SAP’s On-Premise AI Pivot and Twin Acquisitions Signal a Strategy Reset

The German software giant is rewriting its playbook on multiple fronts. Just days after revealing plans to bring its artificial intelligence tools to on-premise customers for the first time, SAP has announced two bolt-on acquisitions aimed at supercharging its data and AI capabilities. The moves come as the stock languishes more than 45% below its 52-week high and the company prepares for its flagship Sapphire conference.

A New Data Pipeline Takes Shape

SAP confirmed in early May that it has acquired Dremio, a data lakehouse specialist, and Prior Labs, a Freiburg-based AI startup founded in 2024. The deals follow the March purchase of Reltio, a data management firm, and together they form a three-part data pipeline: Reltio cleanses the data, Dremio unifies access across disparate sources without requiring data movement or conversion, and Prior Labs delivers the predictive models.

Prior Labs focuses on tabular AI models that forecast business outcomes such as payment delays or customer churn. SAP plans to invest over €1 billion in the startup over the next four years, with the goal of turning it into a leading AI laboratory for structured data. Dremio, which was valued at $2 billion by investors in 2022, will be integrated into SAP’s broader data architecture. The purchase price for both acquisitions has not been disclosed.

The deals are expected to close by the third quarter of 2026, pending regulatory approvals.

Should investors sell immediately? Or is it worth buying SAP?

Opening the AI Door for On-Premise Customers

Until now, SAP’s AI features — including the digital assistant Joule — were almost exclusively available through its cloud products. That left the substantial portion of customers running systems like ECC and S/4HANA in their own data centers without access. According to the DSAG Investment Survey 2026, only 3% of SAP customers are using SAP Business AI productively, while 77% of AI-active companies have turned to third-party solutions.

That is about to change. SAP plans to extend Joule and other AI functions to on-premise operators, though with a catch: customers must begin their cloud migration journey through the “Rise with SAP” program. The company has declined to provide specific details but emphasized that new features will continue to be developed primarily in the cloud.

The timing is strategic. Support for ECC 6.0 ends on December 31, 2027, leaving more than 10,000 customers worldwide facing a migration deadline. Joule could become a powerful incentive for those still hesitating to move to the cloud.

Sapphire Looms Large

All eyes are now on the SAP Sapphire conference, scheduled for May 11-13 in Orlando and May 19-21 in Madrid. CEO Christian Klein has already telegraphed the event’s importance, stating: “At Sapphire, we will show how we are taking the next leap forward.” Analysts expect concrete announcements on both the on-premise AI strategy and the integration of the newly acquired companies.

SAP currently counts more than 40 specialized agents and over 2,400 Joule skills on its platform. How many customers will actually use them depends on whether the on-premise opening moves beyond speculation and into tangible product releases at Sapphire.

SAP at a turning point? This analysis reveals what investors need to know now.

A Bruised Stock, a Steady Target

The market has yet to embrace the strategy shift. SAP shares closed at €149.32 on Thursday, bringing the year-to-date decline to roughly 26%. The stock is still more than 45% below its 52-week high of €271.60, though the relative strength index at 75.5 suggests a short-term overbought condition.

Despite a revenue miss in the first quarter, management has held firm on its full-year guidance. Cloud revenue is expected to land between €25.8 billion and €26.2 billion, representing growth of 23% to 25% at constant currencies.

A Parallel Bet on Healthcare

Separately, SAP and Fresenius are deepening their partnership, announced in January. The two companies are jointly investing in Avelios Medical, a developer of cloud-based hospital information systems. The medium-term investment volume is in the mid-hundreds of millions of euros, signaling SAP’s intent to expand beyond its core enterprise resource planning market into vertical-specific cloud solutions.

Ad

SAP Stock: New Analysis - 8 May

Fresh SAP information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated SAP analysis...

en | DE0007164600 | SAP’S | boerse | 69291059 |