AI transformation dividends reinforce the logic of profit growth! SAP (SAP.US) received a rating upgrade from Xiaomo to “increase holdings”, and the target price jumped to 275 euros

The Zhitong Finance App learned that J.P. Morgan upgraded the rating of SAP (SAP.US) from “neutral” to “increased holdings” in the newly released research report because as artificial intelligence (AI) moves from the pilot phase to full deployment, the bank believes this transformation will benefit systems (Systems of Record) suppliers such as SAP. At the same time, the bank believes that SAP's own AI products are also constantly improving. The bank raised the target price of SAP's shares listed in Europe from 175 euros in December 2027 to 275 euros in December 2028, which means about 30% room for growth.

Komo said in the research report that in the early stages of the AI development cycle, as companies scrambled to experiment, the focus of market attention once turned to AI prototype development. However, as various projects move from the pilot phase to full deployment using agents (Agents), customers gradually discover that to achieve large-scale applications and obtain return on investment (ROI), they rely on far more than the model itself, but also three key factors: context (Context), that is, clean, unified data, and business semantics to ensure that agents can understand the enterprise's business; Control (Control), that is, security, permission management, and governance mechanisms to ensure that the agent's actions are trustworthy; and cost (Cost), that is, can be achieved during large-scale applications Predictable, manageable expenses.

Komo's assessment of system integrator (SI) industry trends over the past year shows that companies are increasingly aware that these factors are the key to achieving large-scale AI operations, and this trend is beneficial to existing recording system vendors such as SAP.

Komo also believes that SAP's own AI products are being improved. The bank's survey of customers and partners also showed that its products have improved and are already showing initial market appeal. The potential launch of AI-related key performance indicators (KPIs) also indicates that the company may have begun to monetize the AI business.

Xiaomo analyzed the year-on-year increase in SAP's organic cloud business current backlog (Current Cloud Backlog). The results showed that this trend may have begun to be reflected in financial data — recent increases bucked the trend and broke through the trend shown by the second-order derivative of values. At the same time, with the support of improved internal AI efficiency and space to further promote workforce transformation, the bank is more confident about the sustainability of SAP's recent profit margins.

Based on the above factors, Komo raised its 2026 to 2028 non-IFRS profit before interest and tax (EBIT) and earnings per share (EPS) forecast by a lower single-digit percentage to a medium single-digit percentage. The main driving force is a larger expansion in profit margins, while slightly increasing the 2027 revenue growth forecast.

Although SAP's stock price has rebounded sharply from its July low, and the current valuation no longer reflects market concerns about the disruptive impact of AI, Komo believes that the company's profit growth model alone is enough to support an attractive return on investment. According to the bank's updated forecast, SAP's non-IFRS EPS compound annual growth rate (CAGR) from 2026 to 2028 is about 17%.