Citizens has downgraded SAP to Market Perform from Market Outperform. The decision follows SAP's fourth-quarter results, which revealed slower-than-expected top-line growth. Specifically, cloud backlog expansion decelerated to 25%, the slowest pace in nine quarters. SAP's guidance for 2026 also fell short of expectations, impacting investor sentiment.

SAP's disappointing performance stems from a shift toward larger transformation projects with longer completion times. Rising geopolitical tensions are also influencing customer decisions regarding sovereign SaaS options. The stock price dropped approximately 15% following the announcement and is down about 18% year-to-date, reflecting investor concerns about future growth.

While Citizens acknowledges SAP's strong foundation, it strikes a more cautious tone. The firm believes the S/4HANA upgrade cycle is past its peak as a growth driver. The firm also lowered its EPS estimates for 2026 and 2027. Investors will be watching cloud revenue performance closely.

Further, the broker suggests SAP is fairly valued compared to its peers. The focus now shifts to how SAP navigates the evolving market. Investors are also keeping a close eye on SAP's progress in Business AI, which could be a key growth area. The company's ability to adapt will be key.