Shares in Snowflake popped after the software maker reported third quarter earnings and revenue that topped estimates amid stabilizing growth at cloud computing partner Amazon.com. Guidance for SNOW stock came in above expectations.
The company released its Snowflake earnings report after the market close on Wednesday. Revenue climbed 32% to $734.2 million, the enterprise software maker said. Analysts projected Q3 revenue of $713.8 million.
On an adjusted basis, Snowflake earnings were 25 cents, up 127%. Analysts expected Snowflake to report adjusted profit of 16 cents per share.
Snowflake reported a loss of 65 cents using generally accepted accounting principles, or GAAP. That compares with a loss of 63 cents a year earlier. Analysts polled by FactSet expected Snowflake to report a loss of 76 cents on a GAAP basis.
"Echoing commentary from other (software and cloud) vendors, Snowflake noted continued stabilization in consumption from customers, with September growth exceeding expectations," said William Blair analyst Jason Ader in a report. "This improvement in consumption is being driven by expansions within Snowflake's largest customers (9 of the top 10 customers grew sequentially) as they lap optimization initiatives and refocus on migrating away from legacy data warehouses."
SNOW Stock: Q4 Outlook Above Views
For the current quarter ending in January, Snowflake expects product revenue in the range of $716 million to $721 million. Analysts had expected $696 million.
On the stock market today, SNOW stock climbed 7.1% to close at 187.68.
In the Q3 earnings release, the company stated: "(Snowflake) now has 436 customers with trailing 12-month product revenue greater than $1 million and 647 Forbes Global 2000 customers, representing 52% and 10% year-over-year growth, respectively."
SNOW stock had advanced 19% in 2023 heading into the Snowflake earnings report. Most of the gain came after Nov. 7 following Datadog's better-than-expected Q3 results. Datadog also is a cloud partner of Amazon.
Because Snowflake's business model is consumption-based rather than subscription-based, investors have raised concerns over a slowing U.S. economy curbing demand.
Further, Snowflake garners about 95% of total sales from product revenue. That's revenue that comes from cloud-based data analytical and storage services. Snowflake also generates revenue from professional services, such as consulting and training.
"New product momentum is robust, though management's optimistic outlook is largely based on strength in core data warehousing," said Raymond James analyst Simon Leopold in a report. "In addition, artificial intelligence is not expected to contribute materially until fiscal 2026 (calendar 2025) and beyond."
SNOW stock holds a Relative Strength Rating of 87 out of a best-possible 99, according to IBD Stock Checkup.
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