SAP won't adjust its renewal discount policy despite a cloud growth slowdown that wiped 22% off its share price on January 29 - the steepest drop since 2020.
CEO Christian Klein told investors the company met revenue expectations with €36.8 billion ($43.1 billion) for 2025, up 8%. But cloud backlog growth is "slightly decelerating" into 2026, remaining around 25% - down from previous years.
The cause: SAP is signing larger customers to its RISE cloud migration package. "Large customers often don't move their mission-critical ERP in the first year," Klein said. "These deals have more back-end-loaded ramps and as a consequence, a limited impact on current cloud backlog in the first 12 months."
What this means for enterprise buyers
SAP's stance on renewals matters because it applies automatic annual uplifts without standard discounts - unlike new S/4HANA licenses, which often come with 50%+ off list price. Klein was explicit: "I don't want to discount the renewal base. What matters for SAP in the mid and long term is the renewal base because that is what is driving the cloud revenue and the profits."
This contrasts sharply with SAP's December 2025 GSA deal for US federal agencies, offering up to 80% off licenses and 35% off cloud - though that's government-specific pricing, not a signal of broader policy shift.
Trade-offs worth noting
Negotiators can still extract value. The path: audit usage 9-12 months before renewal, drop unused "shelfware" licenses, bundle renewals with migration commitments, or leverage quarter-end pressure for credits. Cloud contracts auto-renew unless renegotiated, with discounts tied to volume and multi-year commitments - but benchmarking is harder than on-premise deals.
History suggests SAP has leeway on credits and extras when usage data shows truedowns or multi-year commitments. But Klein's comments indicate the company sees its renewal base as non-negotiable leverage, especially as it shifts larger customers to recurring revenue.
For CTOs evaluating ECC to S/4HANA migrations: factor in that cloud conversion timelines are stretching for large enterprises, and SAP isn't budging on support renewal costs to compensate. Plan accordingly.