SAP SE is turning a decades-old on-premise enterprise-resource-planning franchise into a cloud subscription machine, and the June quarter flipped the signal the equity has been waiting for. Current cloud backlog, the contracted cloud revenue expected over the coming year, accelerated after two periods in which that book lagged recognized cloud sales. Constant-currency backlog growth reached 26%. The reversal matters because the American depositary shares have already surrendered a large share of last year's re-rating, and the market is no longer paying a peak multiple for the Autonomous Enterprise story launched at Sapphire.
The tension sits in the mix. Cloud growth still carries the group while licenses, support, and services shrink, and management just absorbed more than one hundred million euros of profit dilution from the Dremio and Prior Labs purchases. Cloud ERP Suite now accounts for 88% of the cloud line after a constant-currency advance of 27%. Non-IFRS operating profit still expanded at constant currencies, yet sequential profit growth slowed on heavier research spend, Sapphire marketing, and a prior-quarter stock-compensation dip that made the year-on-year comparison harder.
Cash generation stayed intact even as the profit guide moved. Quarterly free cash flow translated to about $3 billion, and the full-year cash target near $11 billion was left unchanged. Cloud revenue guidance for the year was also left in place. The open question is whether backlog can stay ahead of recognized cloud sales through year-end without another cut to the operating-profit path.