SAP falls 4% as UBS downgrades on slow AI agent rollout

SAP shares fell 4 percent to 178.40 euros on Wednesday, the worst-performing Stoxx 600 member, after UBS downgraded the stock to Neutral from Buy.

"The slow delivery of agentic AI to customers is the key factor behind the downgrade," Michael Briest, analyst at UBS, said.

SAP has delivered 17 out-of-the-box AI agents, with 15 more in ramp-up. UBS called the firm's ambition to deliver 200 agents by year-end challenging, given the size and complexity of SAP's customer base in core enterprise resource planning software. Larger customers often run multiple ERP instances on different versions, many on private clouds where custom coding limits SAP's system visibility.

The bank raised its price target to 201 euros from 164 euros even as it trimmed its stance. UBS expects SAP's earnings growth to hold at a 19 percent compound annual rate through 2028, supported by the RISE migration cycle, but anticipates a deceleration in cloud backlog growth in the second half. Free cash flow upside against guidance appears less likely this year than in the previous two, with migration credit utilization weighing on cash flow.

The downgrade arrives as BlackRock lifted its voting rights stake in the Walldorf-based company to 6.75 percent on Aug. 14, treating the recent dip as an entry point. The stock trades at a price-to-earnings ratio of 27.86, elevated relative to near-term earnings growth expectations, according to InvestingPro data. Four analysts have revised earnings downward for the upcoming period.

SAP's second-quarter results drew mixed reactions. The company reported cloud growth of 24 percent, in line with expectations, while current cloud backlog growth of 26 percent topped forecasts. Operating income fell short of Wall Street estimates, weighed by merger and acquisition expenses. Bernstein SocGen and TD Cowen lowered their price targets on margin concerns, while BMO Capital raised its target slightly.

The operational front offers a cautionary tale. Swiss building-materials group Arbonia cut its 2026 EBITDA guidance after the SAP/ERP migration at its German subsidiary Garant triggered disruptions in intralogistics and production. No direct fault is attributed to SAP, but the episode highlights implementation risk across the cloud migration wave.

The stock sits roughly 24 percent below its 52-week high of 242.00 euros set in October, though it has clawed back 23 percent over the past 30 days. Year-to-date, shares remain down 12 percent.

The downgrade signals that investors are pricing in slower AI monetization at SAP, even as the raised price target keeps the long-term earnings trajectory intact. The next test is the pace of AI-agent deliveries over the coming months and the cloud backlog trajectory in upcoming quarterly reports.

This article is for informational purposes only and does not constitute investment advice.