By Angela Palumbo

The German software company SAP reported better-than-expected fourth-quarter financial results and raised its full-year operating profit forecast as demand for artificial intelligence systems continues.

SAP reported fourth-quarter earnings of EUR1.40 ($1.46) a share on revenue of EUR9.38 billion. Analysts surveyed by FactSet were expecting earnings of EUR1.33 a share on revenue of EUR9.06 billion.

Operating profit for the quarter was EUR2.44 billion.

" SAP reported another set of strong results this Q4 amidst a volatile macro environment," Stifel analyst Chandramouli Sriraman wrote in a research note on Tuesday.

On top of beating expectations, SAP said it now expects 2025 operating profit to be between EUR10.3 billion to EUR10.6 billion. That's above previous estimates of approximately EUR10 billion.

Tuesday's results come about one year after the company announced a restructuring plan for 2024 that was expected to affect close to 10,000 employees.

"We wanted to massively redeploy these savings into growing end functions like AI, data security, data management -- the topics that are really crucial for driving our future success," Chief Financial Officer Dominik Asam told Barron's on Tuesday.

Cost cutting is a hot topic this week. Chinese tech start-up DeepSeek announced a cheaper to use AI model that sent the stock market into a tizzy on Monday as investors questioned whether or not the massive amounts of spending American tech companies are putting into AI projects is too much. However, some analysts, including BofA Securities' Brad Sills, believe that the "implications of lower cost to run AI models is a benefit to the general software group."

Asam told Barron's that SAP is open to integrating DeepSeek models into its AI Hub if it leads to cost cutting. That would come after due diligence to ensure the Chinese platform is adhering to "stringent data privacy laws," he said.

Despite the beat and raise quarter, American depositary receipts of SAP were down 0.9% Tuesday to $273.37. The Nasdaq was up 1.7%.

Overall, enterprise software stocks have done well over the past few months as businesses are willing to spend big to get generative artificial intelligence technology that could make their teams more productive. American shares of SAP have jumped 54% over the last 12 months.

"The bar is already very high of course, on the expectations," Asam said. "...I think we've delivered another very strong proof point of the SAP success stories."

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 28, 2025 13:06 ET (18:06 GMT)

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