Data Cloud company Snowflake (NYSE: SNOW) provides a platform for clients to consolidate data into a single source. This helps customers to drive significant business insights, build data-driven applications, and share data.
Recently, the data warehousing firm reported upbeat revenues in the first quarter of its Fiscal 2023 (ended April 30). Meanwhile, the company signaled slow growth in the July quarter, citing macroeconomic headwinds that are affecting customers’ IT spending.
During the earnings call, Snowflake CFO Michael Scarpelli said, “Although these customers are still growing, we believe as long as they are impacted by macroeconomic headwinds, their consumption will be impacted.”
Following the update, shares of the company plunged 13.83% in extended trading on Wednesday.
Results in Detail
Snowflake incurred a loss of $0.53 per share, compared with the loss of $0.70 per share recorded in the prior-year quarter.
Total revenues registered during the quarter climbed 85% year-over-year to $422.4 million, topping the consensus estimate of $413 million. Revenues reflected 84% growth in product revenue, which came in at $394.4 million.
Adjusted product gross margin was 75%, up 300 basis points on a year-over-year basis.
As of April 30, 2022, remaining performance obligations grew 82% year-over-year to $2.6 billion. Exiting the April quarter, the net revenue retention rate was 174%, while the company has 6,322 total customers and 206 customers, with a trailing 12-month product revenue of over $1 million.
At the end of the first quarter, adjusted free cash flow was $181.4 million, while cash, cash equivalents, and short-term and long-term investments came in at $5 billion.
Guidance
For Fiscal Q2 2023, the company expects product revenue in the range of $435-$440 million, representing 71% to 73% year-over-year growth. The consensus estimate stands at $440 million.
For Fiscal 2023, product revenue is forecast between $1.885 billion and $1.9 billion, representing year-over-year growth of 65% to 67%.
Analysts’ Recommendation
The Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 17 Buys, seven Holds, and one Sell. The average Snowflake price target of $252.46 implies 90.15% upside potential from current levels. Shares have lost 60% year-to-date.
Website Traffic
The earnings results were evident on TipRanks’ new tool that measures visits to Snowflake’s website. Pre-earnings, we were able to see insights into Snowflake’s performance in the April quarter.
According to the tool, a website traffic uptrend was visible. In Fiscal Q1 2023, total estimated visits on snowflake.com showed an increasing trend, on a global basis, representing a 12.27% jump from the fourth quarter and 29.01% year-over-year.
The predictions that were based on TipRanks’ website visits data turned out to be correct, with Snowflake reporting upbeat revenues in Q1 2023.
Concluding Remarks
Digital transformation is the future of the world. Amid current macroeconomic headwinds, tech companies are experiencing huge sell-off creating buying opportunities. Therefore, investors purchasing the dips could invest in companies like Snowflake, which have good long-term prospects.
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