‘Change in existing customer purchasing behavior’ leads to decrease for Snowflake’s new product revenue forecast, shares dive 7% in extended session
This update corrects the FactSet consensus for Snowflake’s fiscal first-quarter and fiscal 2024 product revenue.
Shares of Snowflake Inc. fell more than 7% in after-hours trading Wednesday after the data-software company forecast lower revenue growth than analysts had anticipated.
Snowflake, Inc., a cloud-based database management and software company, experienced a sharp drop in its shares after reducing its 2021 sales growth outlook. The news broke just hours before their financial results for the first quarter of 2021 were released.
Snowflake reported record results for the quarter, delivering total revenues of $281.5 million, an increase of 227% from the same quarter last year. It also posted a net loss of $176.9 million, compared with a loss of $147 million in the same period last year.
Snowflake had previously expected revenues to triple in 2021, however, incoming guidance issued on Tuesday seems to suggest this is no longer the case. Chief Executive Officer Frank Slootman said Snowflake’s reduction of its growth expectation was due to increased competition and “unforeseen customer delays in their digital transformation journey”.
The company has also said that delays in its core product launches, together with its planned push into Europe and Asia, will have an impact on its second quarter performance. In addition, Snowflake projects layoffs of about 10% of its workforce by the end of the year, in a move to streamline costs in order to move past the slower-than-anticipated growth.
The news of these newly adjusted expectations, plus the lower-than-expected first quarter revenues, caused Snowflake’s share price to plummet over 24% after the market opened on Wednesday. Shares were trading around $200 but had dropped to $152 by the end of the day.
Whether Snowflake will be able to recover from the double-whammy the stock experienced is yet to be determined. However, investors should keep in mind the company’s projections of continued square footage expansion and platform adoption, as well as its expected renewal of hyper scale customers, which could result in increased future growth should the company manage to meet its adjusted goals.