Investment opportunity in a lesser-known AI company, valued at a substantial $23 billion.
SAP SE, the German software powerhouse, has announced plans to invest over €23 billion ($23 billion) into sovereign cloud AI infrastructure across Europe over the next decade. This strategic move comes as Wall Street analysts maintain a generally positive view on SAP's stock, with a consensus rating of "Strong Buy" and average price targets around €285, which is above the current price of approximately €231.
The investment, which includes SAP's own infrastructure, on-site deployments, and the Delos public-sector cloud in Germany, is designed for regulated industries and public agencies. The aim is to ensure sensitive data stays in Europe, meeting strict rules like GDPR and the upcoming EU AI Act. This move may make SAP's stock worth a closer look for investors looking beyond Silicon Valley.
For Q2 2025, SAP reported total revenues of €9.03 billion, up 9% year-over-year (YoY). Profitability was strong; non-IFRS operating profit rose 35% to €2.57 billion, and net cash from operations jumped 71% to €2.58 billion. SAP's stock has rallied about 15% from April lows of €232 due to a Q1 beat and upbeat cloud targets.
SAP's latest quarter shows robust demand for cloud and AI offerings, with cloud subscription and support revenues growing 24%. This growth is a testament to the company's flagship product, SAP S/4HANA, an advanced enterprise resource planning suite, and other enterprise solutions.
Despite recent challenges like macroeconomic pressures and delayed contract closings, the long-term growth outlook driven by AI-related products remains intact. However, 2026 is expected to be somewhat more difficult. Analysts emphasize the need for operational improvements to navigate these challenges.
Wall Street analysts are closely tracking SAP's AI and cloud initiatives and remain bullish on the stock's prospects. The average 12-month price target of €330 suggests an expected upside of about 22% from the current level. SAP still holds roughly €7 to 8 billion in cash and equivalents, partly due to share repurchases and investments.
The investment in a European sovereign cloud aims to strengthen data sovereignty under strict EU privacy rules and position SAP as a central player in Europe's AI transformation. This move underscores SAP's commitment to its European customer base and the growing importance of AI in the region.
In reaffirming its full-year guidance, SAP expects 2025 cloud revenues of about €21.6 to €21.9 billion and roughly €33.1 to €33.6 billion in cloud+software sales. As SAP continues to innovate and invest in its AI and cloud offerings, it remains a compelling choice for investors seeking exposure to the growing AI market.
