Snowflake’s stock pops as AI momentum drives solid earnings and revenue beat

Shares of Snowflake Inc. popped in extended trading after the cloud-based data storage giant reported better-than-expected second-quarter earnings and revenue and issued upbeat guidance for the rest of the year.

The company reported adjusted earnings of 35 cents per share, easily topping Wall Street’s consensus view of 27 cents per share. Revenue for the period came to $1.1 billion, up 32% from a year earlier and ahead of the $1.09 billion analyst target.

Product revenue, which is derived from Snowflake’s customer’s consumption of compute, storage and data bandwidth, accounted for $1.09 billion of the company’s total sales, also up 32%. Analysts had forecast product revenue of $1.04 billion.

All told, the company reported a net loss of $297.9 million in the quarter, down from the $317.7 million net loss it delivered in the year-ago quarter.

Snowflake, which sells cloud-based data warehouse tools for enterprises, guided for revenue of between $1.125 billion and $1.13 billion in the current quarter, well ahead of the Street’s forecast of $1.17 billion in sales. In addition, the company upped its full-year revenue forecast to $4.395 billion at the midpoint of its range, up from $4.325 billion on its last earnings call three months earlier. Investors liked what they saw, and Snowflake’s stock jumped more than 12% after hours.

Evercore ISI analyst Kirk Materne said in a note that this is a promising development, because Snowflake traditionally tends to be quite conservative in its guidance. “We believe that the strong results and upped full-year guidance demonstrate that the company continues to see steady demand in its core data warehouse business and feels confident in the durability of demand heading into the third quarter,” he said.

Snowflake’s stock has gained more than 30% in the year to date, primarily due to enthusiasm over the company’s role in the artificial intelligence industry. It’s thought that much of the company’s growth stems from the enterprise race to adopt AI, as well as higher spending from companies looking to modernize their data storage infrastructure. Snowflake’s cloud-agnostic platform lends itself well to AI, enabling organizations to host and manage all of their data and AI models from various providers in a single, centralized data warehouse environment.

As more businesses seek to adopt AI and develop AI-powered applications, Snowflake is becoming a preferred data platform for many, as it helps to simplify their AI stacks.

Snowflake Chief Executive Sridhar Ramaswamy (pictured) said “thousands” of its customers are betting their business on his company’s platform, with more than 6,000 tapping into its AI capabilities. “Customers love that our platform is easy to use, connected to enable fluid access to data wherever it sits, and trusted by companies of all sizes and industries,” Ramaswamy added. “We have an enormous opportunity ahead as we continue to empower every enterprise to achieve its full potential through data and AI.”

Constellation Research Inc. analyst Holger Mueller hailed Snowflake’s strong performance, saying its $1 billion product revenue milestone is another proof point for the attractiveness of its data warehouse platform. However, he said investors may have concerns over its struggle to achieve profitability.

“Despite the revenue growth, it only delivered a small improvement in profitability, and in the first two quarters of the fiscal year, it has grown less than it did in the first two quarters of last year,” Mueller said. “It’s not clear how long investors are going to be happy to ignore Snowflake’s profit situation, and some may soon demand that progress is made.”

During the quarter, Snowflake hosted its annual customer conference, Snowflake Summit, where it outlined its AI strategy, centered around the latest version of its core data warehouse and its family of Cortex large language models. There, it unveiled Cortex AISQL, a new model that allows data analysts to use standard Structured Query Language commands to query data across diverse formats, including images, audio and long-form text files.

In addition, Snowflake announced it had acquired a company called Crunchy Data Solutions Inc., which has advanced vector database capabilities to make unstructured data more searchable.

Snowflake faces stiff competition from industry rivals, however. The most notable of those is Databricks Inc., which offers an alternative cloud-based data processing platform. It recently announced it had closed on a major funding round that values it at a cool $100 billion. At today’s market close, Snowflake had a market capitalization of around $65 billion.

Photo: Robert Hof/SiliconANGLE