Snowflake Brakes Its Pattern Of Outlook Cuts With The Power Of AI

On Wednesday, Snowflake Inc SNOW topped analysts' expectations with its latest quarterly revenue and earnings. The cloud data analytics company saw its shares rise 3% upon the report whose results boosted by rising data management and storage needs of businesses amid the generative AI hype. During the reported quarter, Snowlake revealed it  has partnered with Nvidia NVDA who smashed estimates with its monster quarter this week. Together, they will be empowering enterprises to build custom large language AI models using their own data.

Quarterly Highlights

For the quarter that ended on July 31st, revenue rose about 36% to $674 million, topping Refinitiv’s consensus estimate of $662.2 million as Snowflake benefited from the AI hype. Product revenue brought in $640 million as it rose 37% while professional services brought $33.81 million to the revenue table. Snowflake does not get its revenue from subscription but rather from the overall consumption of its product. For the fiscal second quarter, Snowflake made a net loss of $227 million, or 69 cents a share, while during last year’s comparable quarter, it made a net loss of $223 million, or 70 cents a share. But excluding items, Snowflake made a profit of 22 cents a share, while analysts were expecting an adjusted profit 10 cents per share profit. Net retention rate went down from 151% in the first quarter to 142%.

An Affirmed Outlook

As for the undergoing, third quarter, product revenue is expected in the range between $670 million and $675 million, which is in line with $670.8 million that Refinitiv’s survey of analysts came up with. As for the full fiscal year, Snowflake broke its pattern of outlook cuts by maintaining its prior forecast with product revenue expected to bring in $2.6 billion, with the guidance assuming that the largest customers continue acting as a growth headwind. 

Stabilization Not Recovery

Chief Executive Frank Slootman stated the company is well positioned from the AI hype, like Nvidia, with companies becoming increasingly aware that the AI strategy needs to be built upon a data strategy. But unlike Nvidia, AI didn’t fuel Snowflake to smash estimates, but it at least broke its pattern of guidance cuts. Chief Financial Officer Michael Scarpelli noted that the encouraging signs that have been observed in the reported quarter speak of stabilization, but not yet of recovery. But through its partnership with Nvidia, Snowflake is bound to change many enterprises, from healthcare to financial institutions, with the opportunity spanning across virtually all industries as businesses of all kinds will be using their data in the Snowflake Data Cloud. 

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.