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SAP Unveils 2 Billion Euro Reconstruction, AI Focus

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SAP shakes up with €2 billion AI-focused restructure, trimming 8,000 jobs and boosting cloud ambitions.

German software company SAP SE on January 23 revealed a restructuring plan amounting to 2 billion euros ($2.17 billion), which will affect 8,000 positions in the company, Reuters reported. The move will enhance SAP’s focus on the artificial intelligence (AI)-driven business sectors, it said.

The restructuring initiative concentrates efforts on key growth areas, particularly business AI. SAP intends to implement the program mainly through voluntary leave schemes and internal re-skilling measures, expecting to exit 2024 with a headcount similar to the current levels.

With a workforce of over 105,000 employees, SAP anticipates restructuring expenses to impact operating profit, with the majority reflected in the first half of 2024.

Investment in AI, Cloud Business Forecast

SAP envisions a significant transformation in its business through generative AI and has committed to investing over $1 billion through its AI-powered technology start-up Sapphire Ventures, an enterprise capital firm.

In a separate announcement, SAP projected 2024 cloud revenue to range between 17 billion euros and 17.3 billion euros. The company also updated its 2025 outlook, forecasting adjusted cloud gross profit of approximately 16.2 billion euros.

The software maker reported its key cloud business revenue at the end of 2023 at 13.66 billion euros, falling short of the forecasted 14.06 billion euros. This follows the company’s previous shortfall in analyst expectations for cloud revenues in the third quarter.

Job Cuts Last Year

In January 2023, SAP said it planned to cut 3,000 jobs, or 2.5 percent of its global workforce, and explore the sale of its remaining stake in Qualtrics as it looks to cut costs and focus on its cloud business.

“We expect only a moderate cost saving impact for 2023, and a more pronounced one in 2024, about 300 million euros to 350 million in run rate savings as of 2024,” Chief Financial Officer Luka Mucic had said in a call with journalists.

While analysts had raised concerns that SAP’s lucrative cloud business might take a hit with other companies tightening their budgets due to economic uncertainty, SAP has been signing more customers.

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