Snowflake Q2 Revenue Exceeds Expectations; Shares Pop 4%

Cloud-computing-based data warehousing company Snowflake Inc. (SNOW) delivered robust second-quarter revenue, with triple-digit growth backed by continued momentum and strong consumer consumption trends. Shares popped 4% on the news in the after-hours trading session on August 25.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Snowflake’s revenue more than doubled from the year-ago period to $272.20 million and meaningfully outpaced the Street’s estimate of $256.54 million.

Markedly, compared to the prior-year period, Snowflake’s product revenue grew 103% to $254.6 million, while remaining performance obligations (RPO) were $1.5 billion, up 122%. Additionally, the net revenue retention rate was 169%.

However, the company reported a loss of $0.64 per share, wider than analysts’ estimated loss of $0.15 per share. In the prior-year quarter, SNOW reported a loss of $1.31 per share.

Notably, as of July 31, SNOW had 4,990 customers, of which 116 customers contributed trailing twelve-month revenue of more than $1 million. (See Snowflake stock charts on TipRanks)

Commenting on the company’s results, Snowflake Chairman and CEO Frank Slootman said, “While increasing net revenue retention rate to 169%, we also boosted gross margin and operating margin efficiency while our adjusted free cash flow was positive for the third quarter in a row.”

For the third quarter and Fiscal 2022, Snowflake expects Product revenue to fall in the range of $280 – $285 million and $1.06 – $1.07 billion, respectively.

Prior to the earnings results, Rosenblatt Securities analyst Blair Abernethy reiterated a Buy rating on the stock based on expectations of another strong quarterly performance and lifted the price target to $295 (4% upside potential) from $265.

The analyst noted that Snowflake is uniquely positioned to gain from the continued shift of enterprise IT workloads to the cloud, which was expected to accelerate its growth.

Moreover, Abernethy said, “We believe that Snowflake can continue to rapidly scale up its business model over the next 5+ years, with increasing margins as customer consumption levels outstrip Snowflake’s operating expense growth. The Company continues to have $5.1 billion in cash on hand to fund its growth, for tuck-in technology acquisitions, and to fund Snowflake Ventures.”

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 11 Buys and 8 Holds. The average Snowflake price target of $285.38 implies that shares are fully valued at current levels. Shares have gained 11.8% over the past year.