HSBC Warns SAP's Cloud Optimism May Be Overdone

SAP SE (NYSE:SAP) is one of the AI Stocks Analysts Are Watching. On January 20, HSBC analyst Abhishek Shukla initiated coverage on the stock with a Hold rating and a price target of EUR178. The firm noted that SAP’s robust fundamentals and cloud-driven growth are already reflected in the share price, leaving room for limited upside.

HSBC noted how SAP’s valuation is already a reflection of its leadership in the ERP market and a robust double-digit earnings growth outlook. The firm forecasts its revenue to grow at a CAGR of 9.6% over 2025 to 2028, particularly as customers transition from on-premise software to the cloud.

It estimates 5% of on-premise customers to make the shift each year, slightly faster than recent years (about 4.5% over 2022 to 2025). These moves typically generate a revenue uplift of around 2.5 times.

At the same time, HSBC also flagged how the market may be too overoptimistic about how quickly customers migrate and the extent to which it boosts revenues and margins. An estimated 60% of SAP’s on-premise customers have yet to begin migrating to the cloud, even though maintenance fees are expected to rise in 2027 and support will end by 2030.

Rising competition, analysts flagged, may lead to customers delaying cloud upgrades. As such, current cloud backlog has shown passive growth, which is why the firm will look to fourth-quarter 2025 results for clearer signals.

SAP SE (NYSE:SAP) is a leader in ERP software that leverages artificial intelligence to enhance its enterprise resource planning (ERP) solutions.

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