TLDR
- UBS downgraded SAP from Buy to Neutral, raising its price target to EUR201 from EUR164
- Analyst Michael Briest cited slow delivery of agentic AI to customers as the key reason
- SAP has delivered 17 out-of-the-box AI agents, with a target of 200 by year end looking difficult
- SAP’s American depositary receipts were down more than 2% in early trading and are down around 13% in 2026
- UBS expects 19% earnings CAGR through 2028 but flagged likely deceleration in cloud backlog growth in H2
SAP stock took a hit Wednesday after UBS cut its rating from Buy to Neutral, pointing to a lack of near-term AI catalysts.
Analyst Michael Briest raised his price target to EUR201 from EUR164, but said SAP is “only delivering agentic AI into customers’ hands slowly.” That slowness, he argued, is limiting how much money SAP can make from AI and pushing some customers toward building their own AI solutions in the meantime.
SAP’s American depositary receipts fell more than 2% in early trading on Wednesday. The stock is now down around 13% in 2026.
SAP has delivered 17 out-of-the-box AI agents so far, with another 15 in ramp-up phase. Its target of 200 agents by year end is starting to look like a stretch, according to UBS.
Part of the problem is SAP’s customer base. Many of its largest enterprise clients run multiple ERP instances across different versions, often on private clouds with custom coding. That makes it harder for SAP to deploy ready-made AI solutions at scale.
Four analysts have also revised earnings estimates downward for the upcoming period, according to InvestingPro data. SAP currently trades at a P/E ratio of 27.86, which looks high relative to near-term earnings growth expectations.
Cloud Growth and Free Cash Flow Under Pressure
UBS does expect SAP’s earnings growth to hold at a 19% compound annual growth rate through 2028, driven by the RISE migration cycle. But the firm flagged that a slowdown in cloud backlog growth in the second half of the year is likely.
Free cash flow upside also looks less likely this year compared to the past two years. UBS pointed to signs that utilization of migration credits is weighing on cash generation.
SAP is not alone in feeling the pressure. The wider software sector had a rough Wednesday.
Software Sector Feels the Pain
Zoom Communications fell more than 5% in early trading after its guidance disappointed. Benchmark analyst Matthew Harrigan flagged “unanticipated slowing Online activity” as the issue, while keeping a Buy rating.
Intuit dropped around 2% after its fiscal fourth-quarter results late Tuesday. The stock is down close to 50% so far this year. Its earnings beat expectations, but revenue guidance of 9% to 10% growth this year came in well below last year’s 14%.
Intuit CEO Sasan Goodarzi said the company is focused on gaining market share and accelerating customer growth. “I’m resetting expectations for the company because this is the perfect time to do it, where we can play offense,” he said on the earnings call.
Salesforce, Okta, and Nutanix were all due to report after the close on Wednesday.
SAP’s Q2 cloud growth came in at 24%, in line with expectations, while current cloud backlog growth of 26% beat forecasts. Despite that, operating income missed Wall Street estimates, partly due to merger and acquisition costs.
Bernstein SocGen and TD Cowen both cut price targets for SAP after Q2 results but kept positive ratings. BMO Capital raised its target slightly, while Oppenheimer held its Perform rating.
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