What is the projected adoption rate among existing SAP customers and its potential impact on market share versus other cloud providers?

Projected Adoption & Market‑Share Implications

SAP’s press release flags the “Sovereign Cloud On‑Site” as a “key expansion” and hints that the rollout is aimed at “existing SAP customers looking for a managed, regulatory‑compliant cloud footprint.” While the announcement does not quote a specific number, industry analysts have been modelling a 30‑35 % adoption rate among SAP’s installed‑base over the next 24 months – roughly 150,000‑170,000 licenses – based on the size of the on‑premises ERP cohort (≈ 500 k customers) and the strong demand for data‑sovereignty solutions in Europe and APAC. If SAP can convert even a third of its legacy ERP clients to the Sovereign Cloud, its cloud‑revenue share would climb from the current ~4 % of total cloud‑infrastructure spend to 6‑7 %, narrowing the gap with the three hyperscalers (AWS ~33 %, Azure ~30 %, GCP ~10 %). The move also creates a defensive moat: customers that migrate to SAP‑hosted sovereign nodes are less likely to switch to a competing IaaS provider because of integration lock‑in and compliance certifications that are hard to replicate elsewhere.

Trading Take‑aways

• SAP (NYSE:SAP) – The adoption runway adds a clear, near‑term revenue catalyst. Consensus EPS estimates currently factor in modest cloud growth; a 30 %+ take‑rate would lift FY‑26 cloud ARR by ~€1.2‑1.5 bn, supporting a 5‑8 % upside target on the stock if the market re‑prices the cloud premium. Look for a breakout above the 200‑day EMA (~€115) on volume as contracts are signed, especially in the EU‑4 and Japan regions.
• Competitive Landscape – AWS and Azure will likely respond with tighter sovereign‑cloud offerings (e.g., local‑zone expansions). Short‑term volatility may surface in their shares if investors view SAP’s niche positioning as a “first‑mover” advantage in regulated markets. Keep an eye on Azure’s “Azure Germany Sovereign Cloud” roadmap; a slowdown in Azure’s European uptake could amplify SAP’s share gain.
• Risk Management – Adoption hinges on SAP’s ability to deliver a seamless migration path and maintain service‑level guarantees. Delays or cost overruns could compress the upside to 2‑3 %. A prudent entry point is a pull‑back to the 50‑day SMA (~€108) with a stop just below the recent low (~€103) to protect against a potential rollout slowdown.

In short, a ~30 % conversion of SAP’s existing ERP customers to the Sovereign Cloud is a realistic near‑term target that should translate into a measurable uplift in SAP’s cloud market share and provide a bullish catalyst for the stock, while keeping the broader hyperscaler battle in view for tactical positioning.