UBS downgraded SAP from Buy to Neutral citing concerns over the company’s pace in delivering ready-to-use agentic AI solutions to clients. The Swiss bank raised its price target to EUR 201 from EUR 164 while maintaining a cautious stance on SAP’s near-term execution risks.
Analyst Michael Briest highlighted SAP’s progress in AI deployment, noting 17 ready-to-use agents delivered so far and 15 in expansion. The bank views the goal of 200 agents by year-end as ambitious given the complexity of SAP’s enterprise resource planning (ERP) client base. Large clients often run multiple ERP instances across private clouds with custom coding that limits system visibility, creating technical hurdles for rapid AI integration.
UBS also flagged potential headwinds in cloud backlog growth, projecting a slowdown in the second half of the year. Free cash flow generation is expected to fall short of prior-year levels as migration credits weigh on profitability. SAP reported 24% cloud revenue growth in line with expectations and a 26% current cloud backlog increase, which topped forecasts. However, operating profit missed Wall Street estimates due to merger-related expenses.
Other analysts adjusted their outlooks following SAP’s second-quarter results. Bernstein SocGen and TD Cowen reduced price targets while maintaining Outperform and Buy ratings, respectively, citing margin pressure. KeyBanc lowered its target on a sector reassessment despite better-than-expected performance, while BMO Capital raised its target slightly on strong cloud growth. Oppenheimer kept its In-Line rating, noting results beat expectations despite industry challenges.
SAP currently trades at a price-to-earnings ratio of 27.86. UBS maintains a long-term earnings growth forecast of 19% CAGR through 2028, supported by the RISE migration cycle, though near-term risks remain elevated.
