Since its first client in 1972, SAP has hoisted itself up to be the European benchmark for enterprise software. Its solutions cover nearly all business needs, from SMEs to multinationals. While the historical model relied on the sale of perpetual licenses and maintenance, these activities are now losing ground to the cloud.

The launch of the S/4HANA solution in 2015 marked a strategic turning point, with the adoption of a "cloud first" approach, an initiative that resonated with investors. Unlike traditional licenses, the cloud model relies on recurrent payments, ensuring sustainable long-term revenue. This success has propelled SAP to valuation levels rarely seen in Europe, briefly positioning the company as the largest European company by market capitalization.

A near-perfect trajectory, albeit tarnished by the appetite of investors now searching for the collateral victims of AI.

AI as a Catalyst for the Fall?

Attentive readers will have noted: in the stock market, especially of late, a compelling narrative often outweighs the reality of financial results. Like the broader software sector, SAP has experienced a marked decline over the past year, a trend commonly attributed to market fears regarding AI-driven disruption.

However, this trial by intent imposed by the markets clashes with stubborn accounting reality. FY 2025 concluded with growth in revenue, operating margin and cloud income. Q1 2026 is following the same trajectory.

Beyond this market psychology, the exuberance of past valuations calls for a more pragmatic reading. SAP, ServiceNow, Oracle and other sector players were then trading at historic peaks. While the recent correction is linked to the rise of AI, it primarily marks a return to normal, following a period of sector-wide market euphoria.

Clear Skies After the Storm?

This phase of multiple compression should not, however, obscure the key issue: the structural shift towards the cloud. The decline in license-related revenue is largely offset by the strong growth of the cloud business, a trend confirmed by overall revenue growth. Management remains confident in the integration of AI into its solutions. Artificial intelligence already resolves 20% of customer support tickets. Furthermore, the company notes a 30% increase in productivity for its developers using these tools.

In terms of valuation, after a P/E that peaked at 89.2x in 2024, the stock has returned to more reasonable multiples. This retreat has eased the pressure without undermining the company's objectives. This is evidenced by Q1 results and Thales' announcement as the first client for its "trusted cloud" in France. While SAP remains at the heart of the debate, it seems to be moving away from AI-related fears. The company's challenge now lies less in reporting strong results than in its ability to convince the market.