Letter from the CEO

 

2023 was another year of exponential developments around the globe. Looking at the geopolitical landscape, new crises surfaced as old ones had not yet settled, and conflicts in multiple regions kept the world on edge. Looking at the climate, record global temperatures and extreme weather events underlined the urgency to accelerate climate action. At the same time, change continued to be the only constant in the tech industry. The year saw incredible leaps especially in generative artificial intelligence (GenAI), and consumer applications rapidly captured the imagination of the global public. It also became clear, though, that the true value of this seminal technology lies in its application to the business world. GenAI will be a powerful tool to transform companies and to make the world economy more sustainable, resilient, and fair overall. At a time when humanity’s challenges become ever more complex, GenAI promises to drastically expand our capacity to find solutions – and to do more with less. 

 

All these global developments have a direct relevance for SAP. Our solutions touch 87% of global commerce and help keep companies, economies, and global business resilient in volatile times. Our sustainability offering enables customers to systematically track key metrics, including carbon emissions, and to take effective action. Meanwhile, SAP is increasingly embedding business AI in all our solutions. We’re doing our part to make the technology a powerful, readily accessible tool for organizations to become more efficient, more sustainable, and more innovative. 

 

Today, SAP is stronger and more relevant than ever. And this is also visible in our business results: In 2023, we met or exceeded our outlook in all key metrics. Current Cloud Backlog surpassed €13.7 billion, growing 27%, while Cloud Revenue went up 23%¹ to €13.7 billion. Non-IFRS operating profit expanded by 13%¹, exceeding our guidance range. What is more, Total Cloud Backlog increased 39%¹ to €44 billion, fostering the Company’s resilience for the years to come. 

 

Our strong portfolio, tightly integrated in both technological and commercial terms, is at the heart of our Company’s growth formula. Hundreds of leading global companies choose “RISE with SAP” every year to move their business processes to the cloud. In March 2023, we introduced “GROW with SAP,” an offering to support the cloud conversion of medium-sized companies. GROW with SAP, too, is proving to be a major success, with over 700 customers signing up in just nine months. In September, then, we launched Joule, SAP’s generative AI co-pilot, to the public. Joule will be infused throughout our cloud portfolio. It will deliver insights from across SAP solutions and beyond, and it will enable users and companies to quickly reach relevant, reliable outcomes in a fast and responsible manner. Strong partnerships and collaborations with leading AI companies – including Nvidia, Microsoft, and OpenAI, as well as Google – will help SAP to further expand the capabilities of our business AI solutions and to maximize their benefit for our customers. 

 

With portfolio transactions, we additionally rounded out our offering. In June, we closed the sale of Qualtrics, aiming to focus our portfolio and to direct investments where they have the biggest impact. And in November, SAP finalized the acquisition of LeanIX, whose enterprise architecture management (EAM) solutions will help ensure that processes, systems, and data yield the right outcome for every SAP customer. In their combination, SAP LeanIX solutions, the SAP Signavio portfolio, and the SAP Cloud ALM solution for application life cycle management form a unique business transformation suite.

 

Driven by the Company’s excellent results and an overall positive market mood, particularly for tech companies, SAP’s stock soared in 2023. Towards the end of the year that also marked the 25th anniversary of our U.S. stock market listing, SAP stock reached a new all-time high at €148.18 per share. The share price increased 43.2% in total over the course of 2023 – more than double the development of the DAX, which gained 19.1%. The Nasdaq-100 appreciated by 54.9% in the same time frame. SAP also regained its position as the most valuable company among the DAX 40 in February 2023, and ended the year with a market capitalization of €171 billion on December 31, 2023.

 

Shareholders will additionally profit from SAP’s strong performance by means of an attractive dividend. Based on the Company’s strong performance in 2023, SAP intends to propose a dividend of €2.20 per share at the annual general meeting in May – up approximately 7% compared to the preceding year. What is more, we announced a €5 billion share repurchase program to be conducted through the end of 2025. In addition to returning capital to shareholders, the program will help to balance out dilution related to employee share programs.

 

Beyond the convincing financial performance, SAP also met its non-financial goals. In 2023, SAP achieved carbon neutrality in its own operations and continues to focus on achieving net zero by 2030 along our value chain. Further, we intend to make an even bigger contribution to sustainability by helping our customers accelerate their respective journeys. Roughly 1,000 new customers chose SAP’s sustainability solutions in 2023 alone. 

 

Our Customer Net Promoter Score (NPS) improved 2 points year over year to 9 in 2023, reflecting that customers are increasingly satisfied with our solutions. Meanwhile, our Employee Engagement Index remained stable at 80% and came in at the upper end of our target range, indicating high levels of employee motivation, affinity towards SAP, and excitement about the Company’s future. The proportion of women in management roles increased to 29.7% (2022: 29.4%) and reached 35.2% in the workforce overall. 

 

On behalf of the entire Executive Board, I would like to thank all SAP colleagues for these excellent achievements in a challenging environment. We had promised to quickly turn SAP into a cloud company – a company with double-digit profit growth – and we can comfortably say: we delivered. 

 

As we move into the future, we’re determined to keep leading the way as a top Enterprise Application company and we’re determined to become the #1 Business AI company as well. This is why, out of a very strong position, we are accelerating SAP’s development. Over the next two years, we’re going to invest almost €1 billion to develop powerful AI use cases for our customers. And, with a dedicated transformation program, we intend to further intensify the shift of resources to business AI, in line with the significant growth potential we see for SAP. The planned program will also include a restructuring component focusing on reskilling and voluntary exits. A decision affecting colleagues this way is never easy – but we truly believe it is the right next step for the company. We’re setting up SAP for a strong, competitive future that all stakeholders will benefit from. 

 

I would like to thank you, dear fellow shareholders, for your trust in SAP in 2023 – and I am excited about the great opportunities and promising future that lie ahead. 

 

 

Sincerely, 

 

Christian Klein

CEO, SAP SE

 

 

¹ At constant currencies

² Pending approval of Annual General Meeting of Shareholders