(Bloomberg) — Snowflake Inc. gave a sales outlook that failed to reassure investors that the company will gain ground in the market for artificial intelligence software tools. The shares fell in extended traded.
Most Read from Bloomberg
Product revenue, which makes up the bulk of Snowflake’s business, will be $850 million to $855 million in the period ending in October, the company said Wednesday in a statement. Analysts, on average, predicted $848 million, although some estimates exceeded $900 million, according to data compiled by Bloomberg. The company also raised its fiscal year product sales forecast to $3.36 billion from $3.3 billion.
Under Chief Executive Officer Sridhar Ramaswamy, Snowflake has launched products focused on generative AI and other new ways to analyze large sets of data. The strategy is fueled in part by increased pressure from rivals including Databricks Inc. and cloud infrastructure providers like Microsoft Corp. Snowflake offers software that helps customers find, organize and use huge amounts of information from a variety of sources.
Ramaswamy touted “product delivery, and great traction in the early stages of our new AI products.”
Still, Snowflake is navigating a challenging environment between a recent CEO change, security breaches of its customers and some market shift to products outside its traditional wheelhouse, wrote Derrick Wood, an analyst at TD Cowen, ahead of the results.
In the fiscal second quarter, total revenue rose 29% to $868.8 million — coming in under 30% for the first time in Snowflake’s history as a publicly traded company.
The shares declined about 7% in extended trading after closing at $135.06 in New York. The stock has dropped 32% this year, as investors have been concerned about Snowflake’s ability to catch up in AI-oriented tools.
Clients including AT&T Inc., Live Nation Entertainment Inc.’s Ticketmaster and LendingTree Inc. had their Snowflake accounts breached as part of a hacking campaign beginning in May. Snowflake has said its own systems weren’t infiltrated and has added features for customers to implement better security settings.
“We obviously had some rough headlines in the quarter,” Ramaswamy said of the customer breaches during a conference call after the results were released. “The issue wasn’t on the Snowflake side.”
Product revenue increased 30% to $829 million in the quarter, compared with the $813 million expected by analysts. Adjusted profit, excluding some items, was 18 cents a share, just ahead of the average estimate of 16 cents a share.
Snowflake now has 510 customers that spent more than $1 million over a trailing 12-month period, up from 485 the previous quarter. Remaining performance obligations — another key benchmark of growth — were $5.2 billion in the period ended July 31, topping analysts’ average estimate of about $5 billion.
The company has added about 1,000 workers over the last year in a period when many peers were shedding employees or selectively hiring. Snowflake said it had 7,630 employees as of the second quarter.
(Updates with additional context throughout.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
