SAP CEO Christian Klein Talks Company's Q2 Earnings

Summary

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Bloomberg Talks: SAP CEO Christian Klein Talks Company's Q2 Earnings

Date: July 24, 2026
Host: Anna Edwards, Guy Johnson (Bloomberg)
Guest: Christian Klein (CEO, SAP)

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Episode Overview

In this episode, SAP CEO Christian Klein joins Bloomberg’s Anna Edwards and Guy Johnson to analyze SAP’s second quarter (Q2) earnings. The conversation dives into SAP’s surging cloud revenues, the critical shift from on-premise to cloud-based solutions, and the intensifying impact of AI across enterprise IT. The discussion also addresses market volatility surrounding AI disruption, cost pressures from R&D, the future of large language models (LLMs), and SAP’s organizational changes.

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Key Discussion Points & Insights

1. Cloud Revenue Growth and AI Integration

[00:36–02:03]

• SAP’s Q2 results featured accelerated cloud revenue growth, surpassing analyst expectations.
  • Christian Klein: "We have even seen an accelerated cloud growth compared to Q1, far ahead of our... competitors… Even in the cloud, 90% of the deals also had AI included." (01:26)
• Christian underscores ERP’s enduring value as the core ("the brain") of companies, with AI agents layered atop.
• Despite volatile markets, SAP sees robust momentum going into the second half of the year.

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2. Mitigating Risks of ‘SaaS Apocalypse’ and Market Vulnerabilities

[02:03–03:10]

• Anna highlights SAP’s share price falling 38% YTD amid fears of AI-driven upheaval in SaaS.
• Christian points out that while LLMs (large language models) are powerful, they lack understanding of business processes, data, and compliance that are embedded in SAP’s ERP.
• SAP’s "autonomous enterprise" initiative aims to deliver accurate, compliant AI, giving confidence for continued growth.

Christian Klein: “Customers are now turning toward SAP as they understand that the LLMs... don’t understand business process, they don’t understand governance... With the launch of the autonomous enterprise... SAP can deliver accurate and also compliant AI.” (02:27)

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3. AI Disruption and Competitive Threats from OpenAI

[03:10–05:06]

• Guy presses Christian on OpenAI’s potential to disrupt the integration (orchestration) layer, and whether this constitutes a new competitive threat for SAP.
• Christian concedes AI is a major disruptor but positions SAP’s unique advantage: deep domain logic and business context within its platform.
  • SAP’s AI platform is model-agnostic—customers can use any LLM, including open-source, for optimal price-performance.
• SAP focuses on building its own "ontology" of business data/processes to ensure accuracy and compliance.

Christian Klein: "What you find on the SAP platform… is also the context layer... we are building the ontology with our business data, with our business processes... LLMs are not trained on this logic.” (04:08)

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4. Openness vs. Lock-in: The Platform Philosophy

[05:06–05:58]

• Guy asks if SAP will engage in a “fight” to own the integration layer.
• Christian insists SAP provides an open platform, supporting third-party AI agents and APIs, without enforcing customer lock-in.
  • The business AI platform’s value lies in its unique business context, not exclusivity.

Christian Klein: “There’s definitely not a fight about... locking customers into our platform. We want to have an open platform... we want to actually run business processes end to end with our autonomous agents.” (05:18)

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5. R&D Spending, AI Productivity, and Returns

[05:58–07:45]

• Anna probes about the potential cost pressure from increased R&D spend to keep pace in AI.
• Christian admits token consumption costs have risen due to AI use in software development, balanced by a 30% productivity boost in R&D.
• SAP manages “token budgets” alongside headcount and third-party costs—AI investments are strategically controlled for healthy margins.

Christian Klein: "We are not only using frontier models, we are always using the best model… that provides the best price to outcome ratio. That… makes sure that we have healthy gross margins going forward." (07:02)
“You have a headcount budget, you have third-party budget and you have tokens. Our managers… have to manage that according to the productivity assumptions." (07:02)

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6. The Future of AI Models: Frontier vs. Open Source

[07:45–09:05]

• Guy suggests that managing token costs is becoming industry-standard, wondering if open-source models might eventually win.
• Christian argues there is no single winner; both proprietary (frontier) and open-source LLMs will coexist, with value shifting upwards to the application and agentic AI layers.
• He doubts any LLM provider will dominate ERP: “especially not in the ERP market.”

Christian Klein: “These LLMs... will become now more and more commoditized. They are super strong... the value creation… moves up… into the application into the agenda AI layer... I feel now companies like SAP will benefit...” (08:16)

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7. Leadership Changes and Organizational Adaptation

[09:05–09:27]

• Anna queries the sustainability of Christian combining CEO and Chief Product Officer duties following a recent internal reorg.
• Christian explains the change is temporary and beneficial during a period of operational model transformation within R&D.
• He plans to appoint a successor for Chief Product Officer soon.

Christian Klein: “You have to see we are moving from coding features for software into coding agents. So we have to change the operating model, the way how people work. We need to apply AI in all of these jobs. So it's good to be close to development these days.” (09:27)

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Notable Quotes & Memorable Moments

• “Even in the cloud, 90% of the deals also had AI included.” — Christian Klein (01:26)
• "LLMs... don’t understand governance... and that is all sitting in our ERP." — Christian Klein (02:27)
• “What you find on the SAP platform… is also the context layer… business data, with our business processes.” — Christian Klein (04:08)
• "We don’t want to lock in customers on our platform. We want to have an open platform." — Christian Klein (05:18)
• "Token budget... it is a cost we have to manage." — Christian Klein (07:02)
• “There will be not one winner... especially not on the ERP market.” — Christian Klein (08:16)
• "We are moving from coding features for software into coding agents." — Christian Klein (09:27)

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Major Segment Timestamps

• 00:36 — Opening, SAP's cloud revenue results, migration trends
• 01:26 — AI’s integration in SAP deals, business strengths
• 02:03 — SAP’s risk landscape, SaaS apocalypse concerns
• 03:10 — OpenAI’s impact, integration layer risks
• 04:08 — SAP’s differentiation: business context and AI
• 05:06 — Platform openness, customer flexibility
• 05:58 — R&D costs, AI productivity returns
• 07:45 — The future: open-source vs. frontier LLMs
• 09:05 — Leadership changes, adapting R&D organization

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Conclusion

This candid conversation underscores SAP’s strategy amid a rapidly evolving AI-infused software landscape: relentless cloud and AI integration, a commitment to openness and modularity, prudent R&D investment, and an emphasis on business-specific context. Christian Klein’s confidence in SAP’s future stems from its dual focus on technological innovation and maintaining enterprise-grade trust, compliance, and flexibility, even as leadership navigates major internal transitions.

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Transcript

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[Anna Edwards]

News Let us talk about some of those corporate earnings then. As mentioned, SAP cloud revenue grew at a faster pace than analysts expected as customers move away from on premise licenses. Europe's largest software company is facing threats to its business from AI. Well documented of course, as it pushes clients to migrate accounts from locally installed programs to new products in the cloud. SAP's, ADRs, their American depository Receipts jumped following the results and it looks as if we are expecting to see the stock pop a little higher at the start of trade this morning. Christine Klein joins us, CEO of SAP. Christian, very nice to have you with us. Lots to discuss. So the good news in your numbers, cloud revenue better than expected. Your customers then migrating to the cloud, that continues to be a trend. What does that tell us about the underlying strengths of the business at this point?

[Christian Klein]

Christian yeah, good morning Anna. Yeah, I mean we are very, very happy with our quarter. I mean we, we have even seen an accelerated cloud growth compared to Q1, far ahead of our of the market, of our competitors. And even in the cloud, 90% of the deals also had AI included. So which shows that first the ERP is absolutely needed as this is the brain of every company and then the agents are built on top and that gives us a lot of confidence with such a strong half year one especially in such a volatile market environment.

[Anna Edwards]

Okay, so the migration to the cloud continues, Christian, but in amongst all of that we add on, and you've Suggested this includes AI, but we add on the concerns around SAP. Share price down by some 38% year to date because of concerns about the so called SaaS apocalypse. What I will do to companies such as yours. Do you have a much better understanding now of where the vulnerabilities lie for SAP?

[Christian Klein]

Absolutely. And I mean first of all it's great to see that also our customers are now turning towards ACP as they understand that the lams, they don't understand business process, they don't understand business data and also they don't understand governance. I mean you cannot just have agents doing your financial clothes, not adhering to the governance of a company. So, and that is all sitting in our erp. And with the launch of the autonomous enterprise, you know, our customers have seen that SAP can deliver accurate and also compliant AI. And that of course also is reflected now in our Q2 numbers and also gives us a lot of confidence for the second half where the pipeline actually looks pretty strong.

[Guy Johnson]

Chris, can I just pick up on that? Good morning, it's Guy. Open Air is is making waves again in this space this week with its new presence model which is causing not your direct competitors, but people in the SaaS space to see their share prices come under significant pressure. Now in some ways you could argue this software doesn't directly affect you, but in some ways you could argue further down the road it might. You've got your dual softw. It sits at the integration kind of layer, the orchestration layer, which is quite a valuable space to, to occupy and it's looking to target that kind of space. And I'm just wondering how worried you are to Anna's point about kind of understanding the risks, about how big the risk could be of open AI coming in and controlling that kind of integration layer, that key interaction layer that we're dealing with here. And I'm just wondering whether or not that is a threat that is emerging, a new threat that you see emerging right now.

[Christian Klein]

I mean, absolutely Guy. I mean AI is a disruption to the software industry without any doubt. But look at SAP. I mean we are running the world's most mission critical business processes, complex processes and there is a lot of domain logic sitting in the erp. And when you now look at our AI platform, you can choose any LLM you want. And by the way, not every frontier model is the best for every agent. You can also use or open source models where you have a much better price to outcome. But then what you find on the SAP platform, on the business AI platform is also the context layer. So we are building our own AI foundation where we are building the ontology with our business data, with our business processes. Because again the labs don't understand, are not trained on this logic. And when the two worlds are coming together, this is of course how SAP can really deliver accurate and also very compliant.

[Guy Johnson]

But, but is there going to be a fight over that interaction layer where the two systems integrate? Is there going to be a fight there? Do you need to make sure that you control that point?

[Christian Klein]

I mean we always said, I mean our customers data is the customer's data. We have an own platform. We also include third party agents. There's no problem about that. We are believing in the value of our platform because again, this business context is only available on the SAP business AI platform. And that's why we in the value of the platform. We don't want to lock in customers on our platform. We want to have an open platform. We have APIs, we have MCP servers, We want to actually run business processes end to end with our autonomous agents. And that's why we believe in the value. And there's definitely not a fight about, you know, locking customers into our platform.

[Anna Edwards]

I wonder, Christine, how concerned you are about costs and how much you're having to spend at this point to innovate and to keep up. I started this conversation talking about how revenues came in above expectation. Morgan Stanley suggesting that maybe the R and D costs were higher than they had anticipated. Are you concerned about how much you're having to spend to keep up in this race?

[Christian Klein]

I mean definitely in the R and D cost you see, you know, a higher token consumption as we are using AI to code additional features, but especially now additional agents, but vice versa, you also see a huge productivity increase of 30%. So the last 12 months was really about what ramping up our R and D workforce, bringing in some top talents, especially on the data scientist side. But now from now on it's really about gaining the productivity also by applying AI in our R and D workforce.

[Anna Edwards]

Yeah, and Christine, on that point then. So you mentioned that the increased token cost, but then the increased productivity. So what is the return on your investments in AI?

[Christian Klein]

I mean the good pieces and that we can switch models on our platform. Again, we are not only using the frontier models, we are always using the best model which actually provides the best price to outcome ratio. So that first of all makes sure that we have healthy cross margins going forward, both for our external customer business, but also applying AI internally at SAP. Second, obviously we are also managing tokens as part of our cost budget. You have a headcount budget, you have third party budget and you have tokens. So our managers in R and D in the go to market space, they have one budget and they have to manage that also according to the productivity assumptions we reflected in the budget.

[Guy Johnson]

Christian, just kind of picking up on all this. Do you get the, do you get the feeling now that we are moving into a different phase that who's ultimately going to win this battle? Do you think it's going to be frontier models? Do you think it's going to be the open source models cost is becoming and you are one of many CEOs that we talked to about this and they're all giving the same answer. We are now managing, managing our token budget. It is a cost we have to manage. Do you think that ultimately points us in the direction of open source models?

[Christian Klein]

I mean Guy, there is not one winner in the tech space. I mean again these alarms, they will become now more and more commoditized. They are super strong. But there are a lot of new open source models entering the market. But now I feel that the value creation, you know, moves up from the info infrastructure, from the chip side into the application into the agenda AI layer. And so you need both worlds. But I feel now companies like SAP will benefit now from the advancements technological on the infrastructure side, on the chip side by building now this agentic AI layer for our customers. So there will be not one winner, but there is also definitely not an LLM provider taking, taking the whole market, especially not on the erp in the ERP market.

[Anna Edwards]

Christine, at the end of June you announced another top level reorganization at the business which as a result of which you've got a bit closer to managing some of the challenges that the business and opportunities the business has. So your chief Product officer, you've got some of his of his job. Is that sustainable as the CEO and what kind of insight has that given you?

[Christian Klein]

I mean first of all, yes indeed. I mean Mohammed Alam is leaving SAP still around, but he's leaving ACP for personal reason. So I took over his responsibilities. We are in the transitioning period. I guess in this time right now having the oversight about our development organization is actually a good thing because you have to see we are moving from coding features for software into coding agents. So we have to change the operating model, the way how people work. We need to apply AI in all of these jobs. So it's good to be close to development these days. But over the next months and quarters we will definitely also find a successor so that I can solely focus then on my CEO role.

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