Snowflake raises full-year expectations, sees product sales double

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Snowflake raises full-year expectations, sees product sales double

In the fall, Snowflake Inc. sales more than doubled again, and executives Wednesday raised their expectations for the full year, while projecting product revenue could double again in the final quarter of the year, sending shares to a new high in late trading.

Snowflake reported third-quarter losses of $154.86 million, or 51 cents a share, after reporting losses of 28 cents a share a year ago, according to FactSet. Revenue grew to $334.4 million from $160 million a year ago, with product accounting for $312.5 million and the rest attributed to professional services.

The average expected losses of 6 cents a share on sales of $306 million, with $284 million in product sales, according to FactSet. After the results were released, shares jumped more than 13% in after-hours trading, after closing with an 8.6% decline at $311.

Since Snowflake is a young software company, investors tend to focus on other metrics besides profitability, such as the net revenue-retention rate, which measures how much existing customers are spending on the volume-priced offering, and remaining performance obligations, which is the amount of spending that has been agreed to under contracts but not yet recognized.

Snowflake reported a net revenue-retention rate of 173% and a remaining performance obligation of $1.8 billion, up 94% from last year, and roughly aligned with the average analyst estimate of $1.82 billion at the end of the quarter. Snowflake said that the number of customers went to 5,416 from 3,554 a year ago, and 148 of those customers spent more than $1 million with the company in the past 12 months.

Snowflake executives expect product revenues of $345 million to $350 million in the fourth quarter, while analysts forecast $316 million for the fourth quarter. Snowflake management now believes that there will be $1.13 billion in sales for the full year, after previously stating $1.06 billion to $1.07 billion.

Snowflake became one of the most highly valued public tech companies after its initial public offering in 2020 because of its potential to battle Oracle Corp. ORCL, with database software native to the cloud. The company, which was previously based in San Francisco but now claims not to have a headquarters as employees work remotely, attracted big-name investors including Warren Buffett's Berkshire Hathaway Inc. BRK.A, BRK.B and investment analysts.

As data plays an increasingly important role in businesses in all industries and geographies, we believe Snowflake will see durable growth with enhanced visibility because of their irreplaceable role in the IT stack, according to Truist Securities analysts in November, while maintaining a buy rating and $350 price target, but mentioning the likelihood of updating their model after Wednesday s report.

Snowflake stock went higher than prices in the heady early days after it IPO in mid-November, closing higher than $400 for the first and only time on November 16. The stock has gone up 10.5% this year, while the S&P 500 index SPX has gained 21.6% in the past two sessions due to a market rout that has left the stock up 10.5%.