"Change is fast approaching", SAP dips as J.P. Morgan downgrades to 'neutral' amid AI industry shifts

SAP SAPG.DE shares fall 2% after J.P. Morgan cuts Germany's software maker to "neutral" from "overweight" as AI sector competition challenges outlook

The broker points to company's decelerating current cloud backlog and rising volatility as the software industry potentially shifts towards a consumption/outcome-based revenue model

"In a market that now demands acceleration to counter prevailing software bear arguments, deceleration is unlikely to support near-term stock performance," it says

JPM also notes intensifying competition among agentic AI peers – such as Salesforce CRM.N, Workday WDAY.O – and LLM providers, driving need for investment and M&A

"In aggregate, change is fast approaching and incumbents, including SAP, will need to invest and evolve to give themselves the best chance of remaining relevant as the AI cycle unfolds," the broker adds

JPM also lowers price target by almost a third to 175 euros per share

Out of 37 analysts covering SAP, 26 rate the stock "strong buy" or "buy", ​eight rate "hold" and three rate "strong sell" or "sell" – LSEG data