SAP shares have rebounded from the latest drop after a sell-off in the software sector. Should we buy them?

Quotes of German SAP rose sharply after the company's revenue growth from cloud services turned out to be higher than forecasts. Europe's largest enterprise software provider also reaffirmed its 2026 revenue guidance for its cloud business, albeit with a key caveat. SAP's strong performance was a rare positive signal for a market facing a prolonged "software apocalypse. "

Shares of SAP at the opening of trading in Frankfurt soared in price by 7%, about the same amount of the company's securities added at the pre-market in the U.S., thus fully recovering the decline of 6.2% at the end of the last trading session on the New York Stock Exchange. Securities of software developers on Thursday, April 23, were under strong pressure: investors hurried to get rid of securities of the problematic sector after the release of confident, but not outstanding quarterly reports of ServiceNow and IBM, writes Barron's.

In turn, SAP reported a 19% increase in cloud revenue in January-March 2026 to €6 billion, compared to Bloomberg's consensus forecast of €5.9 billion. The company's first-quarter profit was €1.72 per share, also beating Wall Street's expectations (€1.65, according to FactSet). The European software market leader reiterated its revenue forecast for the current year - between €25.8 billion and €26.2 billion, above the average estimate for the market (€25.6 billion). However, SAP pointed out that this benchmark is "based on the assumption of a rapid de-escalation of the conflict in the Middle East".

The market will be watching for any negative signals about business dynamics related to the war in Iran and rising energy prices, given the high share of industrial companies among SAP's customers. Thus, any statements from SAP management like "lengthened sales cycles" that could call into question financial guidance for 2026 are likely to trigger a sharp reaction in quotes, Morningstar analyst Rob Hales said this week. In his view, SAP is now severely undervalued - the fair price of €265 per unit indicated by the expert is 77% higher than the current price (€150).

HSBC, in turn, raised its recommendation on SAP shares to "buy" (Buy). The bank's analysts believe that the market fears competition from artificial intelligence in vain: its threat, according to HSBC, to the company's business is greatly exaggerated. They explain this by the fact that SAP software is deeply integrated into business processes and has a complex individual configuration for the needs of customers. Nevertheless, the bank lowered its target price for the securities to €182, reflecting a slightly more conservative outlook, TipRanks reported.

The consensus outlook on SAP securities traded in Frankfurt is positive: 23 of 28 analysts who monitor the company's shares recommend buying them (Buy and Outperform ratings), according to Marketscreener data. Another five advise to keep them in the portfolio. The company's average target of €225.76 implies a rise of more than 60% from the previous close.

SAP shares have fallen more than 30% in New York this year on fears that new AI startups will overtake traditional software developers by automating tasks. That threatens to reduce subscribers and revenue. SAP was Europe's most expensive company last year, but now it's not even in the top 10. SAP plans to drop subscriptions in favor of charging for AI consumption. Meanwhile, SAP's early AI tools have already been criticized by customers, Bloomberg recalls.

Analysts at JPMorgan Chase have previously highlighted three major challenges for SAP's business: slowing growth in its cloud order book, a shift to AI consumption-based pricing, and intense competition that requires increased investment. Unlike the well-researched move to the cloud, "the transition to a more consumption-based (AI) revenue model is an area of uncertainty," JPMorgan warned shortly before the SAP report was released. "Today's competition is also moving at a much faster pace than anything we have seen before," experts at the largest US bank stated.

This article was AI-translated and verified by a human editor