The share price of darling Snowflake took a beating in an already bearish market for tech stocks after it filed a weaker-than-expected financial guidance amid slowing orders from some of its biggest clients.
For its first quarter of fiscal 2023, ended April 30, Snowflake’s revenue increased 85% year-over-year to $422.4 million. The company posted an operating loss of $188.8 million, though down from $205.6 million a year ago.
Although beating revenue expectations, the cloud-based data warehousing company saw its valuation plummet 16% in extended trading on Wednesday. Its stock price fell from $133 each to $117 in after-hours trading, and is now back at $127. The stumble came amid a broad sell-off in tech stocks that some observers said was overdue.
Mike Scarpelli, chief financial officer of Snowflake, told investors that some customers were consuming less of its cloud services than the company had anticipated “in a changing economic environment that we believe is unique to their businesses, especially cloud businesses.” in contact with consumers.
The slowdown follows “much higher than expected consumption” last year, he said.
With a cloud-based data warehousing approach separating storage and compute, Snowflake has seen dramatic growth in value over the past five years. It grew from $1.5 billion in 2018 to $120 billion shortly after its IPO in late 2020. Snowflake’s market capitalization is currently around $40 billion.
However, it has struggled with cloud hyperscalers each offering their own data warehouses based on similar technical approaches, while on-premises incumbents such as Teradata have made the leap to the cloud.
Critics of Snowflake have pointed out that while its technology makes data warehousing and analysis accessible, it also makes costs difficult to predict.
“For some of our largest customers ($10 million), we’ve reset their full-year guidance. We have a number of our top 10 customers that are exceeding our guidance, and we have a few- ones that are below,” Scarpelli said. mentioned. He added that there had been “weaknesses in Europe” which were “not necessarily” due to the macroeconomics. “I think it’s probably an execution on our part as well,” he said.
However, he added that “the last two and a half weeks” had seen quite high growth.
For the full year, Snowflake expects revenue of approximately $1.9 billion, representing annual growth of 65-67%. Analysts expected $2 billion. ®