Snowflake boosts its forecast, and Wall Street breathes a sigh of relief

By Emily Bary

Stock rises but pares gains, as the outlook implies deceleration

In its first quarterly report since announcing the surprise departure of its chief executive, Snowflake Inc. upped its full-year forecast, to the delight of Wall Street.

The cloud-computing company on Wednesday offered a fiscal 2025 forecast that called for $3.3 billion in product revenue. That compares with its prior outlook, which was for $3.25 billion.

Were Snowflake (SNOW) to achieve the new forecast, it would be posting 24% growth in product revenue relative to a year before. During fiscal 2024, Snowflake grew product revenue by 38%.

Snowflake and Wall Street have a messy history when it comes to guidance, after severals cuts last year and a disappointing forecast offered in the forecast prior to this one.

And while Snowflake's outlook for the fiscal second quarter was above expectations, Evercore ISI analyst Kirk Materne acknowledged that those skeptical on the stock could see reason to nitpick it.

Snowflake's fiscal second-quarter product-revenue forecast calls for $805 million to $810 million, which is above the $793 million analysts had been modeling. That outlook implies 26% to 27%, growth, Materne noted, whereas product revenue rose 34% in the fiscal first quarter.

Plus, the quarterly forecast, taken in conjunction with the annual one, suggests a deceleration later in the fiscal year as well, Materne wrote.

"However, we expect that - similar to F1Q - this outlook will prove conservative and ultimately FY24 product growth will end up in the high 20% range," he wrote.

Shares of Snowflake rose 4% in after-hours trading Wednesday, having pared gains. They were up roughly 11% shortly after the numbers came out.

For the fiscal first quarter, which just wrapped up, Snowflake generated overall revenue of $829 million, up from $624 million a year before. The FactSet consensus was for $788 million.

Snowflake's product revenue for that period came in at $790 million, up from $590 million a year before. Analysts were modeling $751 million.

The company recorded a quarterly net loss of $317 million, or 95 cents a share, compared with $226 million, or 70 cents a share, in the year-earlier period.

After adjustments, Snowflake logged earnings per share of 14 cents, down from 15 cents a year prior. The FactSet consensus was for 18 cents in adjusted EPS.

"Our core business is very strong," new Chief Executive Sridhar Ramaswamy said in a release. "Our AI products, now generally available, are generating strong customer interest. They will help our customers deliver effective and efficient AI-powered experiences faster than ever."

This report comes after Snowflake's prior one ushered in the stock's worst single-day percentage decline on record in light of the surprise announcement that Frank Slootman was leaving as CEO, as well as a product-revenue forecast that missed the consensus view.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-22-24 2021ET

Copyright (c) 2024 Dow Jones & Company, Inc.