SAP (XTRA:SAP) Valuation in Focus as AI Partnerships and Product Launches Showcase Innovation Momentum

Deloitte’s recent adoption of SAP Joule for Consultants highlights how SAP (XTRA:SAP) is increasing its commitment to AI-powered platforms to provide real productivity gains for enterprise clients. This news, together with SAP’s broader AI enhancements and ecosystem expansions featured at SAP TechEd 2025, demonstrates the company’s ongoing focus on AI-driven growth and innovation.

See our latest analysis for SAP.

SAP has delivered a flurry of product launches, security fixes, and partnership announcements over the past month, reinforcing its leadership in AI-powered enterprise technology. Despite this momentum, the share price has softened lately, with a 30-day share price return of -6.3% and a year-to-date decline of 8.6%. The long-term picture remains strong with a 110% total shareholder return over three years. Investors appear to be reassessing near-term risks, even as SAP’s innovation pipeline continues to expand.

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With SAP’s shares now trading at a notable discount to analyst targets despite strong long-term gains, the real question is whether the current pullback marks an attractive entry point or if future growth is already reflected in the price.

Most Popular Narrative: 12.3% Undervalued

With SAP’s fair value estimated at €248.62 according to the widely followed “Tokyo” narrative, shares appear attractively priced versus the recent €218.1 close. The difference has sparked debate about whether the current retreat is an opportunity hidden in plain sight.

Profit Margin: 18% (currently at 12.3%). The transition to cloud was very cost intensive, which kept margins during the last 3 years below 10%. Before that, SAP ranged between 15% and 20% profit margin. Even 20% could be reached in the long run. Future PE: 40 (currently at 54.2). At the end of 2024, SAP had a PE of 90. This has already come down significantly, but with respect to forecasted revenue growth, more than a PE of 40 is not reasonable.

Read the complete narrative.

Curious what’s really driving that 12.3% discount? The narrative’s secret sauce could be ambitious margin expansion or bold profit multiples rarely seen outside tech titans. Which big assumption is the linchpin for that undervalued call? The story in full will surprise you.

Result: Fair Value of €248.62 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, such as slower-than-expected cloud adoption or execution missteps. Either of these factors could put near-term pressure on SAP’s valuation thesis.

Find out about the key risks to this SAP narrative.

Another View: Multiples Send a Different Signal

Looking at valuation through the price-to-earnings lens gives a much less generous take. SAP currently trades at 35.9 times earnings, noticeably higher than the European Software industry average of 26.3 and peer average of 31.6. Even so, compared to the market’s fair ratio for SAP at 40, there is a case this premium could narrow or widen quickly depending on sentiment. Will the stock grow into its higher multiple, or is there risk of a valuation rerating?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own SAP Narrative

If you have a different perspective or want to personalize your insight, you can easily craft your own SAP narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding SAP.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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