snowflake (snow) reported a loss for the April quarter which was in line with estimates while revenue beat Wall Street targets, although growth slowed. Snowflake stock fell on Thursday but trimmed its losses as the Nasdaq rose.
Mark Murphy, an analyst at JPMorgan, said in a note to clients. “However, despite the immediate impact on higher revenue, we remain impressed with the company’s strong free cash flow generation and long-term growth trajectory at scale.”
Snowflake is among the software companies that have a business model based on consumption rather than renewable subscriptions.
“The fact that Snowflake – with one of the strongest fundamental stories in tech – is seeing some early overall weakness (even if only in a narrow pocket of customers) is a negative reading for other tech companies with similar exposures,” UBS analyst Carl Kirsted said in his report. “.
Snow stock reported a loss
At Cowen, analyst Derek Wood said, “Management has indicated that consumption growth on its platform is trending lower in April, weighed down by a handful of larger customers in consumer-facing markets who are seeing slowing end-market demand.”
The enterprise software maker reported a loss of 53 cents a share in Snowflake stock. That’s using Generally Accepted Accounting Principles, or GAAP, compared to a loss of 70 cents a share in the prior year.
Analysts polled by FactSet had expected the company to report a loss of 53 cents per share.
Snowflake stock fell 1.3% to close to 131 in mid-day trading stock market today. The company released its earnings after the market closed on Wednesday. The shares initially fell more than 12% on the earnings release.
Snowflake Inventory: Product Revenue Guide Meets Views
Analysts also estimated Snowflake would report zero cent earnings on an adjusted basis. But the company does not separate adjusted earnings into its releases.
Snowflake said first-quarter revenue jumped 85% to $422.4 million from a year earlier. Analysts estimated Snowflake’s revenue at $413.7 million. Revenue is up 101% and 110% in the previous two quarters.
Snowflake’s earnings report said product revenue rose 84% to $394.4 million versus estimates of $389 million.
For the current quarter ending in July, Snowflake expects product revenue to be $437.5 million mid-steer. Analysts had expected $436.6 million.
Stocks down 61% for 2022
In addition, Snowflake now has 206 customers with “12-month excess product revenue in excess of $1 million,” the company said. That’s up from 184 customers as of Jan. 31.
Snowflake sells data analysis and management tools that run on cloud computing platforms such as Amazon Web Services, and is part of Amazon.com (AMZN).
But Snowflake is not a SaaS or SaaS company. Instead, it uses a consumption-based business model based on how much data its customers store and store.
“Given the high volatility of its consumption-based revenue model, Snowflake’s business interacts in real time with highly impacted customers by adjusting and optimizing their consumption,” Deutsche Bank analyst Brad Zelnick said in a note. “We note that management has indicated that they are only seeing a decrease in consumption from high-growth consumer technology companies and no real impact from other customers.”
As Snowflake’s earnings report nears, software stock is down 61% in 2022. Snowflake’s stock carries a relative strength rating of 10 of the top 99 possible, according to IBD stock check.
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