Snowflake stock soars 18% after sharp drop in revenue

By Emilie Bary

CEO says company’s consumption-based model is ‘an advantage in the type of times we live in’

Shares of Snowflake Inc. surged in Wednesday’s aftermarket action after the data software company easily beat revenue expectations for its latest quarter.

The company reported a second-quarter net loss of $223 million, or 70 cents per share, after losing $190 million, or 64 cents per share, in the year-ago quarter. Analysts tracked by FactSet had expected Snowflake (SNOW) to post a GAAP loss per share of 56 cents.

Snowflake’s revenue fell from $272 million to $497 million, while the FactSet consensus was $467 million. The company posted $466 million in product revenue, above the $439 million that analysts had modeled.

The company revealed that it has 6,808 total customers, including 246 customers with 12-month product revenue over $1 million.

Chief Executive Frank Slootman pointed out that Snowflake operates on a consumption model rather than a software-as-a-service (SaaS) model, which means customers can “limit” their use of Snowflake after signing a contract.

“We think that’s an advantage in the type of times we live in,” he said on the company’s earnings call.

The stock gained 18% in after-hours trading.

For the third fiscal quarter, Snowflake executives expect $500 million to $505 million in product revenue, compared to the FactSet consensus forecast of $502 million.

Chief Financial Officer Mike Scarpelli said of the company’s earnings that amid macroeconomic uncertainty, “the guidance we have issued is cautious.”

For the full year, Snowflake management expects between $1.905 billion and $1.915 billion in product revenue, while analysts expected $1.897 billion. The company’s earlier outlook called for between $1.885 billion and $1.900 billion.

“We believe taking a conservative view is rewarded in this band, and that is reflected in the stock in the secondary market,” Evercore ISI analyst Kirk Materne wrote following the report.

The earnings come as several analysts took a more cautious view of Snowflake shares this month, with at least two share downgrades amid concerns over competition from private company Databricks as well as the potential for macroeconomic pressure to have an impact on customer spending.

Analysts were more optimistic at the start of the summer, as at least three Snowflake stocks improved during the month of June.

-Emily Bary

 

(END) Dow Jones Newswire

08-24-22 2051ET

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