Why Snowflake Stock Soared Today

What happened 

Shares of Snowflake (SNOW 23.07%) surged 22.8% on Thursday after the cloud data leader delivered blockbuster growth metrics.

So what

Snowflake’s revenue rocketed 83% year over year to $497.2 million in its fiscal 2023 second quarter, which ended on July 31. That was well above Wall Street’s estimates, which had called for revenue of $467 million. 

Companies are flocking to Snowflake’s data platform. Its total customer count jumped 36% to 6,808. Many of these customers are also ramping up their spending on Snowflake’s software, as can be seen in its extraordinary net revenue retention rate of 171%. This dynamic contributed to a 112% increase in large customers — those spending over $1 million on Snowflake’s products — to 246. 

It should be noted that Snowflake is not yet profitable; it produced an operating loss of $207.7 million in Q2. However, it did generate $53.8 million in free cash flow, an impressive feat for a young, fast-growing tech company. 

Now what 

Snowflake’s consumption-based pricing model is clearly resonating with businesses, at a time when cost discipline is paramount. Moreover, Snowflake’s performance improvements are helping to reduce its customers’ data-related expenses, thereby giving them a powerful tool to battle inflation. Management, in turn, expects Snowflake’s product revenue to grow by 60% to 62% in its fiscal third quarter to between $500 million and $505 million. 

Looking further ahead, Snowflake pegs its total addressable market at a staggering $248 billion. 

“Snowflake’s next frontier of innovation is aimed at transforming how cloud applications are built, deployed, sold, and transacted,” chairman and CEO Frank Slootman said in a press release. “We look forward to executing against this growth opportunity.”

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Snowflake Inc. The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published. Required fields are marked *