Snowflake's Q2 Earnings Beat Expectations, but Stock Falls on Growth Concerns

Snowflake beats expectations but its stock falls on fears of decelerating revenue growth - SiliconANGLE

Snowflake beats expectations but its stock falls on fears of decelerating revenue growth Shares of the cloud data warehouse giant Snowflake Inc. were battered and bruised in extended trading today, even though the company delivered solid second quarter results and guidance that came in above expectations. The company's stock plunged more than 7% after-hours, with analysts saying that its likely shareholders are concerned over the possibility of a second-half revenue deceleration implied by the outlook. Snowflake reported second-quarter earnings before certain costs such as stock compensation of 18 cents per share, while revenue jumped 29% to $868 million. The numbers were better-than-expected, with analysts forecasting earnings of just 16 cents on sales of $852 million. The company also said it delivered $829 million in product revenue, ahead of the consensus estimate of $814 million. It ended the quarter with 510 customers with trailing 12-month product revenue of over $1 million. All told, Snowflake delivered a net loss of $317 million in the quarter, down from a loss of $227 million in the same period one year earlier. Snowflake's chief executive officer Sridhar Ramaswamy (pictured) was full of enthusiasm, hailing "another strong quarter" in which it surpassed the high-end of its own product revenue guidance. "The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products," Ramaswamy said. "With the combination of our platform, the network effect of collaboration and our AI innovations, we have a huge opportunity ahead to deliver even greater value to our customers." Snowflake's cloud data warehouse offerings have become more relevant to enterprises due to the ongoing shift from traditional on-premises servers to the cloud, and in recent months they have been further boosted by the growing demand for data to power artificial intelligence workloads. The company has responded by introducing a number of AI-related features in its data platform, resulting in increased demand for its services. In addition, the company has stepped into the large language model space with Snowflake Arctic, which is an open-source alternative to proprietary models like OpenAI's GPT-4o. Snowflake said it ended the quarter with $5.2 billion in remaining performance obligations, up 48% from a year ago. That's an encouraging sign for investors, as RPO is generally used as a guide to help them understand future revenue, indicating how much it expects to earn from its existing contracts with customers. It includes revenue that has been invoiced but not yet paid, and future amounts that will be invoiced for goods and services not yet delivered. Looking to the third quarter, Snowflake said it anticipates product revenue in a ballpark of $850 million to $855 million. The midpoint of that range is ahead of the Street's target of $851 million. In addition, Snowflake raised its full-year outlook for product revenue, saying it's now looking for $3.356 billion at the midpoint, up from an earlier forecast of $3.3 billion. Given the strong results and outlook, the after-hours decline may have come as a surprise, but Evercore ISI analyst Kirk Materne said in a note to clients that the guidance also indicates a "significant deceleration" in product revenue growth compared to the first half of the year. He also pointed to the company's deferred revenue, which was slightly lower than expected. "This could be contributing to some of the overhang on the shares in the after-market," he added. Meanwhile, D.A. Davidson analyst Gil Luria told Reuters that the company did not pair its increased revenue projection with a rise in its margin forecast. On a conference call, Snowflake executives explained that the margin forecast was left unchanged as the company is still waiting to deploy new graphics processing units in its data centers. Prior to today's movements, Snowflake's stock had declined 11% in the last 12 months, compared to a 33% gain in the tech-heavy Nasdaq index.

Why Snowflake Stock Was Sliding Today | The Motley Fool

The data storage and analytics company delivered solid revenue growth in Q2, but it's still losing money on a GAAP basis. Shares of Snowflake (SNOW -13.71%) were sliding Thursday morning after the cloud-based data warehousing company posted quarterly results that beat analysts' estimates, but didn't seem to be enough to please investors. Investors also appeared disappointed with the company's falling profits and management's guidance. As of 11:10 a.m. ET, the stock was down by 13%. For Snowflake's fiscal 2025 second quarter, which ended July 31, product revenue grew by 30% to $829.3 million, a modest deceleration from the fiscal first quarter. Overall revenue, which also includes professional services, rose 29% to $868.8 million, which beat the consensus estimate of $851.3 million. In a difficult environment for cloud software companies, Snowflake is still delivering solid growth, and it reported a net revenue retention rate of 127%. Its remaining performance obligations were up by 48% to $5.2 billion. However, the company posted another wide loss on a generally accepted accounting principles (GAAP) basis, with an operating loss of $355.3 million -- worse than its $285.4 million loss in the prior-year period. After adjusting for items like stock-based compensation, adjusted earnings per share fell from $0.22 to $0.18, though that topped the consensus estimate of $0.16. "The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products," said CEO Sridhar Ramaswamy in the earnings release. Looking ahead to the fiscal third quarter, the company expects revenue growth to decelerate. Management guided for product revenue in the range of $850 million to $855 million, which would amount to growth of about 22%. It also forecast an adjusted operating margin of 3%. For the full year, management raised its product revenue forecast to $3.356 billion -- growth of about 26% -- but that implies a moderate deceleration in the second half. With slowing growth, excessive stock-based compensation expenses, and wide GAAP losses, Snowflake still needs to prove to investors that it can be profitable. While its valuation is starting to look more reasonable, this sell-off is understandable.

Snowflake Q2 results show year-over-year growth of 29%, but stock falls

Snowflake (NYSE:SNOW) fell nearly 7% during early post-market trading on Wednesday, despite revealing second quarter fiscal 2025 results that surpassed estimates and increasing its full-year guidance. For the quarter ended July 31, Snowflake reported adjusted earnings per share of $0.18, which was more than the consensus estimate of $0.16. It reported revenue of $868.8M versus the estimate of $850.15M. However, second quarter billings of $779M fell short of the consensus estimate of $831.9M. "Product revenue was up 30% year-over-year at $829M, while remaining performance obligations were $5.2B, up 48% year-over-year," said Snowflake CEO Sridhar Ramaswamy. "The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products." The data cloud platform provider expects product revenue for the quarter in progress, which ends in October, to range from $850M to $855M, with a mid-point of $852.5M. Consensus estimates called for product revenue of $848M. The company also raised it full-year product revenue guidance to $3.36B from $3.3B. The consensus estimate was $3.3B. The Bozeman, Mont.-based company also revealed it plans to repurchase an additional $2.5B of stock through March 2027.

Snowflake (SNOW) Stock: It's Going Lower And For Good Reason

Looking for a helping hand in the market? Members of BAD BEAT Investing get exclusive ideas and guidance to navigate any climate. Learn More " The market is not reacting well to Snowflake Inc.'s (NYSE:SNOW) just-reported earnings. This comes after a tumultuous 2024 year-to-date performance for the AI-cloud company already. It looks set to drop heavily today, though the stock is up off the August 5th Japanese Yen Carry trade crash low. The stock recovered to $135 from its 52-week low of $107.93 on August 5th. Now, the thing is, despite a still sky-high valuation, and earnings that were good, but not good enough, we actually believe the downside is relatively limited from today's drop. A lot has happened this year. It's had a tough year so far, down nearly 40%. Troubles really began brewing back on February 28th, when Snowflake announced that then-CEO Frank Slootman was leaving his role but continuing on as chairman. Sridhar Ramaswamy, from Neeva which Snowflake bought in 2023 to support its AI capabilities, took his place. Then it also lowered guidance for the next quarter and full year FY2025. The stock tanked following this. Then Snowflake surpassed fiscal Q1 2025 earnings expectations and provided higher guidance and announced several new initiatives, but the forecasts were still not good enough to get the stock going. Today, we are seeing more of the same. The stock looks destined to be repriced and revalued to a new normal of around $125 a share, and it is still very expensive. Can the company grow into this valuation? Yes, it can, but with the projected growth not exciting investors, it may be a few years. Yes, years. You see, the adoption of new and novel products, particularly those involved in AI, is strong. We know there are thousands and thousands of customers using AI features already, and Snowflake certainly is raking in revenues. But despite its impressive growth, Snowflake faces operational challenges, particularly around sustained profitability and managing its customer expectations in a highly competitive market. When you factor in the valuation, even though shares have corrected tremendously, it is still priced for perfection. Near perfection is also not good enough. The Street wants not just earnings beats, but sizable beats. And it wants to see continued guidance increases to boot. Now what we see here is that the company's gross margins are pretty stable, but investors should keep a close watch on them. Increasing costs or sales-related spend could pressure margins. T3 he Street, having revalued the stock lower on growth that is not meeting the strict standards of perfection, could lead to the next leg of trading honing in on key metrics like margins. Something to keep in mind. As we move forward, we also have to be on the lookout for potential impacts from broader economic conditions and a tough overall macro environment. All of this comes along with decelerating revenue growth despite expanding its product lineup. So what does the growth look like? Well, the growth is still strong, but it is decelerating. Revenue for the quarter was $868.8 million, which was a strong 29% year-over-year growth, but no longer wildfire-like growth. Of course, comps to a higher and higher revenue base make big percentage year-over-year changes difficult to achieve. That is something to keep in mind in the context of deceleration in revenue growth. Product revenue constitutes the bulk of revenues for Snowflake, and for the quarter this revenue was $829.3 million, representing 30% year-over-year growth. On the back of this result, Snowflake raised its Q3 product revenue guidance for the year. Another key metric to watch is the net revenue retention rate. This was 127% as of July 31, 2024. The company has grown its $1 million plus revenue customer club, too, and growing total customers. The company now has 510 customers with the last 12-month revenue of $1 million representing 28% year-over-year growth. Further, as you can see, total customers are now well over 10,000. This is steady growth. Then there are the remaining performance obligations, or RPOs. The RPOs in the quarter were $5.2 billion, representing 48% year-over-year growth. Now, here is where we see problems. It comes back to margins, and then free cash flow. The company has expanded margins year after year, but looking at this quarter versus a year ago, there was a contraction, and the guidance suggests a contraction as well. As you can see, product gross margins have expanded to 78% from 74% in fiscal 2024 versus 2022. Operating margins swung from -3% to positive 8% in the same time frame, while free cash flow margins expanded from 12% in 2022 to 29% in fiscal 2024. All of that is in the past, however. Take a look at this quarter's margins versus last year. This is billed as "investing for growth" in the slide title, which may very well be true, but as we alluded to earlier, the margin story is likely to become more and more important as revenue growth has normalized some. All margin metrics were down from last year. Moreover, margins for the fiscal year 2025 will show a contraction. As you can see in table form, we have not just decelerated revenue growth on a percentage basis but also gross margins that are now contracting for the year, operating margin is contracting, and free cash flow margin is contracting. As we look ahead for the company, there is no doubt the growth is still very respectable in terms of customers and revenue. There is a massive global opportunity and the company is hiring to address its expansion. However, Snowflake cannot allow itself to slow down much. It must keep growing revenues, and from here we would think that 25% revenue growth is the bare minimum to keep the stock above $100, especially when even their operating margins will be 3% for the year. From a trading perspective, you could easily see the stock valued at 8-10x sales until margins start to meaningfully expand, and free cash flow grows meaningfully. We question whether free cash flow margin will even hit 26% this year. Further, the company must continue to retain customers. The net retention is well over 100% which is fantastic, but has trickled lower. Overall, we think SNOW is a highly overvalued company relative to its peers, but it can grow into this valuation. However, that caps the upside for the stock. There is not much justification to expand the already stretched valuation from here. Growth is strong, despite decelerating, but it is more than priced in. We think the best course of action is to either have a very long-term view, or to swing trade this, as it has great opportunities to do so long and short. Currently, however, we have a negative bias and think the stock is heading back below $120, and will make a run toward $100 in the upcoming weeks.

Snowflake Reports Widening Losses, Sending Its Stock Lower

Snowflake CEO Sridhar Ramaswamy highlighted the company's opportunities related to artificial intelligence. Snowflake's (SNOW) second-quarter revenue grew from the year-ago period and beat analysts' projections, but losses widened as costs rose. The data cloud company reported second-quarter revenue of $868.82 million, a 30% jump from the year-ago period, and above analysts' estimates compiled by Visible Alpha. However, Snowflake's net loss of $317.77 million or 95 cents per share widened from the year prior and represented a more significant loss than analysts projected. Excluding one-time items, adjusted earnings of 18 cents per share beat expectations. The company said it expects fiscal third-quarter revenue to be between $850 million and $855 million and raised its full-year outlook to $3.36 billion, though both missed analysts' expectations. "The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products," Snowflake CEO Sridhar Ramaswamy said in a release, adding that "with the combination of our platform, the network effect of collaboration and our AI innovations, we have a huge opportunity ahead to deliver even greater value to our customers." Shares of Snowflake were down about 7% at $125.70 in extended trading Wednesday following the company's earnings report.

Snowflake Q2 Earnings: Revenue Beat, EPS Beat, Raised Guidance, Additional $2.5B Buyback, 'Great Traction' With AI Products - Snowflake (NYSE:SNOW)

Snowflake reports adjusted earnings of 18 cents per share, beating analyst estimates of 16 cents per share. Snowflake Inc SNOW reported second-quarter financial results that topped analyst expectations after the market close on Wednesday. Here's a look at the key highlights from the quarter. Q2 Earnings: Snowflake reported second-quarter revenue of $868.823 million, beating the consensus estimate of $849.704 million, according to Benzinga Pro. The data cloud company reported adjusted earnings of 18 cents per share, beating analyst estimates of 16 cents per share. Total revenue was up 29% year-over-year. Product revenue came in at $829.3 million, up 30% year-over-year. Net revenue retention rate was 127% in the quarter. Remaining performance obligations totaled $5.2 billion, up 48% year-over-year. Snowflake said it ended the quarter with 510 customers with trailing 12-month product revenue greater than $1 million. "The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products. With the combination of our platform, the network effect of collaboration and our AI innovations, we have a huge opportunity ahead to deliver even greater value to our customers," said Sridhar Ramaswamy, CEO of Snowflake. Check This Out: Fed Minutes Reveal 'Plausible Case' For Interest Rate Cut As Policymakers Cheer Inflation Progress Snowflake's board authorized an additional $2.5 billion for its share repurchase program, and extended the duration through March 2027. The company said it had $491.9 million remaining on its buyback as of July 31. Outlook: Snowflake sees third-quarter product revenue in the range of $850 million to $855 million, up approximately 22% on a year-over-year basis. The company also raised its full-year product revenue expectations. Snowflake now expects full-year product revenue of $3.356 billion, up 26% year-over-year. Management will hold a conference call to further discuss its quarterly performance at 5 p.m. ET. SNOW Price Action: Snowflake shares were down 6.71% in after hours, trading at $126 at the time of publication Wednesday, according to Benzinga Pro. Photo: Shutterstock. Read Next: Billionaire Hedge Fund Manager David Einhorn Says Stock Market Is Fundamentally Broken: Here's Why Market News and Data brought to you by Benzinga APIs