Shares in Snowflake plunged Thursday after the software maker cut its full-year fiscal 2024 outlook amid slowing growth for cloud computing partners such as Amazon.com. Investors shrugged off first quarter earnings for SNOW stock that topped Wall Street targets.
Snowflake released first-quarter financial results after the market close on Wednesday. SNOW stock plunged 16.5% to close at 147.91 on the stock market today.
For full-year fiscal 2024, Snowflake lowered its forecast for product revenue growth to 34% to $2.6 billion from its earlier projection for 44% to 45% growth.
"The debate will be over whether this is the last (guidance) cut," TD Cowen analyst Derrick Wood said in a note to clients.
Snowflake sells data analytics and management tools that run on cloud-computing platforms such as Amazon Web Services, part 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.
"Snow's growth benefited from the ease with which customers could ramp usage, but it now suffers as it is an application where customers can easily dial back," Raymond James analyst Simon Leopold said in a note.
SNOW Stock: Investor Day Set For June 29
In addition, Snowflake announced the acquisition of artificial intelligence startup Neeva. Terms were not disclosed.
Also, an investor day for Snowflake stock is set for June 27. That coincides with the software maker's annual user conference.
"The big question going into the analyst day in June will be whether the updated guidance is the 'final cut' in this optimization cycle," Evercore ISI analyst Kirk Materne said in his note.
He added: "In talking with the company, long-term commitments have not changed but some larger customers running ahead of plan on consumption decided to cut back on storage to save money."
For the quarter ended April 30, Snowflake earnings came in at an adjusted 15 cents a share compared with no profits a year earlier. Analysts polled by FactSet expected Snowflake to report a 5-cent per share profit.
Further, revenue climbed 48% to $623.6 million, the software maker said. Analysts had predicted revenue of $609.7 million.
SNOW Stock: Outlook Misses Estimates
For the current quarter ending in July, Snowflake expects product revenue in a range of $620 million to $625 million. Meanwhile, analysts had expected $647.1 million.
SNOW stock had advanced 22% in 2023 heading into the Snowflake earnings report.
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.
Cloud computing growth has slowed for Amazon, a key Snowflake partner, along with Microsoft and Google-parent Alphabet. The cloud computing titans hope to get a boost from artificial intelligence workloads in the long-run.
SNOW stock holds a Relative Strength Rating of 92 out of a best-possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
