SAP SE narrowly missed analysts’ profit estimates in the first quarter, but the rest of its news was sufficiently good that investors bid the stock up slightly.

New cloud bookings — which reflects cloud-related orders from new customers and incremental cloud business from existing customers — surged 49 percent in the quarter, to $234 million. Cloud subscriptions and support revenue grew 34 percent year-over-year, to $985 million, comprising more than 17 percent of total revenues of $5.76 billion and up from 14 percent the previous quarter.

The increase in subscription revenue was slightly higher than that posted in previous quarters, indicating that SAP is making good progress on its path to a lower-volatility business. Andrew Bartels, vice president and principal analyst at Forrester Research Inc., said the company’s acquisition of companies such as Ariba Inc., Concur Technologies Inc.,  Fieldglass Inc. and SuccessFactors Inc. has been in line with those goals. “”We estimate that over 80 percent of SAP’s subscription revenues come from these acquired product lines,” he said.

In a surprising development, SAP said software license and support revenue grew a strong 8 percent to $3.4 billion. Many software companies are seeing license revenues decline as they shift to cloud-based subscription models, but SAP is successfully growing both businesses. This contributed to total first-quarter revenues of $5.76 billion, up 12 percent year-over-year.

“SAP has been bucking broader market trends with its license revenues growing,” Bartels said. “The growth is clear evidence that adoption of S/4 HANA is accelerating in traditional on-premises deployments.”

HANA is considered an important growth engine for SAP, since the in-memory database is a foot in the door of new accounts. On that front, the company reported strong progress, with 400 new HANA customers, bringing the total to 5,800. Importantly, half were net new SAP customers, the company said.

SAP’s “share of predictable revenue” — or the percentage of total revenue that is based on subscriptions, support revenues and other infrequently changing sources — was 69 percent, unchanged from the previous quarter. In announcing fourth-quarter earnings in January, SAP said its goal was to get that figure to between 70 and 75 percent by 2020, a goal that seems well within reach. That would make the company a blue-chip investment in an otherwise volatile market.

The company also broke out revenues from its infrastructure-as-a-service business for the first time. At $82.8 million, IaaS made up 9 percent of total subscription revenues, up from 6 percent a year earlier. “SAP’s projected cloud platform revenues of over 350 million euros for 2017 will still leave it well behind Oracle, let alone the leaders like Amazon Web Services and Microsoft Azure,” Bartels said.

Image: SAP