Snowflake reduces revenue growth target, and the stock is falling

Snowflake reduces revenue growth target, and the stock is falling

‘Change in existing customer purchasing behavior’ leads to decrease for Snowflake’s new product revenue forecast, shares dive 7% in extended session

Shares of Snowflake Inc. fell more than 7% in after-hours trading Wednesday after the data-software company forecast lower revenue growth than analysts had anticipated.

Snowflake’s SNOW, +0.08% management expects $568 million to $573 million in product revenue in the first quarter, while the FactSet consensus called for $582 million. For the full year, Snowflake executives expect $2.705 billion in product revenue, representing 40% growth from a year before.

The FactSet consensus for the year was $2.826 billion, after Snowflake executives gave an initial full-year product-revenue forecast for 47% growth on its prior earnings call in late November. Newer customers are still consuming on Snowflake, but not ramping at the same pace as the company’s early adopters, executives said.

“The change in existing customer purchasing behavior, lower-than-expected new logo bookings, and [a] slower expected ramp from our youngest cohorts has led us to reevaluate our FY ’24 outlook,” Chief Financial Officer Mike Scarpelli said on the earnings call, according to a FactSet transcript.

Snowflake also disclosed that it has received authorization for a share-repurchase program of up to $2 billion, and increased its guidance for cash flow.

“While we are not surprised by the initial reaction to the lowered FY24 guidance, we think setting a lower bar is prudent in this economy (we were already below the initial 47% guide) and likely leaves room for upside,” Evercore ISI analyst Kirk Materne wrote in a note to clients. “We view the increase in FY24 [free-cash-flow] guidance from 23% to 25% as a positive and the $2 billion buyback helps reinforce the company’s positive long-term view.”

The company generated a fiscal fourth-quarter net loss of $207 million, or 64 cents a share, compared with a loss of $132 million, or 43 cents a share, in the year-earlier quarter. On an adjusted basis, Snowflake earned 14 cents a share, up from 10 cents a share a year before, while the FactSet consensus was for 4 cents a share.

Snowflake posted $589 million in revenue, up from $384 million a year before, while analysts were expecting $576 million. Product revenue rose to $555 million from $360 million and ahead of the FactSet consensus, which was for $542 million. The company had a 158% net revenue retention rate in the quarter.

Snowflake plans to hire more than 1,000 people this fiscal year, after adding a net of 1,900 staffers in the one that just wrapped up.

Shares of Snowflake have shed more than 40% over the past 12 months, as the S&P 500 index SPX, -0.47% has lost about 8%.

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