UBS downgraded SAP from Buy to Neutral, raising its price target to €201 from €164, as the bank cited limited progress in the company’s agentic AI initiatives and a projected slowdown in cloud backlog growth during the second half of the year.
SAP has deployed 17 ready-to-use AI agents, with an additional 15 in expansion, falling short of its ambition to reach 200 agents by year-end. Analysts noted that the company delivered only 10 of more than 40 agentic AI scenarios targeted for 2025, describing the rollout pace as slow and limiting near-term monetization opportunities. UBS also highlighted that clients may increasingly adopt AI solutions independently, reducing SAP’s competitive advantage.
Cloud backlog growth is expected to moderate to around 23% in constant currency for the full year, down from 24.6% in Q2 and 24.2% at the end of 2025. While SAP projects a slight deceleration, UBS does not rule out a 24% increase in the fourth quarter.
The bank reduced SAP’s fiscal 2026 EBIT guidance by €100 million due to dilution from acquisitions. Cloud gross margins before stock-based compensation declined for the first time since 2021, pressured by higher AI token costs in R&D. UBS also lowered its long-term outlook for SAP’s Rule of Forty metric, projecting 37.0% by 2030, compared with a consensus of 36.5%, indicating a diminished expectation of meeting the target this decade.
Analysts reiterated SAP’s core business as a high-quality enterprise software provider but emphasized concerns over IT spending trends amid geopolitical risks, including the conflict in the Gulf, which management has flagged since earlier this year. UBS concluded by favoring Amadeus within the sector.
