Today's sharp sell-off in the shares of $SAP is the most pronounced in more than five years and shows how quickly sentiment toward traditional software giants can change. SAP shares fell more than 15% in a single day, marking the deepest one-day drop since 2020, and during the session the stock broke levels not seen since mid-2024. This slide comes despite relatively solid quarterly results that showed growth in total revenue and profit, but disappointed on two key points investors view as crucial for future growth.

The first of these points is the cloud backlog metric — the value of already-signed cloud contracts — which grew 25% to roughly €21 billion, but remained below market expectations and the company's target. SAP had previously signaled 26% growth, so while this is a robust pace, the market perceived it as a slowdown in the momentum that had been a main driver of the valuation. In addition, the outlook for cloud revenue for 2026 (around 23–25% growth) was technically in line with analyst consensus but indicates a deceleration compared with the prior year. This largely outweighed the positive elements of the results, such as a rising total backlog or the announcement of a new €10 billion share buyback program, which would normally support the share price.

The second factor is the broader market sentiment toward software names generally — investors are now sensitive to any hints that traditional enterprise ERP software models may not benefit from digital transformation and AI as much as some pure cloud and AI-native companies. In recent weeks this sector has already seen sell-offs in similar names, which amplified the decline in SAP as well.

The drop is therefore not just about one quarter's numbers, but about a change in how the market values the growth potential of existing ERP and cloud giants. SAP still generates strong cash flow and has an extensive customer base, but investors now demand clearer evidence that its cloud business can keep pace in a world where AI and new platforms are reshaping IT spending. That could mean the current price is attractive for long-term investors who believe in the company's transformation, but in the short term sentiment is clearly negative.