SAP to restructure 8,000 roles in push towards AI
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(Reuters) -German software firm SAP SE (ETR:SAPG) unveiled on Tuesday a 2 billion euro ($2.2 billion) restructuring programme for 2024 that will affect 8,000 roles, as it seeks to better focus on growth in artificial intelligence (AI)-driven business areas.
SAP said that it expects generative AI to fundamentally change its business and has pledged to invest more than $1 billion by backing AI-powered technology startups through its enterprise capital firm Sapphire Ventures.
Chief Executive Christian Klein said the programme would allow SAP to continue to develop pioneering innovations while at the same time improving the efficiency of business processes. The restructuring programme would be implemented primarily through voluntary leave programmes and internal re-skilling measures, the company said, adding that it expects to exit 2024 with a headcount "similar to the current levels".
Tech companies including global giants such as Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) have embarked on a wave of layoffs in recent months as they look to shift their focus to artificial intelligence software and automation to lighten workloads.
SAP has more than 105,000 employees, according to the company's website.
The restructuring costs would reflect mostly in the first half of 2024, with the programme expected to have a minor impact in 2024 but contribute 500 million euros to operating profit in 2025 due to efficiency improvements, according to the company.
Shares in SAP were up 1.6% in Lang & Schwarz pre-market trade on Wednesday.
STRONG OUTLOOK
The business software maker, separately on Tuesday, forecast double-digit percentage growth in revenue from its key cloud business and overall operating profit for the current year after those 2023 figures met or exceeded analyst consensus.
Cloud revenue is expected to increase 24%-27% in 2024, SAP said, after reporting 23% growth, adjusted for currency effects, to 13.66 billion euros in 2023, in line with consensus.
Operating profit rose a currency-adjusted 13% last year, to 8.7 billion euros, beating predictions by analysts commissioned by the company of an increase of 9%. For 2024, SAP expects that figure to grow between 17% and 21%.
"We kept our promise and achieved double-digit non-IFRS operating profit growth despite an adverse macro environment," said SAP Chief Financial Officer Dominik Assam, who said he intends to further increase profitability in the current year.
The company separately adjusted its medium-term outlook on Tuesday to take into account a change in accounting practices, lowering its 2025 operating profit target to 10 billion euros from about 11.5 billion euros previously.
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