German enterprise software giant SAP's U.S.-listed shares rose about 4.9% after the bell on Tuesday after the company unveiled a restructuring plan that includes cutting about 8,000 employees and released strong performance expectations for 2024 and 2025. SAP said it will "further increase its focus on key strategic growth areas" this year, including artificial intelligence software.
The company said these job changes will take place throughout 2024 "to ensure that SAP's skills and resources continue to meet future business needs" and "the majority of the approximately 8,000 affected positions are expected to be covered by the voluntary furlough scheme and internal reskilling measures."
The company added that it expects headcount to be similar to current levels by the end of 2024 as it invests in growth areas.
SAP expects cloud computing revenue at constant exchange rates to be between 17 billion euros and 17.3 billion euros in 2024, an increase of 24% to 27%. Total cloud computing and software revenue is expected to be between 29 billion euros and 29.5 billion euros, an increase of 8% to 10% after adjusting for currency.
SAP expects adjusted profit this year to be between 7.6 billion and 7.9 billion euros, an increase of 17% to 21% from 2023 at constant exchange rates. Free cash flow is expected to be 3.5 billion euros, including 2 billion euros of costs related to the restructuring plan.
The company expects adjusted operating profit of 10 billion euros in 2025, including 2 billion euros in stock-based compensation expenses. This is €500 million higher than the company's previous forecast. The company now expects free cash flow of 8 billion euros in 2025, up from its previous forecast of 7.5 billion euros. SAP reiterated its previous forecast for revenue of more than 37.5 billion euros in 2025.