German Software Giant SAP Sees U.S. Trade Uncertainty Impact Deals
Europe's most valuable company, German software powerhouse SAP, revealed a slowdown in deal signings during the second quarter of 2025, attributing the dip primarily to ongoing trade uncertainties impacting customer decisions in key markets like the United States. Despite these challenges, a recent trade agreement between the U.S. and Japan offers a glimmer of hope for market stability, SAP’s Chief Financial Officer Dominik Asam told CNBC.
Trade Tensions Weigh on Customer Decisions
Asam explained how trade policy upheavals have extended approval timelines for significant contracts, especially within complex sectors such as industrial manufacturing and the U.S. public sector. "In some of the most affected industries, large deals were delayed toward the end of Q2 due to strategic caution by clients," he noted during an interview.
He emphasized that deals haven’t disappeared but higher-level executive sign-offs have created a bottleneck, stalling decision-making. "We need to monitor how rapidly the trade environment stabilizes to regain momentum," said Asam. The recently announced U.S.-Japan trade arrangement—which caps tariffs on Japanese exports to the U.S. at 15%—offers cautious encouragement but it’s too early to declare it a turning point.
Strong Revenue Growth Amid Challenging Macroeconomics
SAP posted a solid 9% year-over-year revenue increase to €9.03 billion ($10.6 billion) in Q2 2025, just shy of analyst consensus forecasts. The firm’s cloud backlog—a crucial indicator of future revenue—soared 22% overall and 28% on a constant currency basis, reflecting sustained demand for its enterprise cloud offerings.
However, that growth was tempered by the euro’s strength against the dollar and ongoing economic uncertainty. SAP warned these factors would likely continue to pressure results in coming quarters, including an anticipated 5-percentage-point drag on cloud revenue growth in Q3 due to currency fluctuations.
Strategic Shift to Cloud and AI Drives Long-Term Potential
Since overtaking luxury powerhouse LVMH in market capitalization earlier this year, SAP has doubled down on transitioning from traditional software licensing to cloud-based subscription services, with innovative applications in artificial intelligence unlocking efficiencies in finance, sales, and supply chain management.
CEO Christian Klein highlighted "strong momentum" fueled by increased public sector spending on national security and digital infrastructure across Europe, positioning SAP well for long-term growth despite short-term headwinds.
Mixed Market Reception and Analyst Outlook
The market response was cautious. SAP shares dipped 3.5% in early trading after earnings, reflecting investor concerns over trade-related uncertainties and currency risks. While Deutsche Bank analysts praised SAP’s robust cloud backlog, AI initiatives, and major client wins—including Alibaba—the sentiment was less upbeat at firms like TD Cowen and Piper Sandler, which trimmed their price targets.
Expert Perspective: Navigating a Complex Geopolitical Landscape
From an American policy standpoint, SAP’s experience underscores the broader dilemma faced by multinational corporations amid shifting trade dynamics under the Biden administration’s continued emphasis on strategic alliances and supply chain resilience.
The U.S.-Japan trade deal, though modest compared to some past agreements, signals a pragmatic move toward tariff stabilization in a region critical for high-value tech and manufacturing industries. For SAP, which relies heavily on U.S. market growth, this could help mitigate some disruptions caused by lingering tariff threats or export controls.
Nonetheless, SAP’s challenges also spotlight another underreported complexity: the ripple effect of macroeconomic volatility on global software investments. CFO Asam’s cautious tone about delayed deals reveals how larger policy shifts at the macro level directly impact corporate IT transformation timelines and spending confidence.
As the tech sector navigates these trade uncertainties, SAP’s progression toward artificial intelligence-driven cloud services could be a blueprint for resilience—leveraging disruptive technologies to optimize client operations as the global economic landscape recalibrates.
Looking Ahead
- Trade Policy Monitoring: Close attention to upcoming U.S.-EU trade negotiations will be critical for SAP and similar firms.
- Currency Fluctuation Mitigation: Strategies to hedge foreign exchange risks are likely to influence financial results in short to medium term.
- Accelerated Cloud Adoption: Sustained client demand for cloud and AI-driven solutions could offset drag from trade uncertainties.
Editor’s Note
SAP’s Q2 earnings reflect the complex interplay between geopolitical trade actions and corporate growth trajectories in the digital era. While the recent U.S.-Japan trade deal offers a tentative path toward easing market anxieties, the prolonged uncertainty surrounding tariffs and currency volatility underscores the precarious balancing act companies face today. Stakeholders should watch closely how evolving policies influence IT investment decisions, especially as AI and cloud computing become central to business resilience and innovation.
What remains clear is that the path forward for SAP—and many global enterprises—hinges on their agility to adapt not only technologically but strategically within a rapidly shifting economic and geopolitical context.
