And we are shipping so many AI use cases, but we are facing in every country so many regulations, which is hard to make business for our customers and for SAP. And we see very positive signs now coming from Brussels that we will see a more united Europe also with regard to digital. So that I see really as a positive.

So you're seeing those signs and you're seeing those positive changes coming through from Brussels. How big is the gap now, the lag between Europe, for example, in the US and China? When do you see, in what time frame do you see that being closed if these changes are made?

I mean, when I look at our auto industry, when I look at chemical retail and compare this, you know, to our customers in China and the United States, I mean, there's definitely a gap. What we need in Europe is not like trying desperately, you know, to bring up another AI company. What we need is to apply AI to be more stronger, more competitive in the industries we are strong at.

And I see now a lot of companies here in Europe really moving forward on transforming their business model, infusing AI to drive productivity, to drive more healthier growth. So I'm seeing that and I'm really hopeful in the next 12 to 24 months when I look at our plans and those ones of our customers in Europe that we can certainly swing the gap to other companies around the world.

Christian Klein, CEO of SAP, thank you very much indeed on the first quarter profit beat and the expectations around Europe.

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