Snowflake stock slides despite full-year guidance hike, solid Q2 print

Investing.com -- Snowflake (NYSE:SNOW ) lifted its annual guidance Wednesday after the data analytics company's second-quarter results topped Wall Street estimates as ongoing AI demand fueled demand.

Snowflake fell more than 8% in Thursday's premarket trade. 

For the three months ended Jul. 31, Snowflake adjusted earnings of $0.19 per diluted share, down from $0.25 a year earlier, on revenue of $868.8M, up from $674.0M a year earlier. That topped analyst estimates of $0.16 on revenue of $851.6M.

Product revenue was reported at $829.3 million, above the consensus estimate of $808.4 million. However, this marks a 2.6% beat, notably lower than the average beat of 3.7% over the past eight quarters. 

"The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products," the company said.

Snowflake forecast current-quarter product revenue between $850 million and $855 million, compared with analysts' average estimates of $851M.

Looking further ahead, the company guided for fiscal 2025 product revenue of $3.36B, representing growth of 26% from the prior year, which was above a prior forecast for $3.3M in product revenue.

Following the report, analysts at JMP Securities maintained a Market Outperform rating on SNOW shares but trimmed their price target from $235 to $190, due to a "skinnier product revenue beat than historical."

Still, JMP analysts remain bullish about the SNOW story, highlighting several factors: strong core business performance with 30% product revenue growth and notable success in financial services and tech; increased innovation and product delivery under CEO Sridhar Ramaswamy; a large and growing total addressable market projected to reach $342B by 2028; and the company's profitable growth, with FY25 guidance of 26% product growth and a 26% adjusted free cash flow margin.

"Our sense is that there is room to drive further performance across the organization as the company comes up on its four-year anniversary of its September 2020 IPO and closes in on $4B in revenue up from around $500M at the IPO," they wrote.

Separately, Stifel analysts believe the negative stock price reaction is due to the company's "conservative" guidance. Still, they see the Q2 report as a solid one that points to "a stabilizing core business."

"Given solid consumption trends thus far in Q3, we expect these trends should continue to 2H25," they said.

"With this performance being delivered without much AI contribution, as newer products ramp, we believe they should enable Snowflake to modestly accelerate product revenue growth, or at the very least, hold it steady in the upper-20% range," Stifel analysts added. 

Yasin Ebrahim contributed to this report. 

Source: Investing.com