SAP: A Comeback with Q2 Results
For quite some time, SAP was one of the worst-performing stocks on the DAX. As with many software stocks, there was a lot of doom and gloom here, with concerns that AI would call the business model into question. But the company proved the skeptics wrong with its second-quarter results. The cloud business, in particular, delivered impressive results. The Current Cloud Backlog (CCB) rose by 26% on a currency-adjusted basis to EUR 22.9 billion between April and June. The market had expected only a 24% increase. Notably, the acquisition of Reltio contributed less than one percentage point, underscoring the strong momentum of organic growth.
Revenue from the cloud business met expectations, rising 24% to EUR 6.3 billion. The rollout of AI applications to customers is likely to be a key factor in the coming quarters. According to SAP, over 3,000 SAP consultants are currently working with more than 2,000 customers on AI implementation. According to management, the pipeline for the second half of the year is above the comparable level from the previous year.
The fact that SAP fell short of expectations in terms of earnings is due precisely to these investments in future growth. Although adjusted operating profit rose by 9% on a currency-adjusted basis to EUR 2.74 billion, it fell short of the consensus estimate by about 5%. An improvement is also expected here for the second half of the year. For the full year, SAP aims to generate an adjusted operating profit of EUR 11.8 billion to EUR 12.2 billion, according to its guidance. The forecast for free cash flow is around EUR 10 billion.
Apparently, demand for SAP’s AI solutions remains strong, and the market’s skepticism was excessive. The stock is currently trading about 27% below its 2025 high. Even compared to the start of the year, there is enormous upside potential. At the start of 2026, the stock was trading about a quarter higher, even though it has regained some ground following the Q2 results. In the short term, market conditions are likely to keep the stock in the spotlight. In the medium to long term, however, SAP could be among the major AI winners in Europe.
HPQ Silicon: Making Great Strides Toward Commercialization
It is extremely rare for a company to drive three technologies toward commercialization simultaneously. HPQ Silicon, however, is working on precisely this feat. The Canadian company is collaborating with its partner, Novacium SAS, in silicon battery materials to develop silicon-based anode materials for lithium-ion batteries. This approach enables a much higher energy density than conventional methods. HPQ is not targeting the highly competitive mass market, but rather high-margin niches such as defence, aviation, and the drone sector. In addition, HPQ Silicon is developing a system to produce hydrogen directly on-site as needed. This pressurized hydrogen can feed drone fuel cells to extend their flight time.
HPQ is now making significant progress in its third, and perhaps most important, area. The company has developed a reactor that can convert quartz directly into fumed silica in a single, chemical-free process. This not only reduces costs but also significantly lowers CO₂ emissions throughout the entire production process. The process has now completed the pilot program. This demonstrated that commercially viable fumed silica can be produced directly from quartz. Development partner PyroGenesis has now conducted a detailed analysis of the operational data. Management intends to move forward with the construction of a 1,000-metric-ton commercialization plant and is holding discussions with interested parties. Updates on this are expected in the second half of the year. HPQ Silicon is already collaborating with industry giant Evonik. The German company is evaluating whether HPQ’s more cost-effective and low-carbon material meets their strict specifications and quality standards. Evonik is one of the world’s largest suppliers of fumed silica.
CEO Bernard J. Tourillon presented HPQ Silicon’s business model and strategy at the IIF.
https://www.youtube.com/watch?v=V6FO2uPdQLI
HPQ Silicon shares currently have a market capitalization equivalent to approximately EUR 40 million. Since hitting its annual high in February, it has lost about a quarter of its value amid the challenging market environment. This presents an opportunity for long-term investors to buy at a discount. HPQ plans to commercialize its technologies over the next 18 months.
ARM Holdings: Time for a Rebound?
The shares of ARM Holdings have been heavily hyped this year. At its peak, the chip developer’s stock more than tripled—within just a few months. But what goes up must come down. And this stock market adage has now proven true. The stock has fallen by about half from its all-time high.
Operationally, however, the British company continues to perform exceptionally well. The current drivers are the high and growing revenues from royalties on the Armv9 architecture as well as Arm Compute Subsystems (CSS) in AI data centers and smartphones. In the first fiscal quarter that just ended (on a split fiscal year basis), the company reported a net profit of USD 270 million, an increase of 136.8% compared to the previous year. Operating cash flow rose even more sharply, by 171.7%, to USD 902 million. With these figures, the company significantly beat market expectations.
The stock’s plunge can therefore be attributed to two main reasons. First, the valuation had become extreme. While ARM is the leading provider of chip architecture and is benefiting immensely from the AI boom, its forward P/E ratio remains in the triple digits—even at its current lower level. Analysts’ estimates show a wide range. Second, the environment for AI stocks had recently darkened significantly. Many hyped stocks such as SanDisk, Micron, and SK Hynix had to weather substantial sell-offs. From a purely technical perspective, the outlook for the sector and ARM does not yet look promising again. Therefore, the time to bet on a rebound has not yet come.
SAP has surprised the markets positively and could now get back on track. Its valuation also appears attractive. For HPQ, commercialization is now entering a critical phase. The stock has also rebounded in this environment and offers attractive entry opportunities. ARM Holdings has seen much of its upside potential realized, yet the stock remains extremely expensive. From a technical analysis perspective, there is not much to suggest a rebound just yet.
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