Snowflake lowers the revenue growth target and the stock falls

This update corrects the FactSet consensus for Snowflake’s fiscal first quarter and fiscal 2024 product revenues.

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

Snowflakes SNOW,
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% year-over-year growth.

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

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

Snowflake also announced that it has received approval for a share repurchase program of up to $2 billion, and raised cash flow guidance.

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

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

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

Snowflake plans to hire more than 1,000 people this fiscal year, after adding a net of 1,900 staff at fiscal year end.

Read More: Snowflake plans to hire more than 1,000 employees this year as other tech companies cut

Shares of Snowflake are down more than 40% over the past 12 months as the S&P 500 Index SPX,
lost about 8%.

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