Goldman Sachs reiterates Buy on SAP, but lowers the 12-month target price to €215

Overview

Goldman Sachs reiterates its Buy rating on SAP following the company’s 2Q26 results. The core view of the report is that despite macro uncertainty from factors such as Middle East tensions, SAP’s current cloud backlog and S/4 HANA product cycle remain resilient, while the sales pipeline after the SAPPHIRE conference was better than expected, providing greater visibility into cloud revenue growth in the second half. At the same time, Goldman Sachs lowers some EBIT assumptions and cuts the target price due to FX, cloud gross margin, operating expenses, and M&A dilution.

Core views

Goldman Sachs believes SAP’s company-specific product cycle can still support relative outperformance versus software peers. 2Q26 CCB growth came in ahead of expectations. Although management indicated FY26 CCB would slow slightly, it maintained revenue guidance and said post-SAPPHIRE pipeline coverage is better than last year. Profit-side pressure comes from higher SBC, AI-related R&D hiring, higher sales and marketing expenses, and dilution from acquisitions such as Reltio, Dremio, and Prior Labs. However, the report still believes SAP can unlock structural cost efficiencies through internal AI applications and business model transformation.

Analysis framework

The report combines 2Q26 results, management guidance, cloud revenue and CCB growth trends, operating profit assumptions, peer valuation multiples, and a reverse DCF framework to update Goldman Sachs’ forecasts for revenue, EBIT, EPS, free cash flow, and valuation from FY26 to FY28, and adjusts the 12-month target price accordingly.

Methodology notes

• Valuation methodsP/E target multiple

  The target price is based on about 22x 3Q27-2Q28E P/E

  Goldman Sachs sets a 12-month target price of €215 and an ADR target price of US$245, based on about 22x 3Q27-2Q28E P/E, lowered from the previous assumption of about 24x 2Q27-1Q28E P/E.

• Valuation methodsReverse DCF

  Market-implied long-term net income growth

  The report states that under the assumption that margins stabilize at 36% in FY30, the market roughly implies about 4% long-term net income growth.

• Factor analysisGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs’ factor profile compares the stock with covered stocks and industry peers across growth, financial returns, valuation multiples, and composite percentiles, providing investment context.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SAPG.DE

  Covered stock

  Strengths

  Resilient CCB growth, a solid S/4 HANA product cycle, a better-than-expected post-SAPPHIRE pipeline, and improved visibility into cloud revenue growth.

  Weaknesses

  FY26 CCB is expected to slow slightly, cloud gross margin is below previous expectations, operating expenses and SBC are high, and acquisitions are dilutive to profit.

  Comparison

  The report says SAP’s growth-adjusted multiple is broadly in line with software peers, but Goldman Sachs expects it to outperform peers due to its company-specific product cycle.

  Risks

  Macro risk, cloud and subscription customer churn, slower-than-expected progress in S/4 HANA or cloud, insufficient cross-sell synergies, rising operating expenses, and management changes.

• SAP ADR

  ADR mapping of the same company

  Strengths

  ADR target price of US$245, implying about 67.4% upside.

  Weaknesses

  ADR target price reduced from US$271 to US$245.

  Comparison

  Directionally consistent with the target price revision for the Germany-listed stock.

  Risks

  Consistent with SAPG.DE’s fundamental risks, with additional exposure to FX and ADR pricing factors.

Key data

• 2Q26 CCB growth26% yoy ex-fx; about 25% organicAbove Goldman Sachs’ 25% and the market’s 24% expectations.
• FY26 cloud revenue growth forecast24.4% yoy ex-fxPreviously 24.0%, raised due to stronger license and subscription revenue performance.
• FY26 EBIT growth forecast14.5% yoy ex-fxPreviously 14.8%, lowered due to lower cloud gross margin and slightly higher operating expenses.
• FY26 operating profit guidance€11.8bn-€12.2bnPreviously €11.9bn-€12.3bn, reflecting about €100mn dilution in H2 from the Dremio and Prior Labs acquisitions.
• Target price€215; ADR US$245Previously €230 and US$271, respectively.
• Current price and upside€128.32, implying 67.5% upside; ADR US$146.38, implying 67.4% upsideFrom the key data table on the report’s front page.
• Valuation multiplesCY27E EV/Recurring revenue about 4x, P/E about 15x, EV/FCF about 13xCorresponding to FY26-30 recurring revenue, EPS, and FCF CAGR of about 15%, 22%, and 17%, respectively.

Impact & implications

The implication of this report for SAP stock is broadly positive: in the near term, better-than-expected CCB and a stronger post-SAPPHIRE pipeline reduce downside risk to cloud growth in the second half; in the medium term, S/4 HANA upgrades, Business AI, and Autonomous Enterprise may continue to support revenue resilience. However, the profit side needs monitoring for AI investment, sales and marketing spending, M&A dilution, and the pace of cloud gross margin recovery. The target price cut indicates more cautious valuation and profit assumptions, but the Buy rating and high implied upside suggest Goldman Sachs still sees an attractive risk/reward profile.

Risks

• Macro risk, as SAP has broad business exposure across multiple regions.
• Customer churn may arise during the cloud and subscription transition, weighing on revenue forecasts.
• S/4 HANA and cloud execution may fall short of expectations, or the company may fail to capture synergies from cross-selling into the installed base.
• Higher operating expenses may further pressure margins.
• Further management changes may affect execution stability.

What to watch

• Whether CCB in 2H FY26 slows only slightly and can maintain about 22% organic constant-currency growth.
• Whether post-SAPPHIRE pipeline coverage can convert into actual cloud revenue.
• Adoption rates and commercialization evidence for Autonomous Enterprise and the Business AI Platform.
• Whether cloud gross margin recovers, and the margin impact from AI hiring, S&M investment, and SBC.
• Whether dilution from acquisitions such as Dremio, Prior Labs, and Reltio on H2 and FY27 profit widens.