British accounting software powerhouse Sage has reported a robust set of half-year results, driven by surging demand for its cloud offerings and a rapid uptake of its AI tools.
The company is, however, not spared from the persistent tariff uncertainty that has tainted prospects for businesses, both large and small from across the globe.
Sage is upbeat about AI services driving growth
For the six months to the end of March, the Newcastle-based firm’s operating profit climbed 16% year-on-year to £288 million, while total revenue grew by 9% to £1.24 billion, underpinned by a focus on cost control, combined with a continued swing towards subscription-based products.
These higher-margin offerings now represent 83% of Sage’s revenues. As a result of its cash flows and strong balance sheet, Sage has not only extended its share buyback programme by an additional £200 million but also raised its interim dividend by 7%.
Sage’s annualized recurring revenue (ARR) paints an equally encouraging picture; it rose 11% to £2.45 billion. Growth in cloud platform revenues was 9%, while revenue from cloud-native solutions, such as the recently enhanced Sage Intacct, accelerated by 22%.
This momentum was most pronounced in the UK, where revenue climbed 9%, reinforcing Sage’s dominant position in its home market.
CEO Steve Hare highlighted the transformative impact of Sage Copilot, the firm’s AI-powered assistant launched last year.
“Thousands of customers across the UK, US, and Europe are now leveraging Copilot to streamline their workflows.”
~ Hare
He noted the tool will soon be freely available for accountants and bookkeepers as they embrace what he described as the dawning “era of AI” in business finance.
Hare went on to assert that Sage’s strong performance reflects the inherent resilience and diversification of its portfolio. “Our suite of accounting, HR, and payroll solutions continues to gain traction, thanks to sustained investment in our network platform,” he said.
Looking ahead, Sage confirmed it is on track to deliver at least 9% revenue growth for the full year, with further margin expansion expected as cloud and AI become ever more central to its proposition.
The firm’s aggressive pivot to the cloud and advanced automation has placed it in direct competition with global technology giants, all vying for a slice of the business-software market. Nonetheless, Sage believes its deep domain expertise and specialized focus on SMEs will underpin its ongoing success.
Tariff uncertainty is expected to dent customer confidence
Meanwhile, Sage’s management acknowledges that external uncertainties are tempering the spending appetite of its small-business customer base, due to tariff uncertainty, which is affecting other businesses.
In a recent interview, Hare pointed to what he called “tariff noise,” referring to fluctuating US trade policies that have generated a cloud of doubt among clients.
Despite having ample cash reserves, many small and medium-sized enterprises are choosing to delay investments until the outlook stabilises.
“Confidence is the critical factor,” Hare explained.
“When you introduce noise into the system, people become cautious, and decision-making is postponed. We need to encourage our customers to deploy the resources they already have to drive growth.”
~ Hare
This cautiousness was reflected in Sage’s share price reaction: the stock slipped 5% in early trading following the results announcement, erasing gains accrued earlier in the month. Nevertheless, the company stuck firmly to its full-year guidance, reiterating its forecast of 9% or better revenue growth.
Hare stressed that while the current environment is volatile, Sage’s long-term trajectory remains unchanged, supported by ongoing investments in automation and AI.
Sage Copilot, now accessible to roughly 40,000 UK customers, is already in active use by more than a quarter of that group, according to the CEO. The tool automates routine bookkeeping and accounting tasks, freeing up time for business owners and finance professionals to focus on strategic activities.
“By embedding advanced AI directly into our platform, we are not just improving efficiency, we are reshaping how businesses operate,” Hare said, underscoring Sage’s commitment to staying at the forefront of technological innovation in the SME sector.
