SAP 2Q26 Preview: S/4 migration reality vs. AI narrative, cloud business growth momentum remains unchanged (Bernstein)
Bernstein released SAP (SAP.GR) 2Q26 forward-looking report, believing that the company's performance will be slightly higher than market consensus and reiterated full-year guidance.
Bernstein released SAP (SAP.GR) 2Q26 forward-looking report, believing that the company's performance will be slightly higher than market consensus and reiterated full-year guidance. The core point of the report is that the "narrative" in the market that AI will completely replace traditional ERP has been exaggerated, while the real growth driver is still the migration of ECC to S/4HANA. Currently, only about 55% of ECC customers have completed the migration, leaving huge room for conversion. AI is seen as a tool to accelerate migration and increase cloud added value, rather than an independent source of revenue (Joule). Investors need to distinguish whether SAP's cloud business growth is driven by AI concepts or supported by solid S/4HANA migration needs. Bernstein prefers the latter, arguing that growth is more sustainable. One sentence conclusion: The core of SAP's growth story is still the deterministic trend of S/4HANA migration. AI plays a "catalyst" rather than a "protagonist". The market may over-interpret its AI narrative, and the fundamentals of the cloud business remain solid. Positive/negative: Positive for SAP (SAP.GR). The market’s expectations for SAP’s AI monetization capabilities may be too high, but the company’s solid cloud business fundamentals are underestimated. As S/4HANA migration continues to advance, performance will most likely support the stock price. Catalysts: 1) 2Q26 financial report release, focusing on the growth rate of cloud revenue (especially Cloud ERP Suite) and cloud Backlog data; 2) the latest progress on S/4HANA migration and AI integration at the SAP Sapphire 2027 conference; 3) S/4HANA launch announcements from key customers (such as large state-owned enterprises).