Snowflake Inc. shares were clobbered in extended trading Wednesday after the software company suggested product sales will slow down this year.
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Snowflake’s product revenue for the full year nearly doubled, to $1.14 billion from $554 million the year before, but executives suggested the growth rate will slow to less than 70% this year with their annual forecast. Snowflake shares dove to less than $185 in after-hours trading immediately following the release of the results, after closing with a 1.1% gain at $266.03.
The high-flying stock has settled down after a huge welcome to Wall Street in late 2020, which included investments by Berkshire Hathaway Inc. BRK.A,
Because Snowflake is a young software company, investors tend to focus on other metrics besides profitability, including net revenue-retention rate, which measures how much existing customers are spending on the volume-priced offering, and remaining performance obligations, which measures the amount of spending that has been agreed to under contracts but not yet recognized.
Snowflake reported a net revenue-retention rate of 178% as of the end of the quarter on Jan. 31, and a remaining performance obligation of $2.6 billion, up 99% from last year and beating the average analyst estimate of $2.29 billion. Snowflake also reported that the number of customers rose to 5,944 from 4,139 a year ago, and 184 of those customers have spent more than $1 million with the company in the past 12 months.
For the first quarter, Snowflake executives forecast product revenue of $383 million to $388 million, while analysts on average were modeling $382 million, according to FactSet. For the full year, they expect the San Francisco company’s product revenue to hit $1.88 billion to $1.9 billion, while analysts were projecting $1.87 billion.
Many analysts were expecting the company to easily trump those expectations, however.
“Given a strong demand environment, we believe Snowflake’s FY23 outlook can land well above consensus, as some of its recent product innovations and investments see wider penetration,” JP Morgan analysts wrote ahead of the print.
“We expect management to follow historical patterns and guide conservatively on both the top and bottom line, but we do expect the current FY23/24 revenue estimates to move higher post the print,” Stifel analysts wrote in their preview of the report.
Snowflake also announced the acquisition of Streamlit on Wednesday afternoon. Terms were not disclosed.
