SAP SE (SAP): A Bull Case Theory 

We came across a bullish thesis on SAP SE on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on SAP. SAP SE’s share was trading at $201.04 as of January 30th. SAP’s trailing and forward P/E were 27.63 and 22.78 respectively according to Yahoo Finance.

SAP SE, together with its subsidiaries, provides enterprise application and business solutions worldwide. SAP continues to demonstrate strong momentum in its cloud business, combining rapid growth with expanding profitability. In Q3 2025, cloud revenue rose 27% year-over-year, marking the fifth consecutive quarter above 25%, while cloud gross margin improved to roughly 75%, driving significant incremental profit.

Total revenue increased 11% to €9.1B, supported by a 27% growth in current cloud backlog to €18.8B. Non-IFRS operating profit grew 19% to €2.6B despite absorbing approximately €200M in one-off headwinds from workforce transformation and legal provisions, and free cash flow rose 5% to €1.3B, prompting management to lift full-year expectations above €8B.

SAP’s competitive advantage rests on its integrated suite approach rather than point-tool solutions, with cloud ERP accounting for 87% of cloud revenue and growing 31%, anchoring customer relationships and pressuring CRM-centric competitors. The company’s strategic differentiation is reinforced by capital discipline, relying on hyperscalers instead of building proprietary infrastructure, and focusing R&D on applications, business semantics, and end-to-end process coverage.

Agentic AI, delivered through SAP Business Data Cloud, is positioned as applied assistants linked to business personas and workflows, producing measurable productivity gains across IT operations, customer service, procurement, and supply chain planning, with defensibility derived from SAP’s control of harmonized enterprise data and process logic.

Challenges remain in backend-loaded bookings, particularly in industrial manufacturing and the public sector, while software license revenue declined 42% as customers shift from on-premise. Management remains constructive, expecting total revenue growth through 2027, with potential acceleration from AI-led RISE migrations in late 2025. Execution discipline, particularly in backlog conversion, will be pivotal to sustaining cloud growth and overall profitability.

Previously, we covered a bullish thesis on SAP SE (SAP) by FluentInQuality in May 2025, which highlighted the company’s foundational role in enterprise software, deep customer stickiness, and strategic AI integration driving cloud transformation. (SAP)’s stock price has depreciated by approximately 31.28% since our coverage due to market volatility and timing of cloud bookings. Sergey shares a similar thesis but emphasizes Q3 2025 financial performance, backlog execution, and near-term cloud growth as key catalysts.

SAP SE is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held SAP at the end of the third quarter which was 32 in the previous quarter. While we acknowledge the risk and potential of SAP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SAP and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.