- Snowflake's revenue beat estimates for the quarter as losses mounted.
- Goldman Sachs upgraded Snowflake stock to buy earlier this month as its performance trailed that of the Nasdaq.
Snowflake shares fell as much as 8% in extended trading on Wednesday after the data-analytics software company barely met analysts' expectations for product revenue, the company's main source of total revenue, for the full fiscal year.
Here's how the company did:
- Earnings: Loss of 70 cents per share
- Revenue: $228.9 million, vs. $212.9 million expected by analysts, according to Refinitiv.
Revenue grew 110% year over year in the fiscal first quarter, which ended on April 30, according to a statement. In the previous quarter revenue increased by 117%. The company's net loss swelled to $203.2 million from $93.6 million.
Renegotiations with cloud providers benefited the company's gross margin, Mike Scarpelli, the company's finance chief, said on a conference call with analysts. He said that in April Snowflake implemented a storage compression change that will widen margins.
He also said the company is working on new chip technologies that could bring performance gains. "That's more next year," Scarpelli said.
With respect to guidance, Snowflake said in the fiscal second quarter it expects to generate $235 million to $240 million in product revenue, which delivered 93% of Snowflake's total revenue in the fiscal first quarter. At the middle of the range that would represent 171% growth. The projection came in above the FactSet consensus estimate of $235.4 million.
For the full 2022 fiscal year Snowflake called for $1.020 billion to $1.035 billion in product revenue, which at the middle of the range implies 86% growth and is more than the $1.02 billion FactSet consensus. In March Snowflake's full-year guidance was $1.00 billion to $1.02 billion in product revenue. Snowflake also raised the forecast for adjusted operating margin to -17% from -23%.
Excluding the after-hours move, Snowflake shares are down about 17% year to date, while the S&P 500 index is up almost 12% over the same period.
Earlier this month Goldman Sachs analysts upgraded their rating on Snowflake stock to buy from the equivalent of hold.
"With the stock ~50% off its highs from December 2020 relative to a 1% decline for our broader software coverage and +4% for the Nasdaq over the same time period, we believe investor expectations have become more balanced and see a path towards outperformance, as we believe the durability of growth is not fully reflected in the company's current valuation," the analysts wrote.
They said that investors could rotate back into growth opportunities, and that Snowflake could introduce long-term growth and margin guidance at its Snowflake Summit conference in June that could lift the stock.