Snowflake plunges 14% as Q1 earnings miss expectations, cloud software peers fall

May 26, 2022 2:10 AM ETSnowflake Inc. (SNOW)DDOG, ZS, TDCBy: Gaurav Batavia, SA News Editor26 Comments
  • Snowflake (NYSE:SNOW) has sunk 14% after hours after the company reported a wider-than-expected fiscal first-quarter loss.
  • The cloud-based data-management technology company expects Q2 product revenue to be between $435M-$440M, up 71%-73% from the $254.6M in 2Q21. It also expects FY23 product revenue to be in a range of $1.885B to $1.9B, up 65%-67% from the $1.14B in FY22. This is a tiny increase from the prior guidance of $1.88B-$1.90B.
  • The StreetAccount consensus was for Q2 product revenue growth of 72%, CNBC reported. For FY22 the consensus was for growth of 66%.
  • The Q2 product revenue growth would be the lowest since Snowflake became a public company, according to Bloomberg.
  • The company also raised FY23 adjusted free cash flow margin to 16% from prior 15%.
  • Analysts are concerned about the results, highlighting the company’s consumption-based business model.
  • Citi reiterated its Buy rating on Snowflake, but cited another softer year over year performance that reflects rapidly decelerating growth. The analyst is cautious about the consumption model, as organizations will optimize costs and budgets heading into a potential downturn.
  • Barclays maintained its Overweight rating on Snowflake. While the analyst is positive about the company's strong free cash flow, he raised concerns about the performance of the consumption model.
  • Before it announced its results and its stock was hit, Snowflake (SNOW) had an average rating of Buy from Wall Street analysts, and a less enthusiastic Buy from Seeking Alpha authors. Seeking Alpha's quant system, which consistently beats the market, rated Snowflake a Hold.
  • Snowflake's results are hitting other cloud software stocks as well: Datadog (DDOG) falls 4.8%, Zscaler (ZS) is down 1.9% and Teradata (TDC) has sunk 4.44%.
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