SAP Expands Sovereign Cloud to Drive Digital Innovation & AI in Europe

SAP SE (SAP) recently unveiled its cloud strategy, expanding the SAP Sovereign Cloud portfolio, which emphasizes its commitment to digital sovereignty and AI-based innovation in Europe. With increasing regulatory requirements, a growing need for data protection, and a rapidly evolving AI landscape, SAP's enhanced offerings aim to empower companies, governments, and regulated industries in Europe to innovate securely while maintaining full sovereignty over their digital assets.

The expansion of SAP Sovereign Cloud opens up the full spectrum of cloud innovation and SAP AI tools, making them available within a sovereign framework tailored to the needs of each customer. The key feature of the updated SAP Sovereign Cloud is flexibility in deployment. Customers now have several options to meet their regulatory and operational needs.

SAP Cloud Infrastructure ( Europe ) is an Infrastructure-as-a-Service ( IaaS ) platform built with open-source technology and operated in SAP data centers in Europe. All data remains in the EU to meet national compliance requirements. SAP Sovereign Cloud On-Site offers SAP-operated infrastructure deployed in customer-chosen data centers, providing the highest levels of data, operational, technical, and legal sovereignty while still allowing full SAP cloud innovation.

In addition, SAP offers Delos Cloud (Germany), a sovereign cloud specifically for the German public sector, designed to accelerate digital transformation while meeting strict national sovereignty requirements. This flexibility allows organizations to innovate at their own pace, with a deployment model that balances compliance, control, and scalability.

€20 Billion SAP Commitment to Europe's Digital Future

SAP supports its sovereign cloud strategy with a long-term investment of €20 billion for Europe's digital resilience. This investment reflects the company's focus on building secure, local, and compliant cloud solutions for the public sector and highly regulated industries.

With SAP Sovereign Cloud, organizations can run their SAP Business Suite in a sovereign environment while benefiting from continuous innovation cycles across the SAP Business Technology Platform (SAP BTP) and embedded SAP Business AI capabilities. This ensures that customers can accelerate transformation without compromising sovereignty or compliance.

Available in several countries, this offering is supported by hundreds of local shipping experts and extensive certification. This ensures organizations across various industries can adopt sovereign cloud solutions knowing that they meet the highest regulatory standards.

Cloud-First Strategy Drives SAP Revenue Momentum

The momentum of the SAP cloud continues to drive growth. The cloud backlog rose by 22% (28% at cc) to €18.1 billion in the second quarter, while cloud revenue surged by 24% (28% at cc) to €5.13 billion, led by a 30% spike in Cloud ERP Suite revenue to €4.42 billion. Strong adoption of RISE with SAP and GROW with SAP—with customers such as Alibaba Group, BALMAIN, and Cementos Argos—highlights the increasing demand for end-to-end business transformation. Despite facing macro challenges, SAP reaffirmed its 2025 outlook, projecting cloud revenue of €21.6–€21.9 billion (up 26–28% at cc) and cloud & software revenue of €33.1–€33.6 billion (up 11–13% at cc).

Next, SAP's growth strategy is centered on four pillars — product innovation, go-to-market transformation, simplification, and human resources. By incorporating AI into its Business Suite, streamlining operations, and investing in talent, SAP aims for sustainable growth until 2027, with increasing momentum in the second half of 2025.

SAP Business Data Cloud emerges as a core platform, unifying enterprise data to support AI-based operations with trusted and context-rich insights. The adoption of Business AI is also accelerating. SAP will launch 14 AI agents in the first half of 2025, including one for Commerce Cloud that enhances natural language search. Other agents support pricing offers, customer service, dispute resolution, and finance. By the end of the year, SAP plans to expand this portfolio to 40 AI agents across all business areas, driving automation in planning, accrual, and cash flow.

However, SAP faces revenue fluctuation challenges due to long sales cycles, complex licensing agreements, shifting customer budgets, and the close relationship between software and service revenue. US-China trade tensions and tariffs continue to pressure licensing sales. Cloud backlog growth slowed by one point in the second quarter, reflecting weaker bookings. The recovery timeline is uncertain, but catching up in the second half, when about two-thirds of annual cloud deals are typically signed, will be critical.

Zacks Rank & SAP Stock Performance

SAP currently holds a Zacks Rank #3 (Hold). The company's stock has surged 23.6% in the past year compared to an industry growth of 21.2%.

Stocks to Consider

Ubiquiti Inc.(UI) currently holds a Zacks Rank of 2 (Buy). You can view the complete list of stocks with a Rank #1 (Strong Buy) from Zacks today here.

In the last reported quarter, the company delivered a profit surprise of 61.29%. Ubiquiti has spent considerable funds on research and development activities to develop innovative products and cutting-edge technology to expand its accessible market and remain at the forefront of networking technology. The company believes that its new product pipeline will help enhance the average selling price for high-value and top-tier products, thereby increasing revenue. Ubiquiti has witnessed healthy traction in the Enterprise Technology segment.

Jabil, Inc. (JBL) currently holds a Zacks Rank #2. In the last reported quarter, the company delivered a earnings surprise of 9.44%.

Jabil's focus on end market and product diversification is the main catalyst. The company's target of "no product or product family should account for more than 5% of revenue or cash flow in any fiscal year" is commendable. This initiative should position Jabil well on the growth trajectory.

InterDigital, Inc. (IDCC) currently holds a Zacks Rank of #2. The company has delivered a earnings surprise of 54.27% over the last four quarters.

InterDigital's global footprint, diversified product portfolio, and ability to penetrate different markets are impressive. The company focuses on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. In addition to its strong portfolio of wireless technology solutions, the addition of sensor-related technologies, user interfaces, and video to its offerings is likely to drive significant value, given the size of the licensed market.