SAP SE has announced a comprehensive restructuring plan, with a significant focus on artificial intelligence. The German software firm revealed its intentions to restructure roles for 8,000 jobs to prioritize growth in AI-driven business areas.
SAP plans to spend 2 billion euros ($2.2 billion) on this restructuring program, which will encompass either retraining existing employees with AI skills or facilitating their exit through voluntary redundancy programs. In recent months, many companies including Google, Riot Games and eBay have announced layoffs as they shift their focus to AI and related automation to lighten workloads.
SAP has been an early experimenter with OpenAI's ChatGPT, planning to embed this generative AI technology in its products. Beyond integration, the company is investing over $1 billion in AI-powered technology startups through its venture capitalist, Sapphire Ventures. Alongside its restructuring announcement, SAP also provided a robust financial outlook. The company forecasts a 24%-27% increase in cloud revenue for 2024, following a 23% growth in 2023. Operating profit is also expected to rise significantly, with projections between 17% and 21% growth for 2024.
SAP also made adjustments to its medium-term outlook, accounting for changes in accounting practices. The 2025 operating profit target has now been revised to 10 billion euros, down from the previously forecasted 11.5 billion euros. As part of its 2025 ambitions, SAP's updated non-IFRS operating profit ambition for 2025 is now approximately €10.0 billion, a revision influenced by the inclusion of share-based compensation expenses of about €2 billion. Additionally, SAP's 2025 free cash flow ambition has been updated to approximately €8.0 billion, surpassing latest analyst consensus estimates.
While SAP's strategic restructuring might be helpful to the firm, it is set to bring challenges for the workforce. However, since the restructuring is aimed towards a strategic one and not cost-cutting, it is likely to bring up more job opportunities rather than mass layoffs.
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