UBS downgraded SAP to Neutral from Buy, citing limited near-term catalysts from artificial intelligence and weak investor sentiment, while raising its price target on the stock to €201 from €164.
SAP shares fell 2.4% in early German trading at 07:10 GMT. The downgrade reflects concerns over the pace of SAP’s agentic AI deployment, with only 17 out-of-the-box AI agents delivered to date and a further 15 in ramp-up. Analysts view SAP’s target of 200 agents by year-end as ambitious, particularly after the company delivered just 10 of more than 40 promised agentic AI scenarios last year. Rising AI token costs have also pressured research and development expenses.
UBS estimates SAP’s cloud backlog organic growth at 24.6% in the second quarter, up slightly from 24.2% at the end of 2025. While SAP continues to guide for a slight slowdown to around 23% at constant currency for the full year, UBS does not rule out 24% growth in the fourth quarter.
The bank noted SAP’s cloud gross margins before stock-based compensation declined for the first time since 2021. SAP also trimmed its fiscal 2026 EBIT guidance by €100 million due to expected dilution from acquisitions. UBS projects SAP’s three-year EPS compound annual growth rate near 20%, implying a PEG ratio below 1.5x.
The Rule of Forty target, combining free cash flow as a percentage of sales with sales growth, is projected to reach 37.0% by 2030, according to UBS—above the consensus of 36.5%. However, the bank no longer expects SAP to achieve this target within the decade. UBS reiterated its preference for Amadeus within the sector.
