Shares of cloud computing company Snowflake dropped 14 percent on Thursday morning following its fourth-quarter earnings report which the company posted on Wednesday.
The results posted on Wednesday by the company shows declining revenue growth from 2019. Sales growth which grew 101 percent, YoY, in the quarter declined from the third quarter which saw sales growth of 110 percent. It however surpassed what analysts had projected for the quarter. They had projected $372.6 million in revenue for the fourth quarter. The company’s guidance also was slightly higher than analysts’ expectations, but this didn’t prevent the company’s stock from falling on Thursday morning.
While analysts projected 78 percent product revenue growth, Snowflake says it expects between 79 percent to 81 percent growth in product revenue in the fiscal first quarter. The company reported that product revenue increased by 102 percent in its fiscal fourth quarter. Product revenue is an important part of Snowflake’s revenue as it takes up a major share of its total revenue, and reflects how much its products and services are being used for storing and running queries on a variety of data. The company expects revenue growth to come between 65 percent and 67 percent for its 2023 fiscal year. Wall Street expectation for this category was 66 percent according to a FactSet poll from analysts.
According to a note written by analysts from Piper Sandler on Thursday, Snowflake’s guidance reflects challenges from imminent platform improvements that “reduce customer query costs in the short-term but aim to stimulate broader consumption longer-term”.
Analysts from Credit Suisse mentioned that Snowflake’s platform improvements will be a brief challenge, adding that other upgrades such as improved workload scheduling, could be boosters for Snowflake. “Although the upside to FQ4 and forward guidance was less than investors have come to expect from Snowflake, we continue to view Snowflake as a true pioneer in cloud-native data analytics and believe the company will play an increasingly important role across the entire data value chain — with increased workload applicability due in part to the aforementioned platform enhancements”, the analysts wrote.
Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.
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