Sap SE (SAP) September 2026 Conference Transcript

Great. Good morning, everyone. Thank you for joining us. We are delighted to have the CEO of SAP, Christian Klein, join us today at the conference. Christian, thank you for joining us.

Yeah, thanks for having me, Mo.

That's great. Before we start, I just need to read a safe harbor statement, so if you could bear with us. SAP will make forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results and outcomes to materially Additional information regarding these risks and uncertainties may be found in SAP's filings with the Securities and Exchange Commission, including but not limited to the risk factors in section of SAP's 2020 file annual report or Form 20F. So with those sort of niceties out of the way, Christian, maybe to start with, can you give us a sense of the conversations you're having with your customers? You'll come off the back of what were very strong Q2 results, at least certainly given where fears were in the marketplace. What are the kind of key priorities in the context of both the geopolitical uncertainty but all the structural disruption around AI that you're seeing? and maybe your sort of perspective on kind of the discussions of AI deployment in the boardroom and particularly, you know, how do they think about before they commit to suspend those returns?

Yeah, that's a lot in this question. So let's start with the geopolitical situation. I mean, throughout the whole year, we were always mentioning the geopolitical conflicts, especially in the Middle East. I mean, now we are so much into the year that I can say, at least for SAP, We don't see now an impact at a global scale. Obviously, the Middle East is not a small business for us, so it's a very well-won business for SAP, but definitely will not have an impact now on the cloud revenue anymore. Now on CCP for Q4, obviously, it's still a sizable business, but that's why it could have a certain swing, but it's not something what we are heavily concerned about anymore. Now, you know, the board level, the C-level conversations, conversations and I can also shed some light on the conversations we're having with our ecosystem and partners where you also hear a lot about what they are hearing from the market and the customers I mean when we are going to you know send our customers to the cloud I mean 12 months ago 24 months ago it was more about okay Christian let's get it done automate my business processes Let's get rid of the custom code and show me the outcome of the WISE journey. So, you know, how are you going to make it work together with us? Now the C-level conversation is, Christian, I can't wait another 12 months for these business processes to be automated or infused with intelligence via AI. So AI is now in every conversation. Even if the customers in the C-level doesn't have really a concrete idea, they just want to see AI connected to it. And that's why when we are now doing this, it's very important for us to really look into, you know, what, first of all, what business use cases have the best ROI. Customers also are asking more and more for, okay, the TCO token, because they see the token spent running away. And then the last piece, which I feel is a very good sign for all the announcements we did at Sapphire, is that customers who even built some agents with open-weight modules on third-party platforms, they are coming saying, Christian, I'm honestly completely overwhelmed my IT organization by making sure that these agents deliver the right outcome. Accuracy is a big problem oftentimes. And the governance of these agents. I mean, we have so many compliance requirements, audibility of a financial close, payroll needs to run 100%, perfect. So a lot of customers are saying, hey, SAP, can you not do this for us before my IT teams are dying a lot of complexity on running and managing those agents?

So obviously, we're going to delve into AI because there's a lot to talk about with kind of upcoming releases. But maybe just touch on the kind of RISE journey and the kind of S4HANA migration. Can you kind of tell us kind of where you are in that? Because I think CCB is still growing quite healthily. And, you know, how much of that journey is there? And there were some fears, I think, earlier in the year around potential slowing of that migration. But Q2 sort of told us that perhaps that's in decent shape. So we'd love to get a perspective on that.

Being here in San Francisco, it's also memories are coming back at the time when I was the CFO of SuccessFactors. and right after the acquisition we didn't have so many good times also with some other acquisitions not integrated sitting on a stack which was not really scalable not performing i mean that has changed a lot looking at the ccb quotes of 26 in q2 it's not only s4 all lobs are winning market share and i'm so happy that when we did this cloud move a lot of customers were really quite concerned oh how do we do this are the products competitive etc in the meantime we are winning market share in all LOBs which was definitely not the case in two or three years and also the channel is performing even better than our direct sales which I always find a good indicator that we are not only converting install base to the cloud but that also you know we are winning a lot of new family members with grow with sap also here in the valley a lot of startups who want to scale their business say okay sap has localization for over 100 countries the platform works public cloud end-to-end why not sap and also some private investors are saying okay let's really close a framework contract for sap because our startups should just use the best platform to scale their business. So that's good. Now, going forward, we talk a lot about AI, but in my financial plan for the next years, I mean, still there's 60% of our installed base is not yet in the cloud. So there's stuff to come, work to be done. Just this morning, I talked to Julie Sweet from Accenture, and she asked me, Christian, I have so many SAP consultants, how long will this party continue and I said this party will continue but in a different way and form also for the existing for the customers who are now moving to the cloud because they want to be moved to the cloud with AI tooling with the AI use cases which are then showing them the value and not just you know do a technical migration so there is enough potential also on the cloud side the maintenance is coming to an end standard maintenance 2030 is then the end of the extended maintenance and again three years sometimes for such an ERP modernization is not a long time but again it's not even the dominating factor for the next years why to move to the cloud even some customers who moved before my tenure as a CEO to S4 on-prem they see now the value with AI and to make the move to the cloud So yes, there is enough business left to be converted. And yes, I'm not seeing that our subscription business will decline. It's just the opposite. I still see very healthy quotes. Maybe one last piece, which is maybe also important for the audience to understand. When now Lockheed Martin, BMW, and others are coming and say, Christian, we need more features in our S4 system. I said, features? I would love to talk about agents. So how can we convert that? And even there, we are now seeing that, you know, we see a lot of growth also in the subscription business by adding features. But we are not only adding features for spare parts management. We are telling the customer, okay, we can add a feature, but only if there is some data missing to the system of record. And then we want to build an authentic AI layer right away on top. And so you see both the subscription business and as well as, of course, the consumption-related AI business. We'll see close in the future, I'm sure, about that.

So maybe let's turn to kind of AI. You laid the roadmap out at Sapphire earlier this year in May, and obviously you've got the Autonomous Suite, the SAP Business AI platform. Maybe for the benefit of the audience, can it help us kind of understand that sort of vision, what you sort of see in terms of the role SAP plays, particularly as we move to the LOB solutions to more kind of agentic workflows?

Yeah, happy to do so, and I saw also some comments about, is SAP maybe a little bit late on shipping all of these assets now? I don't believe that we are late. We want to get it right. And as I mentioned also before at earnings, there was a learning curve. It's not like that we understood everything perfect right away from the beginning when we started to build the first AI use cases two years ago. Now what is different with the announcements we did this year? I told my product managers, which are all gathered together in our all-in-on AI workshop here in Palo Alto, I told them, hey, when you believe we are developing an agent for document scanning and we are going to win with this agent, you are completely wrong. Our ERP wants the most complex business processes in the world, and we need to solve the most complex challenges of our customers with our agents. So all the agents we are shipping, 400, 200 now in September, will solve complex business challenges, not the low-hanging fruit, which you can easily do with any LLM you pick from the market, first. Second, lessons learned was accuracy. Data, ontology, BDC, super important. I just saw Shrida here on the floor, Snowflake, Ali, Databricks. We don't want to give away our ground tools, our semantics, but we want to make sure that our agents also understand non-SEP data, That the ontology layer, the semantical layer, you can build it with Palantir, but with SAP you get a lot of that out of the box. We have 7 million triples in the ERP system, and this 7 million triples need to be understood. I mean, the data correlations need to be understood via knowledge graph, via the semantical layer, which sits on our new AI platform. So that is the first element. And then the second element, what we really saw in our learning curve is what I mentioned before. A lot of customers came to us and said, Christian, even for the simple AI use case, identity management, authorization. Has the agent now read access, change access, or wide-back access? Compliance requirements, FATRAM here in the U.S. In Germany, we are not short of bureaucracy as well, so there are a lot of requirements as well, which is understood by our ERP, but not yet understood if a customer tries to run those agents on their own. So with the new platform, we are going to manage every agent which is built on this platform. Either it's built by SAP, built by our partners, or built by a customer, which is a huge differentiator next to the context layer because we are saying no matter where this agent needs to operate, in which industry, in which country, we ensure that it's governed and compliant 100%. And then last but not least, some of our peers announced great partnerships with one LLM provider. We believe that with Jules Studio on the new platform, we want to be model agnostic because we don't see that one model always delivers the best price outcome. So we are checking our agents with at least six, seven different models before we go GA. And we don't see that only one model is winning. So this being agnostic, switching the models, delivering the best price outcome is also very key for our customers. So it's the context, it's the governance, which comes via SAP. It's the extensibility. You can build your own agents, partner can build agents, but it's all provided the context of SAP, and it's governed by SAP.

Got it.

So I think you said you've got a kind of important launch coming up in the fall this year, which showed you work.

and you know i think there's a kind of wave of additional kind of use cases coming maybe talk us about the early feedback you received from some of the pilot customers around these products and your expectation of product rollout yeah i mean first just on the commentary on why is sap maybe a little bit late with the new platform we could have shipped the platform already at the beginning of the year no problem but then again every acp customer would need to manage the agents by their own which is a lot of feedback again coming where say we are dying in this complexity we can't do it please do it and now no matter if it's a concur and s4 logistics supply chain cx sales all a-to-a scenarios are managed by acp and i told my product managers we are not going ga as long as we cannot proof that we can manage the whole life cycle. Now what is coming in fall is the new platform. With that comes Choolwork. Others announced their own engagement layer. I don't want to be headless as SAP, so we have Choolwork. You look at Choolwork as you're used to Fiori or the good old SAP GUI. First of all, Choolwork is beautiful. We have 150 customers. They love the audibility, the traceability. They love the context Choolwork has. And they're even saying why should I use even for the non-SEP users? And I really want to emphasize that. Aldi, a German retailer, is saying why would I not use Chulwork for all of my people at Aldi? Because you can automate a power, you can create a PowerPoint, you can automate an Excel report, but you're always getting the SAP context, the SAP data. And wait a second, you are checking authorizations, data access, You are managing these A-to-A scenarios underneath JuleWork. Why is JuleWork not becoming my one engagement layer for the company? In SAP, we have 100,000 people, a bit more. 80,000 are using JuleWork. Feedback is great. And so we are confident of what is coming in for us. So it's the platform, it's JuleWork, it's 400 agents. And again, this morning, I said to Julie, move all your SAP consultants a bit away from typical ERP migrations, use the tooling for migration, AI tooling, but also let them build agents on top of the new platform, because extensibility will be key in such complex scenarios what we are going to deliver. We have seen it in the ERP. We have a lot of customizations, and also the agents, they need partners who are going to extend it, and we need partners building also their own agents on top of our platform.

Okay, that's great. So I wanted to come back to this sort of discussion on the moat, and obviously one of the kind of appreciated aspects is the contextual layer, the knowledge graph, and hence the decision to sort of use a third-party LLM system versus we're going with SAP. Can you expand upon that kind of richness of that sort of data moat? Because you also cross multiple domains, the ability to bring in now non-SAP data. And so ultimately in that conversation with the customer of why kind of dual work works over, you know, kind of building your own DIY solution.

I mean, obviously when the concerns were coming up, also visible in our share price now, we are doing better and confident that this will continue. But obviously I asked my portfolio and my strategy team immediately, I said, okay, which app is really up for disruption? Which app can be easily replaced by any LLM? The answer was we have two solutions in our portfolio where I would say the mode is not really great. Conquer Bookings, which is, God thanks, a very tiny business of our overall Conquer business. Conquer is really used often for travel expense, recording expenses. So a lot of regulations, et cetera, are not easily replaceable and not easy to disrupt. But the bookings part, yes, this is where we now build a partnership with Amex and others. And then the learning business and the success factor, because to create a personalized learning, LLM can do that. Now, even for those two apps, which is only a minor part of our portfolio, for learning, I said, hey, dear success factors team, we need to provide an A-to-A scenario where we connect learning to the total workforce management AI scenario we are building. What skills do you have today? What skills do you want to need to have tomorrow? How is the recruiting agent connecting to that, the learning agent, and so on, to safeguard this business? Because standalone, no chance. And then, obviously, the mode for all the other solutions. I mean, when we build the integration between S4 and all of our acquired entities, I mean, I learned myself how deep the data model is, how deep also the process complexity is between a logistical solution and a finance solution. And so that is, you know, for us, we need to, the teams who are building that ontology layer on our new platform are very experienced domain experts who once built our payroll solution, logistical solution, coupled with data architects, data engineers, who really build this together. And, you know, for us, this is doable. but I don't believe that this is something what you can do with people who are checking today LLMs and is an LLM accurate, yes or no. For me, these are two different people, type of people, type of profiles, type of skills, so I can sleep well enough. Again, we need to get our acts together with the new platform. We need to prove that our agents can work more accurate, that should work is way more accurate. We need to prove that the governance is managed by SAP. And if we can prove that, I mean, we will use all of these LLMs, not one. So they will be partners. But I see not a scenario now where I would now say, oh, my God, this could disrupt my ERP business or the overall portfolio of SAP. It's one plus one is three on our platform and not one plus one is two.

And I just want to touch one other product area. Business Data Cloud has been out for kind of 18 months. It's somewhat been sort of forgotten a little bit, but as we now roll out kind of the agentic workflows and the kind of data consumption drives, where are we in terms of kind of the adoption, the kind of customer feedback? You've obviously signed up now a very comprehensive list of partners as well.

And also I can answer this question also giving a little bit of context to the acquisitions we did in the data space. BTC, obviously, is fundamental for our new AI platform. We see even that for billing assistance. Sometimes you need to check a ticket in a ServiceNow system to see, okay, why is the customer not paying? Ah, there is an escalation, et cetera, et cetera. So extensibility to non-SEP data sources is key. And if a customer now has Databricks or Snowflake, et cetera, they love that they have zero copy. They don't need to change now the data layer. They can just use BDC, and we build a semantical layer as part of the BDC data platform. With Relchio, then we can also govern the data, now also non-SEP data, because data quality is key so that the agents really understand, okay, the whole context of the business and the tasks they need to fulfill. And so these partnerships are great. Now, with Tremio, we did it because take, for example, H&M. We built a shopping assistant. They want to have social media data to not only do the same non-intelligent recommendations on certain products they have on the stock. They want to check the sentiment on social media. They want to check the sentiment coming from other stores, et cetera, et cetera. So they said, no, SAP, I have this data nowhere now. I want to store it, but please give me this AI scenario end-to-end SAP. So we infuse Tremio. if a customer really says, okay, I want to be agnostic. I don't want to use, you know, one of the other data lake providers. So we can do that. And, again, with Relio, I already explained the data governance part. So, yes, BDC is actually a core part of the new platform, of the context layer. And in every AI scenario, we are now going to launch, which we are already implementing. We see, of course, there is a great pull-through now also to the data platform because you need sometimes more data products, sometimes you need a better governance of the data, sometimes you're missing certain parts of non-SEP data. Okay, give me Dremio. It has great TCO. It's built on Apache. So it's all good. And that's why BDC is, for us, connected to our AI platform. And we'll see, of course, a huge upside potential now just by building more and more agents on the new platform.

Got it. So you're obviously on track now on the product rollout. You've got this target of sort of 30% consumption revenue by the end of the decade. Can you maybe give us a sense of now, is we're clearly going to be in an execution phase? You know, what gives you that confidence around kind of hitting that target? And do you need to do anything in your go-to-market in terms of sort of getting there?

Yeah. Yes, we are on track. I mean, I don't want to downplay this. After the cloud transformation, this is a transformation which is equally big for our workforce. I mean, in product management, I told the people, I said, look at these standard AI use cases what we shipped at the very beginning. Everyone can do it. Go out, find the domain experts on the customer side, and design agents in a week, prototype them with AI, and come back and build real AI agents who are solving real problems. And sometimes you are the victim of your own success. When you have a backlog on features, which is enough for the next three years, why would you talk anymore to the domain experts? So some of our product managers needed to learn how to go back to the customer and really design our agents which are really solving complex business problems. And again, the 400 we are going to ship will make a big difference in that. Accuracy, ontology building, accuracy, not shipping features anymore, but really making sure that the agents we are going to ship have the right accuracy. Big change. I mean, data scientists play suddenly a much bigger role than in the past, an even bigger role than in the past. And now on the go-to-market side, think about all of the customers who already moved to the cloud. I mean, these account teams, these sellers will wake up next year and are going to see, oh, my God, the bookings, the app bookings are gone. I see a huge quota now on data and AI, consumption, consumed ACV. We are moving them to an even more consumption-related business model. And so for them, it will be also a change where we are now obviously preparing them also already to do it. The product, the platform is there. We see now it's working, and now we are going to do the shift on the go-to-market side as well. And when you have seen our service revenue, maybe a slight decline. I mean, the reason why is I don't want to sell our consultants anymore to do ERP migrations. Let's give this to our partners. I want to use our consultants to, first of all, making sure we're extending our agents so to really solve even bigger problems, first. And second, to use our data architects, our data engineers, to drive the adoption on the platform much better than to, you know, support any ERP migration project out there because, again, this is something what the partners can do. So also the consultants next to our customer success managers, they will be pulled in much more into this AI project to really make sure that the adoption is there, the value is there, and that we can monetize, obviously, all the stuff what we are going to sell in our AI portfolio.

So I wanted to touch briefly on gross margins, There's sort of the fear out there that even if sort of consumption revenues grow, you know, this will be negative for gross margin. But it's interesting that you're taking this very agnostic approach, particularly with regards to some of the LLM providers. But you also emphasize the point about the more complex business cases.

So give us a sense of kind of how you think that gross margin evolves, both short and sort of medium term. yeah i mean i'm sometimes it's good to have you know an own opinion and own and own vision and own strategy and not just follow what everyone tells you there were people in my supervisory board who told me at three years ago let's bet the whole company on oh may i then everyone told me let's bet the whole company on entropic and now we are so happy that we have a model switching where we can switch the model within a day and we have agents who have seen in the meantime five different models because we see that not one model always you know delivers the best outcome and it can change you know with every with the next generation of models maybe not the one model is leading the other model is leading so switching models is very very important and also for the cross margin because we have seen of course at the beginning when we delivered the first agents the cost margin didn't really look good but then of course we have proven the value now on the new platform customers are really excited about what they see the billing assistant works super smart cash flow we have the first supply chain agents now for the demand and the supply chain optimization the inventory optimization so that works and now we of course what we are seeing is that over time we can heavily improve the tco to also shift you know some of these agents to you know some open-weight modules, because, again, they deliver sometimes as good outcomes as some of the frontier modules. And then, last but not least, if we come to our new engagement layer, it should work. I mean, sometimes customers are also telling us from a sovereignty perspective, let's use Mistwell in Europe. I want to use, and again, the accuracy is good enough, to also do an HR report, create an HR report with success factor data with Mistwell. So absolutely, let's shift to Mistwell. We can cut the cost by five compared to some other frontier modules, and we deliver still a good enough outcome for the customer. So yes, so that's why all of these concerns will have this shift, a negative impact on the cost margin. I don't see it. I mean, obviously, when you land an agent, you should now not be overly aggressive on price. You should first prove the value. But then with the model switching we have in place and that we see the new platform is really providing the value, providing strong context. We manage the customers. We manage the agents for the customers. I mean, we definitely, I have no concerns that the cost margin will see now not a healthy development in the future.

And maybe just touching upon how you are using AI efficiencies internally, you've outlined this sort of 2 billion of efficiencies over the medium term. Maybe talk us through how you've been managing internally, not just cost of interest, but how much potential and runway there is in the company to kind of extract more efficiencies.

Maybe we have also done a little bit of different approach than some of our peers in the industry. You have now not seen a big restructuring from SAP in the last 12 months. Because I told the team, I mean, first of all, we are not running out of, you know, development ask from our customers, co-innovation ask. So despite we have seen a huge increase in development productivity, of course there's a lot of stuff to deliver, first and foremost, all the agents, what we promised. Now still, we also needed to make sure that we could accelerate the delivery of code a lot, 30%, 35% increase. Now still, you need to check the code. You need to check if all data privacy requirements fulfilled, cyber, et cetera. And we need to make sure that we cannot only generate much more code, but that we can also ship it to the customer way more faster. And that's a good example where I said, let's get first the homework done, and we are on a very good track to really get the productivity not only on coding, but really getting the code out to the customer faster, which we are now doing. And then also roll out tool work inside SAP. We are seeing now productivity gains in finance, in HR, and other functions of up to 20%, which is great. And now we are also, of course, having the discussion on, okay, what do we do with this higher productivity? We need to transform our workforce. And with that, you can also expect that by the end of next year, you are not going to see the same kind of SAP workforce like what we have today, just based on the productivity gains what we are seeing.

Got it. So maybe in closing, you know, with every sort of technology cycle, there may be a commoditization of certain processes, but it opens up, you know, new frontiers in terms of from sitting in your seat where your software kind of powers a lot of the enterprises of the world. What are some of those sort of use cases or workflows that you see that kind of excite you and when you speak to your customers that kind of drive that leg of growth?

I mean, just look at myself. When I prepared for this conference here, I asked to work, okay, what are the analyst estimates? What are the concerns? What is the sentiment in our investor base? And connect it to my forecast for half year two. And, you know, I by myself created all of this stuff in the past. And now I have in one minute a rock-solid analysis about what my forecast says, what my pipeline says, what the expectations are. and how confident, how bullish can I be for this conference. And that is, of course, something where you needed an amount of people in Alexandra's organization, in controlling, in FP&A to do that. And that excites me. I mean, the hours I spend in my life to pull this stuff out of SAP is enormous. Or when an Infineon CEO says to me, Christian this order management agent is it's so great because it has so much intelligence on I have not a demand problem as in Finian I have more a supply problem and now this agent makes sure that in thousands of orders coming in every day how to route it to which customer who gives me the best margin and it's unbelievable the kind of intelligence what we're gonna see and then the last example even if the german user group imagining that they are so critical i mean germans tend to be more critical but the user group they are testing now to work and they're saying christian this is unbelievable the user experience the results what are we getting out of that you know we have they even did one you know user group member did a post on linkedin and they say the results are incredible and you see the potential and now with the platform with the agents we are going to ship. We are at the beginning, but I see there is a lot of potential for our customers, and obviously when you then multiply that with the install base, what we are having, it's of course also for us an exciting time.

That's great. I think we're up on time. Christian, thank you so much. Thank you for having me. Thank you everyone for joining us.

Thank you.