Snowflake stock falls as executives forecast a narrower margin than expected

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  • While Snowflake beat revenue expectations for its fiscal first-quarter results, its adjusted operating margin forecast was lighter than expected.
  • Management maintained its guidance for the full year.
  • The company seeks to add business by offering tools designed for companies in the retail and health care industries.

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Shares of Snowflake fell up to 16% on Wednesday after the data analytics software maker disappointed analysts by saying it doesn’t expect positive adjusted operating margins for the current quarter.

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Here’s how the company did it:

  • Earnings: 53 cents per share
  • Revenue: According to Refinitiv, $422.4 million versus $412.8 million expected by analysts.

The company’s revenue grew nearly 85% year over year in the quarter that ended April 30, according to a Statement, In the prior quarter, revenue increased 101 percent. Nearly all of Snowflake’s revenue comes from product revenue, which jumped 84% compared to 102% last quarter. This figure accounts for Snowflake’s use of software to store and execute queries on the data stored in its systems.

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Snowflake reported no adjusted operating margin, while analysts surveyed by StreetAccount had predicted a -1.2% margin. Snowflake’s net loss narrowed to $165.8 million compared to $203.2 million in the year-ago quarter.

Snowflake took steps to become more relevant in specific industries in the quarter. announced it retail data cloud which is based on an expanded partnership with Amazon, as well as a Healthcare and Life Sciences Data Cloud, One of Snowflake’s rivals, the privately held Databricks, has begun to focus on industries as well.

Snowflake had 6,322 subscribers at the end of the quarter, up from 5,944 at the end of January.

With respect to guidance, management called for fiscal second quarter product revenue growth of 71% to 73% and adjusted operating margin of -2%. Analysts polled by StreetAccount had expected growth of 72% and adjusted margins of 0.3%.

For the full fiscal year, Snowflake continues to see 65% to 67% product revenue growth and 1% adjusted operating margin. The StreetAccount consensus was approximately 66% product revenue growth and an adjusted operating margin of 1%.

Snowflake’s software was expanding rapidly, with 120% revenue growth when it debuted on the New York Stock Exchange in September 2020, and growth hasn’t slowed too much. But investors have become less favorable on the stock. Without the after-hours move, Snowflake’s shares are down about 61% since the start of the year, compared to a 16% drop for the S&P 500 US stock index over the same period.

Salesforce, through its corporate-enterprise arm, sold the remaining stake in Snowflake through an initial public offering during the first quarter.

Seeing the decline in Snowflake’s share price, Rosenblatt Securities on Monday upgraded it from a hold equivalent to a buy rating.

Snowflake executives will discuss results with analysts on a conference call beginning at 5 p.m. ET.

This is breaking news. Please check back here for updates.

watch: Why Citi’s Tyler Radke Says It’s Time to Be Selective With Software Stocks

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