Snowflake Earnings: Existing Customers Slow Spending Growth and Booking Temperature Drops

We are lowering our fair value estimate for Snowflake SNOW to $231 per share from $258 as the firm began its first quarter with a chill that we think has implications for the long term. While revenue exceeded our expectations, EPS came in under our forecasts. Guidance for the year was moderated as existing customers are slowing spending growth, which is informing our fair value cut, as we think this will moderate longer-term growth. On the flip side, while bookings continued to see headwinds due to conservative, shorter-term commitments, we were encouraged that this was not the result of competitive dynamics. We believe that shorter-term commitments due to the macroenvironment will likely not diminish customers’ total commitments significantly in the long term, as we believe Snowflake’s product has very sticky beginnings reflected in an outstanding net revenue retention rate of 151%. So, all in all, while we have moderated growth expectations in the long term, we believe existing customer spending is safeguarded and sticky. Even with our fair value cut, we believe Snowflake shares are attractive. We remind investors that no-moat Snowflake boasts differentiated technical abilities in the data lake and warehouse markets with ample upside from its currently small but mighty data marketplace offering.