shares of snowflake (snow) saw a boost in aftermarket trading on Wednesday after it reported second-quarter earnings that slightly beat analyst expectations. But SNOW shares recovered their gains in early trading on Thursday.
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For the period ended July 31, the cloud data platform provider reported adjusted earnings of 22 cents per share on revenue of $674 million. Sales increased 36% from $497 million in the same period last year.
SNOW’s equity analysts surveyed by FactSet had expected annual revenue to grow 33% and earnings to reach $662 million, or 10 cents per share.
Snowflake officials also reiterated their sales outlook for the remainder of the company’s fiscal year 2024, which ends in January. The company expects revenue of $2.6 billion this year, a 34% year-over-year growth. But that forecast fell short of analyst estimates of $2.76 billion in a FactSet poll ahead of Wednesday’s earnings.
SNOW shares took a hit in May when the company cut its full-year outlook ahead of its first-quarter results. The company forecasts a 44% to 45% increase in sales.
Possible AI boost?
SNOW shares fell 4.8% to 148.27 in recent moves in the stock market today.
Snowflake reported quarterly results as most eyes of the investor world focused on the semiconductor maker and artificial intelligence leader’s earnings report. Nvidia (NVDA). Company officials said Snowflake could also benefit from the AI boom.
“Snowflake is well positioned to enable the growing interest in AI as the world’s source of trusted enterprise data.[machine learning]“Businesses and institutions alike are increasingly recognizing that they cannot have an AI strategy without a data strategy,” Snowflake chairman and CEO Frank Slootman said in a written statement.
Snowflake announced in June that it would partner with Nvidia to build custom large-scale language models for AI. The deal will allow companies to use their data in the Snowflake Data Cloud.
SNOW Stock Name: Seeking Thaw in Cloud Computing
Large enterprises have spent the last few quarters looking for ways to reduce or optimize their spending on cloud services. But the market showed signs of improvement heading into Snowflake’s earnings on Wednesday.
especially, Amazon (AMZN) reported earlier this month that second-quarter revenue growth for Amazon Web Services’ cloud computing division exceeded analyst expectations. SNOW stock rose 3.5% in trading on Aug. 4, the day after Amazon announced its earnings.
Snowflake’s product revenue for the quarter increased 37% year over year to $642 million. This metric represents customers using the company’s software to store or analyze data.
But Snowflake’s management suggested that customers continue to focus on the cost of the software.
“Our forecast assumes that our largest customer will continue to be a headwind to growth,” Chief Financial Officer Michael Scarpelli said on an earnings call. “There are encouraging signs of stabilization, but no recovery.”
Encouraging consumption signs
Snowflake derives most of its revenue from billing for the entire consumption of its products, not subscription-based.
William Blair reiterated his outperform rating for SNOW stock.
“Overall, the company is still unclear on consumption pressures, but the signs are encouraging,” William Blair analyst Jason Ader said in a note to clients. “We expect continued improvement in profitability and new growth tailwinds driven by AI to dovetail nicely with a rebound in cloud consumption next year.”
SNOW shares rose 2% to close at $155.70 on the stock market today. Overall, SNOW stock is up 8% in 2023 on earnings. However, the stock fell 12.5% in the quarter.
In addition, Snowflake’s stock is weak at 56 out of 99, the highest IBD overall rating. IBD inventory diagnosis. The company’s share price ranks 59th out of 127 companies in the Computer Software Enterprise Group.
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