SAP’s cloud business, venture fund drive results, outlook By Reuters

By Nadine Schimroszik and Supantha Mukherjee

BERLIN (Reuters) -SAP said on Thursday demand for its cloud business database was growing as the German business software group confirmed its preliminary third-quarter results and full-year guidance boosted by big returns by its venture capital fund.

Last week, the company had forecast cloud revenue to grow by 16%-19% in the year as a whole, helping its overall cloud and software revenue to increase by 2%-4%.

Cloud backlog for flagship database S/4HANA was up 58% at constant currencies and current cloud backlog – a measure of incoming business – grew 22% in the third quarter.

“Our cloud revenue now represents 35% of our total revenue and that’s driving up our share of more predictable revenue, which rose by three percentage points year over year to 77%,” Chief Financial Officer Luka Mucic said on a call with journalists.

SAP raised its forecast for cloud and software revenue for the full year by 200 million euros ($232 million) to 23.8 billion-24.2 billion euros.

Adjusted revenue rose 5% to 6.68 billion euros ($7.70 billion) for the third quarter ended Sept. 30, and adjusted earnings per share rose 2% to 1.74 euros.

Quarterly results were also lifted by its venture capital arm, Sapphire Ventures, which accounted for a quarter of SAP’s 2 billion euro profit in the third quarter, underscoring the fund’s recent success in backing small tech start-ups.

It has backed high-profile start-ups such as Square, Box, Fitbit (NYSE:) and Wise.

Some analysts say they do not take into account in their forecasts the fund’s performance, preferring to focus on the more predictable results of its cloud offering.

But year-to-date the business has contributed round about 1.8 billion euros to earnings, up by 1 billion year on year, SAP CFO Luka Mucic said on a call with journalists.

“Our typical check size is $10 to $60 million, but we can go all the way up to $100 million,” Andreas Weiskam, co-founder and partner of Sapphire Ventures, said in an interview with Reuters.

Weiskam said the fund’s asset under management currently stands at $6.8 billion. SAP had injected $1.75 billion last quarter.

“Sapphire Ventures gives SAP tailwind. But is also means volatility – depending on the capital markets,” said Knut Woller at brokerage Baader Helvea.

($1 = 0.8581 euros)