(Bloomberg) -- SAP SE increased its sales outlook for the year to reflect a major acquisition and an accelerating cloud business, as Europe’s biggest software company benefited from increased global IT spending.
New cloud bookings, a keenly watched metric because it indicates future sales growth, grew 25 percent at constant currencies in the first quarter, the Walldorf, Germany-based company said Tuesday. SAP generated sales of 5.26 billion euros ($6.4 billion) in the period, missing the 5.31 billion euro average estimate by analysts.
SAP is off to a solid start to the year, said Knut Woller, an analyst at Baader Helvea Equity Research, citing the raised outlook and a “strong” development of the operating margin. “The peak of the investments is behind us,” he said in an emailed note. Shares gained 3.2 percent -- the most since October 2016 -- in early Frankfurt trading.
SAP this year made its biggest acquisition in more than three years when it bought Callidus Software Inc. for about $2.4 billion, gaining access to new sales analytics and customer engagement tools.
Citing the purchase, the company raised its outlook for the year, saying it now expects non-IFRS sales of as much as 25.3 billion euros, from a previous maximum expectation of 25.1 billion euros. It also hiked its guidance slightly for cloud and software revenue and operating profit.
SAP rose as much as 3.2 percent in early Frankfurt trading, the steepest intraday gain since Oct. 21, 2016. It climbed 2.9 percent, to 89.66 euros a share, as of 9:04 a.m. local time.
Chief Executive Officer Bill McDermott has tried to expand SAP’s cloud-based services to challenge rivals such as Salesforce.com Inc. and Oracle Corp., and serve clients using the software to run sales, manufacturing and human resources functions.
“We’re gaining market share fast and are outpacing our toughest competitors,” McDermott said on a call with reporters.
SAP’s flagship S/4 Hana software added about 400 customers in the first quarter to reach more than 8,300 users, a smaller intake than in the previous three-month period. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.