Snowflake reported a loss for the April quarter that met estimates while revenue topped Wall Street targets, though growth decelerated. Snowflake stock fell on Thursday but pared its losses as the Nasdaq gained.
"Snowflake's Q1 product revenue growth reflected a slowing of consumption patterns on macro headwinds in April, which impacted activity among specific high-growth customers due to a pull-forward of demand in the prior year," JPMorgan analyst Mark Murphy said in a note to clients. "However, despite the near-term drag on revenue upside, we remain impressed by the company's robust free cash flow generation and long-term growth trajectory at scale."
Snowflake is among software companies with a consumption-based business model rather than renewable subscriptions.
UBS analyst Karl Keirstead said in his report: "The fact that Snowflake – with one of the strongest fundamental stories in tech – is seeing some early macro weakness (even if only in a narrow pocket of customers) is a negative read-through to other tech firms with similar exposures."
SNOW Stock Reports Loss
At Cowen, analyst Derrick Wood said: "Management indicated that consumption growth on its platform trended down in April, weighed down by a handful of larger customers in consumer-facing markets who are seeing slower end-market demand."
The enterprise software maker reported a 53-cents-a-share loss for Snowflake stock. That's using generally accepted accounting principles, or GAAP, compared with a loss of 70 cents per share a year earlier.
Analysts polled by FactSet expected the company to report a loss of 53 cents a share.
Snowflake stock fell 4.5% to close at 126.80 on the stock market today. The company released earnings after the market close on Wednesday. Shares initially fell more than 12% on the earnings release.
Snowflake Stock: Product Revenue Guidance Meets Views
Analysts also estimated Snowflake would report zero-cents earnings on an adjusted basis. But the company does not break out adjusted earnings in its releases.
Snowflake said first-quarter revenue jumped 85% to $422.4 million from a year earlier. Analysts had estimated Snowflake revenue at $413.7 million. Revenue climbed 101% and 110% in the two previous quarters.
The Snowflake earnings report said product revenue rose 84% to $394.4 million vs. estimates of $389 million.
For the current quarter ending in July, Snowflake expects product revenue of $437.5 million at the midpoint of guidance. Analysts had expected $436.6 million.
Shares Down 61% For 2022
In addition, Snowflake now has 206 customers with "trailing 12-month product revenue greater than $1 million," the company said. That's up from 184 such customers as of Jan. 31.
Snowflake sells data analytics and management tools that run on cloud computing platforms such as Amazon Web Services, part of Amazon.com.
But Snowflake is not a software-as-a-service, or SaaS, company. Instead, it uses a consumption-based business model based on how much data its customers crunch and store.
"Given greater volatility of a consumption-based revenue model, Snowflake's business is reacting in real-time to macro-impacted customers modulating and optimizing their consumption," Deutsche Bank analyst Brad Zelnick said in a note. "We note management indicated it is only seeing reduced consumption from hypergrowth consumer tech companies and no real impact from other customers."
Heading into the Snowflake earnings report, the software stock had retreated 61% in 2022. Snowflake stock holds a Relative Strength Rating of 10 out of a best-possible 99, according to IBD Stock Checkup.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
