Wednesday, November 27, 2024

Snowflake earnings | Analysis | Barron's | After earnings

Snowflake Stock Soars After Earnings Crush Expectations

Updated Nov 21, 2024, 4:41 am EST / Original Nov 20, 2024, 2:30 am EST 

Snowflake stock soared early Thursday after the software company reported quarterly results Wednesday that flew past Wall Street’s estimates.

Snowflake posted third-quarter adjusted earnings of 20 cents a share on revenue of $942.1 million. Analysts surveyed by FactSet were expecting earnings of 15 cents a share on revenue of $899 million.

Product revenue—which is derived from the consumption of compute, storage, and data transfer resources by Snowflake customers, was $900 million—a 29% increase from the year-ago quarter.

“Our obsessive drive to produce product cohesion and ease of use has built Snowflake into the easiest and most cost effective enterprise data platform,” Chief Executive Sridhar Ramaswamy said in the news release.

The company also said it expects fourth-quarter product revenue to be between $906 million to $911 million, surpassing Wall Street estimates for $882 million. For the year, the company now expects product revenue of $3.43 billion, up from its previous guidance of $3.36 billion.

The stock was rising 20.4% at $155.46 in the Thursday premarket having spiked 14% in after-hours trading following the report.

As of Wednesday’s close, Snowflake shares have tumbled 35% this year. Concerns about competition, high costs, a CEO departure, and a hefty valuation have weighed on the stock. The stock is trading at 149 times earnings expected over the next 12 months.

There were high expectations coming into the print: Software stocks have gotten a boost in recent months as companies invested heavily in generative artificial projects. Earlier this month, Palantir Technologies both reported better-than-expected financials for their latest quarters and increased their respective outlooks for the year, citing strong AI technology demand.

In the case of Snowflake, investors were hoping strong results would provide incentive to buy up shares of the expensive, beaten-down stock. It seems the company has delivered.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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