Earnings

SAP's new leadership duo delivers in-line results, lifts guidance

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Key Points
  • Europe's most valuable technology company now expects adjusted operating profit to grow by between 8% and 13% in 2020.
  • It confirmed its longer-term ambition of achieving 35 billion euros ($38.8 billion) in revenue in 2023.
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SAP raised its revenue and profit outlook on Tuesday as new co-CEOs Jennifer Morgan and Christian Klein delivered a solid first set of quarterly results at the leading provider of business software.

Europe's most valuable technology company now expects adjusted operating profit to grow by between 8% and 13% in 2020, while confirming its longer-term ambition of achieving 35 billion euros ($38.8 billion) in revenue in 2023.

Non-IFRS operating profit is forecast to reach 8.9-9.3 billion euros this year while revenue is expected to gain 6-8% to 29.2-29.7 billion euros, implying a pickup in profitability.

"We have great expectations for continued efficiency gains and expansion of our profitability in 2020," said Chief Financial Officer Luka Mucic. At the mid-point, margins would increase by 120 basis points to 30.9% in 2020, compared to an 80 basis point gain last year, he told reporters.

Krisztian Bocsi | Bloomberg | Getty Images

In the fourth quarter, non-IFRS operating margin at constant currency was 35.2%, up a percentage point from a year earlier, and just above a median forecast of 35% in a poll of analysts by Vara Research.

Long-time CEO Bill McDermott stood down last October after a decade, handing the task to Morgan and Klein of completing SAP's transition away from running software at customer sites to hosting its services at remote datacenters.

McDermott's departure came following the entry of U.S. activist investor Elliott, which revealed a $1.3 billion stake in SAP in April of last year.

Speaking to CNBC following Tuesday's earnings, Morgan said that she and Klein had been in regular communication with all shareholders, customers and employees since taking the reins.

"We are listening, we're focused on growth, we're a growth company, we want to be clear about that — we're focused on our margin and being efficient," she told CNBC's Annette Weisbach.

"You'll see we've already made some changes to make sure that we can create better synergies, we brought our sales teams together so we show up better in front of our customers. We're simple, and we get more scale, so we're focused on a lot of the things that all of our investors want us to be focused on and we will continue to listen to all of them."

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—CNBC's Elliot Smith contributed to this article.