German software firm SAP SE has unveiled a comprehensive 2 billion euro ($2.2 billion) restructuring initiative for 2024, impacting 8,000 positions.
The move is part of SAP’s strategic shift towards enhancing its focus on artificial intelligence (AI)-driven business sectors.
SAP anticipates that generative AI will profoundly reshape its business landscape and has committed to investing over $1 billion in supporting AI-powered technology startups through its enterprise capital firm, Sapphire Ventures.
CEO Christian Klein emphasized that the restructuring program is designed to enable SAP to advance groundbreaking innovations while concurrently enhancing the efficiency of its business processes.
The company outlined that the restructuring will primarily involve voluntary leave programs and internal re-skilling initiatives, with the aim of exiting 2024 with a headcount comparable to current levels.
In recent months, tech giants such as Google and Microsoft have undergone significant workforce adjustments as they pivot towards AI software and automation to streamline operations.
SAP Announces Restructuring Plan and Positive Financial
According to SAP’s website, the company currently employs over 105,000 individuals.
The anticipated restructuring costs are projected to be most pronounced in the first half of 2024. Despite a minor impact expected in 2024, the program is forecasted to contribute 500 million euros to operating profit in 2025 due to efficiency enhancements, as stated by the company.
SAP shares experienced a 1.6% increase in Lang & Schwarz pre-market trade on Wednesday.
In a separate announcement on the same day, SAP forecasted double-digit percentage growth in revenue from its crucial cloud business and overall operating profit for the current year, following positive performance in 2023 that met or exceeded analyst consensus.
Cloud revenue is anticipated to rise between 24% and 27% in 2024, building upon a 23% growth reported in 2023. Operating profit, which saw a currency-adjusted increase of 13% to 8.7 billion euros in 2023, is expected to grow between 17% and 21% in 2024.
SAP CFO Dominik Assam expressed satisfaction with the company’s double-digit non-IFRS operating profit growth in 2023 despite challenging economic conditions, pledging a continued focus on increasing profitability in the current year.
In a separate adjustment to its outlook, SAP revised its 2025 operating profit target to 10 billion euros, down from the previously stated approximately 11.5 billion euros, considering changes in accounting practices