German software giant SAP embarks on massive restructuring to focus on AI growth



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Summary

German software company SAP SE announces a two-billion-euro restructuring program through 2024.

A total of 8,000 jobs will be affected by the restructuring. The goal is to “ensure that SAP’s skill-set and resources continue to meet future business needs.”

Voluntary severance programs and internal retraining will be the primary means of restructuring. The company expects the number of employees to remain at a similar level until the end of 2024.

The majority of the restructuring costs will be recognized in the first half of 2024 and will contribute €500 million to operating income in 2025 through efficiency gains.

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SAP also intends to focus on growth in AI-driven businesses. The German software company plans to invest more than $1 billion in AI-based technology startups through its venture capital firm, Sapphire Ventures.

“If 2023 was the year when generative artificial intelligence (AI) finally became a consumer reality, this will be the year when AI in a business context takes a big step forward,” says SAP Executive Board member Scott Russell.

SAP beats expectations

For the current year, SAP expects double-digit percentage revenue growth in its core cloud computing business and an overall increase in operating profit. The cloud business is expected to grow by 24% to 27% at constant currencies to €13.66 billion in 2023.

This puts cloud growth at or above the level of key cloud competitors Microsoft, AWS, and Google. However, SAP has a much smaller overall market share and would need to grow faster to catch up with Big Tech.

Last year, operating income increased by 13 percent at constant currencies to 8.7 billion euros. In 2024, SAP expects operating income to grow by 17 to 21 percent.

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