Snowflake (NYSE:SNOW) Surprises With Q2 Sales But Stock Drops

Data warehouse-as-a-service Snowflake (NYSE:SNOW) reported results ahead of analysts’ expectations in Q2 CY2024, with revenue up 28.9% year on year to $868.8 million. It made a non-GAAP profit of $0.18 per share, down from its profit of $0.22 per share in the same quarter last year.

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"Snowflake delivered another strong quarter, surpassing the high end of our Q2 product revenue guidance and, as a result, we're raising our product revenue guidance for the year," said Sridhar Ramaswamy, CEO of Snowflake.

Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake (NYSE:SNOW) provides a data warehouse-as-a-service in the cloud that allows companies to store large amounts of data and analyze it in real time.

Data Storage

Data is the lifeblood of the internet and software in general, and the amount of data created is accelerating. As a result, the importance of storing the data in scalable and efficient formats continues to rise, especially as its diversity and associated use cases expand from analyzing simple, structured datasets to high-scale processing of unstructured data such as images, audio, and video.

Sales Growth

As you can see below, Snowflake’s 55.6% annualized revenue growth over the last three years has been incredible, and its sales came in at $868.8 million this quarter.

This quarter, Snowflake’s quarterly revenue was once again up a very solid 28.9% year on year. However, its growth did slow down compared to last quarter as the company’s revenue increased by just $40.11 million in Q2 compared to $54.01 million in Q1 CY2024. While we’d like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Looking ahead, analysts covering the company were expecting sales to grow 20.2% over the next 12 months before the earnings results announcement.

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Large Customers Growth

This quarter, Snowflake reported 510 enterprise customers paying more than $1m annually, an increase of 25 from the previous quarter. That’s in line with the number of contracts wins in the last quarter but quite a bit below what we’ve typically observed over the last year, suggesting that the sales slowdown we observed in the last quarter could continue.

Key Takeaways from Snowflake’s Q2 Results

It was good to see Snowflake beat analysts’ revenue and adjusted operating income expectations this quarter. On the other hand, its billings unfortunately missed analysts’ expectations by a pretty large magnitude. Since billings can be a leading indicator of revenue, this is a negative for topline trends. That guidance was fine and largely above expectations did not erase the billings blemish. Overall, this quarter could have been better. The stock traded down 5.6% to $127.50 immediately following the results.

Snowflake may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.