(Bloomberg) — SAP SE shares jumped the most in more than three years after the German software company said it’s planning a restructuring that will affect about 8,000 jobs and increase its focus on artificial intelligence. The company projected that operating profit would rise to roughly €10 billion ($10.9 billion) next year as result.
Most Read from Bloomberg
The shares jumped 7.1% at 9:10 a.m. in Frankfurt after earlier jumping as much as 7.5% to €160.58, the biggest intraday gain since July 2020 and a record high.
As part of the restructuring this year, SAP will increase its focus on strategic growth areas, particularly artificial intelligence for business and identify “AI-driven efficiencies” in its operations, it said in a statement late Tuesday. While the company didn’t immediately respond to a request for comment on how many people will lose their jobs, it said in the filing that it plans to end 2024 with a headcount similar to current levels because of “re-investments” in other areas.
Europe’s biggest software company is working to stay competitive with rivals for its base of corporate customers. After spending the past few years transitioning its enterprise business to cloud subscriptions, SAP is focusing on ramping up AI integration into its software, using the technology to help retailers predict orders and pushing out a generative AI assistant, named Joule.
“The next phase is all about an ongoing transformation,” Chief Executive Officer Christian Klein said in an interview on Bloomberg TV. “We are investing in AI, over a billion for the next two years, while of course we’re also applying AI internally. So we will try for higher automation, automation of activities. It’s all about re-skilling and making sure that SAP on its own becomes more productive.”
The German software giant also invested in Aleph Alpha GmbH, Anthropic PBC and Cohere last year, with plans to add more AI services.
In May, SAP also announced a partnership with Google’s cloud computing unit that it said would allow clients to more easily unite data from disparate sources and use AI to improve their operations. The company, along with its software rivals, is working to incorporate AI tools into virtually all of its products.
The restructuring will ensure that the company’s “resources continue to meet future business needs,” and is expected to cost about €2 billion, the “vast majority” of which will be recognized in the first half of 2024, SAP said in its statement. The majority of positions affected will be covered by voluntary leave programs and internal “re-skilling measures.” Full-time workers at the company totaled 107,602 as of Dec. 31.
Separately, SAP reported fourth-quarter revenue of €8.47 billion, surpassing analysts’ estimates of €8.35 billion. Adjusted operating profit was €2.51 billion in the period ended Dec. 31, compared to an average estimate of €2.53 billion.
SAP forecast cloud revenue would be above analyst expectations this year on the top end, as the software company transitions more legacy customers to the faster-growing market.
Cloud revenue is expected in a range of between €17 billion to €17.3 billion this year in constant currencies, the company said. That compares with an average estimate of €17 billion by analysts surveyed by Bloomberg.
Cloud infrastructure services are important for companies seeking to tap technologies like AI, with a Bloomberg Intelligence survey this month finding 72% of businesses plan to increase their IT infrastructure budgets in 2024.
SAP also projected 2024 operating profit of as much as €7.9 billion, an increase of 21% at constant currencies. The company’s profit outlook of €10 billion for 2025 reflects a €2 billion reduction in share-based compensation expenses and €500 million in “incremental” gains from the restructuring.
–With assistance from Vlad Savov and Anna Edwards.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email [email protected] Follow our WhatsApp verified Channel