Ladies and gentlemen, thank you for being here. Welcome, and thank you for joining the SAP Q2 and Half Year 2025 Financial Results Conference Call. I would now like to turn the conference over to Alexandra Steiger, Global Head of Investor Relations. Please proceed.

Good evening, everyone, and welcome. Thank you for joining us. With me today are CEO, Christian Klein; and CFO, Dominik Asam. On this call, we will discuss SAP's second quarter 2025 results. You can find the deck supplementing this call as well as our quarterly statement on our Investor Relations website. During this call, we will make forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to differ materially. Additional information regarding these risks and uncertainties may be found in our filings with the SEC, including but not limited to, the Risk Factors section of our annual report on Form 20-F for 2024. Unless otherwise stated, all numbers on this call are non-IFRS, and growth rates and percentage point changes are non-IFRS year-on-year at constant currencies. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with IFRS. And with that, over to you, Christian.

Yes. Thank you, Alexandra, and a warm welcome to everyone on the line. Q2 was another very good quarter with our Sapphire conference as the main highlight. Let me start with 2 key messages. First, we are looking at a very solid set of Q2 numbers today. SAP was performing very well across all key financial indicators. Second, uncertainty in global markets from earlier this year remains, but SAP has an excellent pipeline for half year 2 in almost all markets and regions. In a few individual industries impacted by uncertainty, we are seeing extended approval workflows on the customer side, for example, in the U.S. public sector and among manufacturers affected by tariffs. Whatever the market environment may bring, SAP is really well prepared. We are taking big steps in product innovation and rapidly increasing our productivity with Business AI. Before I go deeper into these topics, let's have a look at the Q2 numbers and customer highlights. In Q2, cloud revenue rose 28%, marking an increase of 2 percentage points compared with Q1. The Cloud ERP Suite once again drove this momentum. For 14 quarters in a row, it has been consistently expanding at a rate of over 30%. Total revenue growth also continued to accelerate and reached 12%. Our current cloud backlog grew by 28% in Q2. Despite the currency headwind, it came in at EUR 18 billion. Finally, our Q2 bottom line is a real highlight. Operating profit surged 35%. This is a testament to the strength of SAP's business model and the lasting improvements we achieved in our cost base with our transformation program, which includes the internal adoption of Business AI. The customer stories from Q2 add some nice color to the picture. They reflect the whole spectrum of what SAP has to offer from Cloud ERP for our installed base and net new customers to leading data and LOB solutions to our sovereignty cloud offering and much more. Let's start with our installed base on the RISE journey. In Q2, Alibaba entered into a strategic partnership with SAP with a focus on 2 key areas. First, we will roll out the SAP Business Suite at Alibaba end-to-end, including BTB, Business AI, Ariba, Integrated Business Planning, SuccessFactors, and Emarsys. Second, Alibaba, even more importantly, will become a partner for our RISE and GROW journeys. Together, we will be addressing the huge market potential in China, both among the installed base and net new customers. Other key wins in Q2 were the pharma company GSK and the fashion brands Balmain and Replay. A number of new customers also joined us via the GROW journey. Our wide range of net new customers included the American furniture company Gardner-White and the fitness device maker EGYM. Beyond Cloud ERP, many net new customers are also embracing solutions from the business suite. The U.S. construction company NAPCO and the live marketing company MCH, for example, signed up for HR and finance. In our solution areas and LOBs, business was humming too. For example, nearly 300 cloud customers selected our digital supply chain solutions only in Q2. For example, the airline Delta. Nearly 100 customers selected our customer engagement platform, for example, BMW, who also went live on Digital Supply Chain this quarter, and over 300 customers signed up for our human capital management solutions. The German federal pension insurance opted for SuccessFactors in Q2. And the global cosmetics leader L'Oreal expanded their SuccessFactors footprint as well. Finally, the German Armed Forces signed up for SAP project and resource management, Business AI, Analytics Cloud, LeanIX, and Signavio. Let's now have a quick look at our software and cloud offering. In Q2, the German defense company HENSOLDT and the British defense and security leader BAE Systems were among the customers that embraced SAP's excellent software and cloud offering. The debate on digital sovereignty and the best way to achieve it has picked up speed in recent weeks. SAP stands out as the only vendor that can offer sovereignty over the entire stack from the infrastructure to the application. We also offer customers additional features on top, for example, EU Access, Bring Your Own Key, and Air Gap. Our platform runs on any hyperscaler and many local providers, but we also operate data centers of our own across the world. Our unique capabilities ensure that customers stay in control of their data at all times. They can be sure, regardless of how their local sovereignty requirements evolve, we will be able to meet them. Let me now conclude the customer stories with a very exciting topic, the SAP Business Data Cloud. Many of the Q2 deals I have mentioned so far included BDC as a key component, including GSK, Replay, BAE Systems, and NAPCO. The software company Adobe selected our new data offering too, and we are deepening our partnership with Palantir in the context of BDC. All taken together, this makes for a great start. Only a few months after we launched, the pipeline for Business Data Cloud is skyrocketing. For all our customers in all geographies, we have 1 goal. We want to help them take full advantage of the SAP Business Suite for their company. And with each innovation we add, the Business Suite becomes even more attractive. In Q2, well over half of our cloud order entry volume came from deals that included AI use cases. And every hour, every day, more customers go live. ABB, for example, is using SAP Business AI to bring down the time to create price growth for larger products from 15 days and more to only 1 day. Siemens is using a tool for consultants to speed up the transition to S/4HANA Cloud. And the Australian utility company SA Power Networks leverages SAP Business AI to maintain its vast network of electricity poles in a targeted, efficient manner, for example, with predictive maintenance techniques. With the next generation of innovation now arriving with customers, we expect Business AI adoption to further speed up. In half year 1, we released our first 14 AI agents, for example, an agent for the Commerce Cloud. Instructed via natural language, the agent helps online shop customers find exactly the items they look for. No more clicking through pages of product pictures. The result is higher customer satisfaction and better sales conversion. Other agents released so far help customers create quotes, streamline customer service, solve dispute cases, analyze open receivables, and validate expense reports. By the end of the year, we expect the total number of available AI agents to reach 40. The agents will work across business functions, addressing all buying centers. In finance, for instance, our agents will streamline financial planning, ensure that accruals are automatically calculated, and proactively identify cash shortages. And in supply chain management, upcoming agents will keep production moving, for example, by recommending and onboarding suppliers and proactively responding to shop floor disruptions. As for Joule, our Sapphire announcements are starting to become available to customers. Joule will be available everywhere across SAP and non-SAP systems starting in Q3, thanks to the integration with WalkMe. And it will also be giving answers to everything starting in Q4, powered by our partnership with Perplexity. With regard to data products or the Business Data Cloud, we are making very good progress as well. As of today, we have released more than 100 prebuilt SAP-managed data products covering finance, sales, manufacturing, and logistics. And by the end of the year, we will more than double that, covering our entire Business Suite. These data products underpin our intelligent applications for core ERP, spend, finance, people, customer, and supply chain that bring together data, business emulations, and AI capabilities. Every day, we are expanding our innovation footprint in the data and business AI space. Now coming to our own transformation. Of course, SAP also uses Business AI internally to boost productivity. This is reflected in the solid expansion of our operating profit. We are decoupling expense growth from revenue growth, thanks to our transformation program. Three examples of internal AI use cases. Our digital sales engagement platform, powered by Joule, increases productivity by up to 50% for selected sales roles. Thanks to Joule for SuccessFactors, HR tickets are now resolved in up to 20% less time. And with Joule for developers, coders at SAP are becoming up to 30% more efficient. This is the beginning. It is already clear that AI will further increase productivity at SAP and in many other companies. And it will start to change shops and shop profiles. This is why it is so important to keep evolving and transforming our workforce in a continuous process. As before, this transformation includes a reskilling component, reductions in areas with lower resource demand, and hiring in shop profiles that define the future of our company, such as data and Business AI. To summarize, we achieved an outstanding Q2 despite market uncertainty. Since it is difficult to predict how this market environment will exactly evolve, we continue to focus on what makes us successful in the mid and long term. With our data and AI innovations, we are strengthening our portfolio, and there's more to come. Our AI-enabled go-to-market transformation is moving ahead with speed, and we remain very diligent about simplification. The AI power transformation of our workforce continues. Thanks to ongoing operating efficiencies, we are able to do more with a leaner headcount. All this means that SAP is very well prepared for the second half of 2025 and for the coming year. And with that, I'm handing over to you, Dominik.

Thank you very much, Christian, and thank you all for joining us this evening. As you can see from some of the financial results Christian just shared, SAP delivered another great quarter, highlighted by accelerating total revenue growth and continued strength in both operating profit and free cash flow. This further reinforces the strength and consistency of the execution of our strategy. The ongoing momentum of the Cloud ERP Suite and the impact of our strict cost discipline were again key contributors to this performance. Together, they reflect the resilience of our business model and our ability to deliver consistent results in a dynamic and uncertain environment. Our strategy is working, and our offerings remain mission-critical to customers as they pursue their transformation towards cloud-based business models. Now let me provide more details around our financial highlights. Current cloud backlog reached EUR 18.1 billion, up 28%. Cloud revenue increased also by 28% year-on-year. This was again driven by the strong performance of the Cloud ERP Suite, which continued to deliver 34% growth in Q2. This represents 86% of total cloud revenue, underscoring its role as a foundational part of our cloud business. As we look towards half year 2, we are mindful of the broader environment, including geopolitical developments, notably the ongoing uncertainty about trade policy that has contributed to elongated sales cycles in certain sectors, such as the U.S. public sector and industrial and manufacturing. The sequential 1 percentage point deceleration in current cloud backlog growth is underscoring the dampening effect on bookings in Q2. It is obviously hard, if not impossible, to predict when exactly we'll catch up on the pushouts. Closing these open opportunities will be a focus in half year 2, where we, as you will recall, usually close roughly 2/3 of our annual new cloud business. Unfortunately, we have no crystal ball to reliably predict global trade policy decision-making. And it goes without saying that the longer this uncertainty persists, the more pressure it is likely to put on global trade and our customers' ability to make well-informed decisions. So while capital markets appear to be optimistic and continue to perform at or near all-time highs, we do prepare SAP for less favorable outcomes by focusing on elements within our control to protect our bottom line and safeguard free cash flow in 2025. These priorities will ensure SAP remains resilient and well-positioned regardless of how external conditions evolve. Software licenses revenue decreased by 13% in Q2, in line with the strategy we pursue. The pace of contraction remained relatively stable as customers increasingly advance their transformation journeys with RISE and GROW with SAP towards the cloud. Finally, total revenue came in at EUR 9 billion, up 12%, driven by broad-based strength, particularly within our share of more predictable revenue, which increased to 86%. Now let's take a brief look at our regional performance. In Q2, SAP's cloud revenue performance was particularly strong in the APJ and EMEA region and solid in the Americas. Brazil, Chile, France, India, Italy, South Korea, and Spain had outstanding performance. Now moving down to the income statement. Our non-IFRS cloud gross margin for the quarter continued its upward trend, expanding by 1.8 percentage points to 75.2%, driving cloud gross profit up by 31%. IFRS operating profit increased to EUR 2.5 billion in the quarter, positively impacted by a restructuring expense decline of EUR 0.6 billion as compared to the prior year in connection with the 2024 transformation program. In the second quarter, non-IFRS operating profit was up 35% to EUR 2.6 billion. Both IFRS and non-IFRS operating profit growth strongly benefited from cloud revenue growth, expanding cloud gross margin, and a significant reduction in share-based compensation expenses. In fact, we have been able to reduce share-based compensation expenses by EUR 331 million or 26% in the first 6 months of 2025 as compared to the same period last year by allocating grounds in a more targeted fashion and largely hedging the residual cash settle part of it through April of this year. Recall that in the last year, we had a significant headwind from share-based compensation expenses as the last major cash settle tranches were mark-to-market while our share price increased by roughly 50% in half year 1 of 2024. The IFRS effective tax rate in Q2 was 30.1%, and the non-IFRS tax rate was 30.8%. Operating cash flow in the second quarter was up by 71% to EUR 2.6 billion, and free cash flow increased by 83% to EUR 2.4 billion. The increase was mainly attributable to the higher profitability and the positive development of working capital, lower payouts for share-based compensation, restructuring payments, and income tax payments. Finally, basic IFRS earnings per share increased to EUR 1.45, and non-IFRS earnings per share increased to EUR 1.50. Now let's move on to the outlook. As you've likely seen in the quarterly statement published earlier today, we've decided to keep our 2025 outlook unchanged across all metrics. In summary, Q2 reflects another leap forward for SAP, marked by continued strong momentum in our Cloud ERP Suite, resulting in accelerated total revenue growth and strong margin expansion. These results are a clear indication that our priorities are translating into consistent execution and measurable progress. We remain focused on disciplined execution, cost control, and protecting our bottom line and free cash flow for the remainder of the year. With the first half complete, we are focused on sustaining momentum and closing the year with strength amidst the volatile and uncertain macro environment. Thank you, and we'll now be happy to take your questions.

All right. We will now take your questions. As always, I would like to kindly remind you to only ask 1 question when prompted. Operator, please open the line.

We'll take our first question from Adam Wood with Morgan Stanley.

Congratulations on another good quarter. If I could just maybe dig in on the operating margin and the EBIT growth for the second half of the year. Obviously, you've had a phenomenal first half with margins at around 8% and then 5% in Q1 and Q2. If my back-of-the-envelope is right, it looks as if we're looking for more likes of 2%, 2.5% increases in margins in the second half. Obviously, Christian, you've talked about decoupling revenues and expenses and the benefits of consuming your own technology internally, but I imagine there's some nervousness in terms of how the macro turns out and also some desire to invest for growth. Could you maybe just talk us through how those things play off against each other? How much caution is in there in terms of that big step-down in margin improvement in the second half of the year, please?

Yes, sure. I'm happy to have a stab at that. So first of all, let's not forget that one important factor of the strong performance in operating profit in the first half of the year was that kind of EUR 331 million improvement in stock-based compensation. You recall that we said we want to end up the year at about EUR 2 billion. We had EUR 2.4 billion last year, so we basically said at about EUR 0.4 billion improvement that will come from stock-based compensation and the lion's share of that is kind of hitting H1. The reason being that, as I mentioned in my introductory remarks, that the headwind we had last year was very kind of first half-year centric. So we have kind of much easier comps in the first half than in the second half on that factor. Secondly, we will continue to fine-tune and adjust our workforce. You mentioned the AI transformation being in full swing. So that means that on one hand, there will be hiring, so there are resources we need to get on board to future-proof the company. On the other hand, after having now completed this massive restructuring program in the first quarter, we will probably see, going forward, continuous adjustment, I would call it optimization of a much smaller magnitude. So you can think of the kind of 1% to 2% of workforce annual adjustments. And we cannot rule out that there might be some severance payment for the one or the other position in certain geographies here. So that will also be kind of happening. And that will not be an adjustment to our non-IFRS operating profit because that will be, I always say like brushing teeth going forward, this will not be something that is very special. By doing that, we want to avoid actually having to kind of, every now and then, make a huge restructuring but rather continuously adjust as we move along. So these are the factors that I want to call out. So I would say the full year guidance is solidly on track, so no reason to get overly excited about that. And obviously, the other question is always where exactly will we end up on the cloud revenue side. And yes, I think that protects us also for kind of lower outcomes in case the trade disputes we alluded to would continue to weigh on sentiment here.

Yes. And maybe, Adam, just to build on that, we are just in the planning process for the upcoming years for the next 2 years. And obviously, Dominik and I have given the team also now the task to say how can we further decouple the expense growth from the accelerated total revenue growth we are going to achieve in the next years. And I mean, think about the cloud gross margin. I mean, we just achieved that by economies of scale. An EUR 18 billion backlog signals there is more to come. But when you think about onboarding customers, patching customers, when you think about servicing customers, I mean, there is almost like a digital twin to our operations people who helps to further automate this task by a significant percentage point. And then second, I mean, when you are in support solving tickets, ticket routing, ticket solving, I mean, there's more to come and what we are seeing with Joule and when we are now building these agents, I mean, what we expect is actually that AI will be a further productivity driver also in the years to come, for sure. And that is also, I guess, very important for our credibility. When we go to customers to showcase, hey, this is how SAP wants and this is our transformation. And that is, of course, also our major goal when it comes to margin optimization for the years to come. And obviously then, it's our obligation to always look at our workforce and do our job and do some cynical, very distinct measures on reducing profiles where we don't need the people anymore. But on the other hand, of course, when it comes to agentic AI, you wouldn't believe how many customers are now coming and say, 'Hey SAP, I need Joule. I don't need customer AI use cases. I don't even know how to train all of that and how to improve the outcome.' And this is why we need also, on the consulting side, very dedicated people who can help us to drive the change management with the customers and to implement all of these agents at the business of our customers.

The next question is from the line of Mark Moerdler with Bernstein Research.

Congratulations on the quarter. I'd like to drill a little more on the substantial margin improvement that we saw this quarter. We saw it in cloud gross margin. We saw it in the sales and marketing and R&D as a percentage of revenue. Can you give us a color, Dominik, how you think long term about the sustainability of those improvements, especially as you invest in AI? And how much more room you think there is for continuing to drive that margin improvement?

Yes, sure. I mean, I can say that now with more confidence because as Christian mentioned, we are now kind of starting to sharpen the pencil for the planning exercise for the coming years. And I just always come back and I'm glad to say that won't change. Our operating leverage, i.e., the increase in total expenses versus the increase in revenues will be contained in the range of 80% to 90%. And that is the kind of yardstick for coming years. Now we have been doing much more than that now with the big restructuring. We have executed through Q1 of this year. That was 10,000 jobs being eliminated. As I just stated, while there might be some continuous fine-tuning at a much smaller degree, which will then also not be kind of fully embarked on non-IFRS operating profit, that will enable us to get there. So our confidence level on being able to reach these operating leverage ratios is quite high. And now where exactly we'll end up in that range also for '26, that is something we want to really hone in when we communicate the guidance for 2026. But it's the best kind of rough yardstick I can give you at present for these coming years. And how it's distributed, I mean, we never go into details because we want to keep the flexibility. Sometimes you want to kind of push harder on incentives. Sometimes we want to give more marketing incentives. But the pecking order is still that the biggest percent improvement in operating leverage is in selling expenses. And then there is also still some improvement potential, we believe, on the R&D side and then also some on G&A. On the gross margin, you've seen a pretty favorable development. We were really pleased with the massive expansion we've seen in Q2, 1.8%. That's really good news because we talk about pushing cloud and then also giving transformation incentives. I mean, that's all embarked in that number. So all of that is absorbed and still we kind of come to the 1.8% gross margin improvement. Now that will become a slower, much slower gradient going forward because the one-off extra effects that we were benefiting from in the past might not reoccur. But still that's also part of the kind of grinding up the margin.

The next question comes from Jackson Ader with KeyBanc Capital Markets.

Christian, I'd like to spend a couple of minutes on the Alibaba partnership that you mentioned in your prepared remarks. Just curious, how large is your Chinese footprint today? And I guess, are there any more details or maybe mechanics on the go-to-market motion how this partnership is actually going to work with Alibaba? And maybe how large is that Chinese total addressable market for SAP?

Yes. I mean, the China market, we have to look at it from 2 angles. First, you have to see that 90% of the multinationals, we are running also outside of China doing business in China. Because of the trade conflicts, I mean, obviously, they are looking for solutions to further drive productivity in China for China in their factories, to improve their logistics, to get more supply chain resiliency. But they need to decouple it, to a certain extent, to mitigate risk. And there, of course, Alibaba is now key because we have now also a Chinese partner with us where we can really deliver our cloud in China for China. Then the Chinese customers itself, I mean, there are many, many tech companies who are very open for moving with us to the cloud. They need SAP also to globalize their business. I mean, also, a car manufacturer one like BYD, they started rather small and now they became very big on our platform. And so while, of course, the market is still smaller compared to the U.S. or Germany, actually, the growth we are seeing is quite considerable. And of course, with such a partnership, we definitely want to now see how we can join forces on go-to-market. And it's not only about the large enterprises, it's also about the upper mid-market, which we want to capture and hopefully then also can win together with Alibaba. So I have huge hopes. And then, of course, over time, let's see with Ali. I mean, we see also now customers in Asia, even in EMEA also asking for our partnership with Ali. So let's see what we are going to do, but the first focus is now to make it work in China for China.

I mean, in terms of revenues, we don't disclose China-specific revenues, but it's included, of course, in what we call the rest of APJ, which I just checked is about 10% of our revenues. And of course, not all of that is China. So if you want to pick the middle as a wild guess, you come to mid-single-digit kind of contribution very roughly. And you also see the growth rates for these regions, which are reasonable. But we don't have, by far, the same business size as we have in the United States, where we generated 31% of revenues in Q2.

We'll move on to our next question from Michael Briest with UBS.

Congratulations as well. Dominik, another really good quarter on cash flow. Contract liabilities, I think, the cash inflow is up about EUR 400 million year-on-year. And I know at Sapphire, you were talking about the impact of transformation credits. Can you maybe say whether those are related? And in terms of the unwinding of that transformation credit balance, what size is it today and what impact might it have on cash flow next year?

Yes. Regarding the transformation credit, I want to clarify what it entails. When we sign deals, we sometimes provide a credit to the customer, which acts as a cash voucher to help cover nonrecurring project costs related to transforming or expanding our business lines or migrating to the public cloud, for instance. We then amortize the value of that voucher over the duration of the deal. If utilized early on, there may be an initial negative impact from hedge conversion, but that gets recovered over time. In the end, the overall effect balances out, contributing to mutual cash conversion. We don’t disclose specifics about the size of these credits, as that information is sensitive from a competitive perspective. It's a part of our working capital management. For 2026, I suggest starting with non-IFRS operating profit and factoring in reasonable currency assumptions. We are actively hedging for cash flow and have obtained favorable rates for 2025, but we also must continue hedging for 2026 as the year progresses. We should consider several elements: beginning with non-IFRS operating profit, then deducting taxes at current rates, which should serve as a reasonable projection for 2026. Additionally, there is typically an offset between cash and stock-based compensation, which adds around 1 billion euros. In the first half of this year, we've seen over 0.5 billion euros as a positive contribution to cash conversion from stock-based compensation. I wouldn’t overly emphasize the quarterly fluctuations since they can be volatile or seasonal. There's substantial information in our balance sheet, including contract liabilities. However, going through every detail in this call would be too extensive. I'm preparing some notes to discuss this further offline if anyone is interested. It's important to note that any single quarter can be misleading, and focusing on a rolling 12-month window is more informative, which is why I emphasize the full year. After reviewing the midterm planning, a simplified approach of taking non-IFRS profit, adjusting for taxes, and accounting for the positive impact of stock-based compensation is a good estimation for that timeframe, albeit with some yearly fluctuations.

And Michael, to expand on that, we are currently assessing the business deals we are finalizing. We typically deploy migration credits for large clients undergoing significant transformations. These clients are often completely overhauling their demand forecasting, supply chain optimization, and logistics processes. This redesign process entails initial expenses related to system migration and refining business processes. To strengthen the business case, we offer these migration credits within a limited scope. Importantly, we are also seeing our post-discount prices steadily increase. Our aim, which is crucial for long-term margins and profits, is to achieve consistent quarter-over-quarter price growth, and we are successfully accomplishing that. Despite some desperate strategies from competitors, we are realizing a healthy price increase each quarter. When comparing figures, it’s clear we are strategically utilizing these migration credits to help safeguard our pricing for subscription and recurring cloud revenue.

The next question is from Frederic Boulan with Bank of America.

You started your comments with a fairly prudent message on the macro environment. It would be great if you could discuss how you see the demand impacting CCB in the rest of the year. You highlighted the U.S. public sector and some manufacturing segments impacted by tariffs, but also an overall fairly positive message. So it would be great to understand a bit your assumptions and how we should think about CCB and also cloud with a nice pickup to 28% versus Q2, but any specific factors we should bear in mind for the second half?

Yes, thanks a lot. And look, I mean, first, we clearly said already at the beginning of the year that we always expected a slight deceleration of CCB. So what we said at beginning of the year is now actually also becoming a reality and was planned in, as we honestly, after this massive Q4, we, of course, also came in at a very high base. And Q1 was, of course, definitely a record high. Now when you're looking at half year 2, I mean, first, which gives me the confidence on the guidance is that pipeline coverage. We actually have the same coverage like last year where we had a stellar half year 2. And that, of course, assuming now we're going to hit the same conversion rates like last year, I mean, that is, of course, a very great position to be in. I mean, that is good, strong pipeline on, of course, on a set of very ambitious bookings numbers for half year 2. Now of course, what now comes in is the uncertainty. And the same lag in Q1, I would love to have a crystal ball. I mean, there are some megadeals in where, of course, this creates a swing in CCB on both sides. And obviously, what we need to see, especially in a few sectors like the U.S. public sector, manufacturing industries where customers are impacted by tariffs, I mean, that is, of course, now really an important factor in half year 2. So we have the pipeline, we have really good coverage. And look, the fascinating thing about SAP is also when you're sitting in these forecast calls, I mean, you see the sheer resiliency of this company, and I'm not sure if all of our peers have that. I mean, no matter if 1 geo is performing a little bit soft, we have other geos who are actually performing really well. And then you also see a good swing in the products. I mean, we have a broad portfolio. Last quarter, it was definitely a very good quarter in cash flow optimization. We had a good quarter in spend, et cetera. And now it's really hard to say for half year 2. It's really about do we get all of the deals in with a similar conversion rate like last year? And of course, what we need for that is really predictability on trade and customers who really then sign up for those deals.

Don't forget about the WalkMe impact for the remainder of the year. This is the last quarter, Q2, where we will still see the year-on-year improvement, which will phase out over the next few quarters. In fact, by Q3, it will be finished for CCB since we closed that deal in Q3 of the previous year. At that point, it becomes a direct comparison, which is roughly 1.5 percentage points. So once that occurs, we can expect other changes as mentioned by Christian. Additionally, it's important to remember that we have some capacity to protect the accelerated revenue growth for '26 and '27 due to a very strong mix effect that we are currently experiencing.

The next question is from Charlie Brennan with Jefferies.

Just a couple of quick ones, if I can. Firstly, on the cloud revenues, we don't often see growth matching the CCB. Were there any one-off catch-up payments in the cloud revenues that we should be aware of, or was it a fairly clean quarter? And then secondly, obviously, in the prepared remarks, you were calling out the Business Data Cloud. You gave a couple of examples of contracts where you've got BDC embedded into the contracts. Is there anything you can say in terms of the commercials that you've been able to extract, shed some light on how material it could be for you over time?

I will address the 28% growth for both CCB and cloud revenue. You're correct that cloud CCB growth typically experiences some decline due to transaction revenues. We didn't mention that earlier, but I can point out now that the transactional aspect of the business was disappointing again. This isn't surprising, given that temporary workforce companies have seen their share prices drop significantly over the past six months, and airlines are also facing travel restrictions, sometimes due to policies, creating a challenging environment. This situation has had a dilutive effect. However, the positive note is that the previously mentioned $800 million ticket is becoming less significant in the mix, reducing the dilutive impact on cloud revenue growth. Typically, CCB growth leads to cloud revenue growth, which is somewhat lighter because of the transactional business.

I can address that question regarding BDC. It's encouraging to see how we can utilize BDC in various ways. For instance, BDC is integral to many Wise deals, particularly with our customers, many of whom still operate their BW systems on-premises. They are now recognizing a solid business case with BDC because they see that by shifting BW to the cloud, they can also work with Databricks to harmonize data, develop a semantic layer, and utilize the intelligent applications built on top of that. This enhancement in a Wise deal can increase the annual contract value by about 20% to 30%, depending on the BW system's size and the number of data products the customer uses. Importantly, BDC is not just an addition to Wise; it is now incorporated into all our solutions. For example, when you use SuccessFactors in the future, you'll have our intelligent application for HI, complete with prepackaged content and data products tailored to manage your workforce effectively, including skills and hiring profiles. BDC will also be included in all our line of business deals. Overall, I expect that in a few years, BDC could generate several billion dollars, especially when considering the existing installed base we have on the BW side.

The next question is from Mohammed Moawalla with Goldman Sachs.

Great job on the quarter. I have a question regarding the macro impacts you're experiencing. It's clear you've managed to hold up remarkably well. When we analyze your CCB growth compared to some of your peers, it's still quite impressive. In your opinion, what has changed in the past couple of months that has influenced this situation? You mentioned that large deals could be a limiting factor. I've observed that the percentage of large order entries has decreased slightly. Is that the reason, or is it due to the complexity of some deals prompting customers to opt for smaller arrangements? It would be helpful to understand this better. Are there specific sectors where you're noticing this weakness?

That's a great question. First and foremost, it's important to note that no deals have been lost due to extended deal cycles. Recently, we've observed that customers now require additional approvals from upper management, which has lengthened the deal cycles due to stricter cost controls, especially in certain industries we've mentioned. Looking ahead to the second half of the year, we have clear closing plans for our significant deals, and we are seeing customers engaging positively with the business case. Many view SAP as a way to address their financial challenges stemming from economic uncertainty. However, predicting whether we'll close all lined-up deals, particularly the megadeals, in Q3 is difficult. We've communicated that we anticipate a slight deceleration, and even if we experience an additional percentage point of deceleration in Q3, our total revenue growth could still accelerate. The positive aspect is that our pipeline remains strong, and we aren't losing these deals. We need to be diligent in managing our closing plans and maintain close communication with our customers to ensure we secure these deals. The customer commitment behavior could shift in the second half of the year, but we have a robust pipeline and customers are responding favorably to the business cases we present to them.

The next question is from the line of Ben Castillo with BNP Paribas.

Just coming back to the OpEx trajectory. Obviously, you've just grown EBIT some 40-something percent in H1. I know you talked about the stock comp impact there. But nevertheless, that still implies the operating profit growth slows quite materially in H2. How much of that is just kind of conservatism on your part versus concrete plans to accelerate the investments in the back half? I guess tying that into your comments around headcount, which was only up very modestly, Dominik, you mentioned possible continued optimizations going forward. What's the level of hiring that you feel is appropriate to deliver on the growth acceleration there?

I tried to highlight the factors that will make the second half of the year more challenging compared to the first half. As you pointed out, we've already taken most of the stock-based compensation improvements due to relatively easy comparisons in the first half, which were impacted by significant cash-settled options. This situation will change in 2025. Regarding our investments, we are focused on hiring, and while I can’t specify an exact number, we are looking at several thousand new hires. I also mentioned that ongoing improvements are necessary to avoid large restructuring efforts, like last year's reduction of 10,000 employees, which will require periodic adjustments. We believe Q3 is a good time to implement these changes, which may involve severance payments in certain locations, like Germany. If we consider about 1% to 2% of our workforce, that could mean up to 2,000 people. As for costs, we chose not to disclose specifics as these adjustments will likely be an ongoing theme in the coming years. Therefore, in a way, this represents an upgrade, as we are integrating these changes into our financial outlook without harming our operating profit. This is why the second half appears more manageable. I also want to emphasize the need for caution and prudence regarding H2 performance and our top line, avoiding speculation about our operating profit guidance, especially if we end up leaning towards the lower end of expectations. We are prepared for this scenario to ensure our operating profit remains solid. The same applies to cash flow, which remains robust for the remainder of the year. Overall, I believe it is a manageable task.

The next question is from the line of Johannes Schaller with Deutsche Bank.

One for Christian, maybe. I mean, yesterday, we launched the Made For Germany initiatives. SAP is unsurprisingly part of that and I think you also attended the launch event. Can you maybe talk a little bit about that? Just firstly, maybe in terms of SAP's contribution to this initiative? Are there any also maybe investments that you're planning as a part of that, that's material enough for us to think about? And then secondly, just what you're hoping to get out of this as SAP. It's obviously with EUR 600 billion-plus massive investments planned over the next few years. So talk a bit about potentially the financial impact for you but also what you hope to get out of it financially.

Johannes, I'm glad to address your question. First, in Germany, there is definitely some optimism needed. The initiative announced yesterday is a positive starting point as the private sector is recognizing early favorable actions from our new government, which we want to support while emphasizing Germany as a key investment area for the future. Regarding SAP, we have significant labs in Munich and Berlin where we collaborate extensively with the technical university on supply chain AI. We are also working closely with HPI, renowned for its expertise in AI related to data, and we are involved in research on industrial AI modules. These are just a few of the investment areas we will continue to pursue. It's crucial for us at SAP to advocate for reducing over-regulation in Europe, as it hampers the competitiveness of both the industry and numerous start-ups. While we develop AI in places like Palo Alto and India, we have many tech start-ups in Europe that are already at a considerable disadvantage due to excessive regulations compared to their global counterparts. Finally, we are focused on sovereignty. I've mentioned HENSOLDT and our numerous defense customers in Europe. With this initiative emphasizing digital advancements, we anticipate significant momentum in transforming defense, which is seeing substantial spending. Our defense customers are indicating the need to invest not only in physical assets and production capabilities but also in digitization. This focus on sovereignty is a crucial aspect of what SAP can offer to enhance Europe’s competitiveness, particularly in the public sector and defense.

The next question is from the line of Michael Turrin with Wells Fargo Securities.

Christian, you mentioned Sapphire as the main highlight in Q2. Can you speak more around any business impacts you're seeing on the back of that event? Any commentary around pipeline, new product impacts or adoption trends and how that sets you up for the rest of the year? And just a small follow-on on the U.S. public sector commentary. Are you confident any elongation impacts you're seeing there currently are appropriately factored into how you're looking at the rest of the year from a guidance perspective?

Yes, Sapphire is always a key event of the year for us, as it allows us to build enough pipeline to achieve our year-end targets. This year was no different, and we added several billion to our pipeline following Sapphire. It is consistently necessary each year, but this year, the results were particularly positive. When we examine the pipeline generated from Orlando and later from Madrid, we see strong potential. Regarding the U.S. public sector, conditions have become more challenging, especially with DOGE and specific agencies. There are decision-making processes that influence project advancement, but we are working closely with DOGE and several agencies in hopes of seeing positive outcomes in the latter half of the year. We recognize this area needs attention, and we aim to accelerate sales cycles in the second half. That summarizes the current situation in the U.S. public sector.

Awesome. Well, thank you, Christian, Dominik, and this concludes our call for today. Thank you, everyone, for joining.

Thanks a lot.

Have a great day. Bye-bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.