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SNOW shares tumbled as Snowflake offered weak product revenue guidance


Snowflake (SNOW) reported third-quarter earnings that met expectations, while revenue beat Wall Street targets. The enterprise software maker’s product revenue guidance came in below expectations. SNOW shares initially fell, then turned higher.




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The company reported a third-quarter profit after the market closed on Wednesday. For the full fiscal year 2024, which begins in the April 2023 quarter, Snowflake said it expects product revenue growth of 47%, below consensus estimates of 52%.

Because Snowflake’s business model is consumption-based rather than subscription-based, bearish investors have raised concerns about a possible U.S. recession curbing demand. Snowflake’s revenue is tied to how much data its customers process and store on cloud computing platforms.

For the quarter ended Oct. 31, Snowflake said it lost 63 cents per share, compared with a loss of 51 cents a year earlier. Analysts polled by FactSet had expected Snowflake to post a loss of 63 cents per share.

The company reports results using generally accepted accounting principles, or GAAP. Snowflake does not disclose adjusted earnings in its releases.

Third-quarter revenue rose 67 percent to $557 million, the software maker said. Analysts had forecast revenue of $539.4 million.

SNOW Stock: Earnings forecast missed

Snowflake’s earnings report also said product revenue rose 67% to $522.8 million, versus estimates of $505.2 million.

At UBS, analyst Karl Keirstead said in a report: “To be clear, 67% revenue growth in the third quarter and guidance for 47% growth in fiscal 2024 are very impressive in this macro (economy) and certainly do not speak for anything “broken” with Snowflake. Nevertheless, investor expectations were high at this press.”

For the current quarter ending in January, Snowflake expects product revenue of $537.5 million at the midpoint of its outlook. Analysts had expected $549.2 million.

SNOW shares initially fell after the earnings release. But Snowflake shares reversed 2.1% to near 146 in morning trading on the stock market today.

Stock of snowflakes is down 57% for 2022 to the earnings report.

Snowflake sells data analytics and management tools that run on cloud computing platforms such as Amazon Web Services, part of Amazon.com (AMZN).

Against the background of the bear market in software growth stocks, the software stock has a relative strength rating of 17 out of a possible best of 99, according to IBD Stock Check.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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