German software company SAP SE has announced a restructuring program worth 2 billion euros ($2.2 billion) for 2024. The program will affect 8,000 roles as the company seeks to concentrate on growth in artificial intelligence (AI)-driven business areas. SAP anticipates that generative AI will fundamentally change its business and has committed to investing more than $1 billion by supporting AI-powered technology startups through its enterprise capital firm, Sapphire Ventures.
CEO Christian Klein stated that the program would allow SAP to continue pioneering innovations while improving the efficiency of business processes. The restructuring program will primarily be implemented through voluntary leave programs and internal re-skilling measures. The company expects to exit 2024 with a headcount similar to current levels. SAP has more than 105,000 employees, according to its website.
Recently, tech companies including Google and Microsoft have embarked on a wave of layoffs as they shift their focus to artificial intelligence software and automation to lighten workloads. SAP forecasts double-digit percentage growth in revenue from its key cloud business and overall operating profit for the current year. Cloud revenue is predicted to increase by 24%-27% in 2024, after reporting 23% growth, adjusted for currency effects, to 13.66 billion euros in 2023. Operating profit rose to 8.7 billion euros in 2023, beating predictions by analysts commissioned by the company. For 2024, SAP expects operating profit to grow between 17% and 21%.
The restructuring costs will mostly reflect in the first half of 2024, with the program expected to have a minor impact in 2024 but contribute 500 million euros to operating profit in 2025 due to efficiency improvements. Shares in SAP were up 1.6% in Lang & Schwarz pre-market trade on Wednesday. The company separately adjusted its medium-term outlook on Tuesday to take into account a change in accounting practices, lowering its 2025 operating profit target to 10 billion euros from about 11.5 billion euros previously.