SAP to buy Prior Labs, invest over €1 billion in AI push

SAP moved to spend more than €1 billion on Prior Labs, a Freiburg startup barely 18 months old, while keeping the company independent and folding its work into SAP AI Core, SAP Business Data Cloud and Joule. The deal, announced on May 4, was still pending regulatory approval and the terms were not disclosed, but it showed how aggressively SAP is leaning into AI even as it narrows the outside agents customers can use.

SAP said the acquisition is meant to help build a globally leading frontier AI lab in Europe focused on structured data, a category the company says large language models still struggle with because they are built for tables, numbers and statistics. SAP is betting instead on tabular foundation models for business data such as payment delays, supplier risks, upsell opportunities and customer churn risk. Philipp Herzig, SAP’s chief technology officer, said the company had already built SAP-RPT-1 to prove the case for enterprise data, while Frank Hutter, Prior Labs’ co-founder and chief executive, said SAP would give the startup the resources, data environment and customer reach to push the category forward.

Prior Labs was founded in 2024 in Freiburg by Hutter, Noah Hollmann and Sauraj Gambhir after what SAP described as about 18 months of team-building. Its TabPFN model series, published in Nature, has more than 3 million downloads and more than 6,000 GitHub stars, according to the company. SAP said the model has set state-of-the-art results on tabular benchmarks across hundreds of independent academic studies. Prior Labs also says its newer TabPFN-2.5 supports datasets of up to 50,000 samples and 2,000 features.

SAP said Prior Labs would remain an independent unit to preserve research velocity, even as the company looks to productize the technology through its own cloud and AI stack. It also said it would continue support for Prior Labs’ open-source strategy. That matters because Prior Labs has built its reputation around open access, while SAP is trying to keep a tighter grip on how enterprise customers adopt and connect external AI tools.

The purchase sits inside a broader spending wave. SAP’s investor materials also pointed to planned acquisitions of Dremio and Reltio, which the company said are meant to strengthen SAP Business Data Cloud and expand analytical and AI workloads in real time. SAP’s first-quarter 2026 results, published April 23, showed cloud backlog of €21.9 billion, cloud revenue up 19 percent and non-IFRS operating profit up 17 percent, giving the company room to spend heavily. Prior Labs had raised only €9 million in pre-seed funding, led by Balderton Capital with support from Atlantic Labs and XTX Ventures and angels including Thomas Wolf of Hugging Face and Robin Rombach of Black Forest Labs.