JPMorgan downgraded SAP to Neutral from Overweight and trimmed its price target to €175 from €260, reflecting concerns over the firm’s cloud backlog deceleration. Analysts noted the cloud backlog growth, which peaked in 2024, is expected to slow further as the base of migrated customers matures.

SAP’s current cloud backlog (CCB) growth has moderated significantly since its 2024 peak, with further deceleration anticipated into 2026 as the pool of new enterprise migrations stabilizes. This slowdown raises the risk of weaker subscription revenue and margin pressure in the near term.

SAP flagged a strategic shift toward an outcome- or consumption-based business model intended to drive long-term growth, but analysts warn it could introduce revenue volatility and disrupt the traditional metric relationships investors rely on. The potential model change may complicate forecasting and amplify quarter-to-quarter fluctuations.

Intensifying competition in AI and the need for rapid innovation could require elevated R&D and capital expenditures, increasing pressure on margins. Incumbent software providers like SAP must invest heavily to maintain relevance as the AI cycle progresses and customer demands evolve.