Shares of SAP jumped 7% to an all-time high after the German software firm forecast growth in cloud revenue and said it will restructure roles for 8 000 jobs to focus on growth in artificial intelligence.
The company said it will spend €2-billion (R41-billion) on the programme to either retrain employees with AI skills or to replace them through voluntary redundancy programmes.
SAP, which expects to end 2024 with a headcount similar to current levels, started experimenting with OpenAI’s ChatGPT as soon as the generative AI technology started gaining traction and announced plans to embed it in its products early last year.
The German company now expects gen AI to fundamentally change its business and has pledged to invest more than US$1-billion by backing AI-powered technology start-ups through its investment arm Sapphire Ventures.
“The right adjustments are being made and the company is being reorganised to prepare it for the age of artificial intelligence,” said investment strategist Jürgen Molnar at brokerage RoboMarkets.
“Even if some employees are likely to fall by the wayside, HR policy is less of a cost issue and more of a strategic one, in which many new opportunities are also likely to arise,” he said. Tech companies including global giants such as Google and Microsoft have embarked on a wave of layoffs in recent months as they look to shift their focus to artificial intelligence software and automation to lighten workloads.
Restructuring costs
Most of the restructuring costs would be in the first half of the year, and contribute €500-million to operating profit in 2025 due to efficiency improvements.
The business software maker separately on Tuesday forecast double-digit percentage growth in revenue from its key cloud business and overall operating profit for the current year after those 2023 figures met or exceeded analyst consensus.
Cloud revenue is expected to increase 24-27% in 2024, SAP said, after reporting 23% growth, adjusted for currency effects, to €13.7-billion in 2023, in line with consensus.
Operating profit rose a currency-adjusted 13% last year, to €8.7-billion, beating predictions by analysts commissioned by the company of an increase of 9%. For 2024, SAP expects that figure to grow between 17% and 21%.
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The company separately adjusted its medium-term outlook on Tuesday to take into account a change in accounting practices, lowering its 2025 operating profit target to €10-billion from about €11.5-billion previously. — Kanjyik Ghosh, Hakan Ersan and Supantha Mukherjee, (c) 2024 Reuters