SAP Reports Strong Q1 Sales Growth, But Slimmer Profits

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SAP more than doubled its cloud subscription and service revenue in its first quarter, helping to boost the software company's overall sales growth to an impressive 22 percent.

The Walldorf, Germany-based company also reported strong growth in its business network segment and early signs of customer adoption of the recently introduced SAP Business Suite 4 SAP HANA (S/4HANA) line of ERP applications.

But a 30 percent increase in operating expenses, including significant growth in employee headcount, took its toll on the company's operating margin and cut its bottom-line earnings by 23 percent.

[Related: SAP Launches New Predictive Analytics, Data Visualization Apps With Eye On SMB Customers]

"SAP S/4HANA saw robust early traction and is catalyzing momentum across SAP," CEO Bill McDermott said in a statement. "We are a strong growth company, with every region growing in double digits in cloud and software revenue this quarter."

For the first quarter of fiscal 2015 ended March 31, SAP reported total revenue of just less than 4.5 billion euros ($4.81 billion), up 22 percent from 3.70 billion euros ($3.96 billion) in the same period last year.

SAP is juggling multiple product transitions with the move to cloud computing the most significant. Once focused on developing on-premise business software, the company has been transforming itself to become a provider of cloud-based applications. Some of that has come through such acquisitions as the 2012 buyout of SuccessFactors, a developer of cloud-based human capital management applications, and in-house development of new cloud software.

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