Snowflake's Stock Falls as Guidance Boost Isn't Enough for Wall Street

Analyst says outlook seems conservative but 'insinuates a significant deceleration' in the second half of the year.

Snowflake Inc. beat expectations for the latest quarter and boosted its guidance, but shares of the data-software company were still moving lower in Wednesday's extended session.

An analyst said bears may be quibbling with the potential for a second-half deceleration as implied by the company's outlook.

Snowflake's stock was down 8% in after-hours action Wednesday.

The company logged a fiscal second-quarter net loss of $317 million, or 95 cents a share, compared with $227 million, or 69 a share, in the year-earlier period. On an adjusted basis, Snowflake (SNOW) earned 18 cents a share, while analysts tracked by FactSet were looking for 16 cents.

Snowflake posted revenue of $868 million, up 29% from a year before, whereas analysts were modeling $852 million. The company generated $829 million in product revenue, while the FactSet consensus was for $814 million. There were 510 customers with trailing-12-month product revenue that exceeded $1 million, it said.

"The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products," Chief Executive Sridhar Ramaswamy said in a statement.

The company reported $5.2 billion in remaining performance obligations, up 48% from a year prior.

Looking to the fiscal third quarter, Snowflake models $850 million to $855 million in product revenue. Analysts were looking for $851 million.

The company's full-year outlook is for $3.356 billion in product revenue, which would translate to 26% growth. That compares with a prior full-year forecast of $3.3 billion.

"We expect bears will point to the (implied) [second-half] guidance which insinuates a significant deceleration vs. [first-half] product growth," Evercore ISI analyst Kirk Materne said in a note to clients. Still, he's upbeat on the stock as he thinks the outlook may prove conservative.

Materne further noted that "deferred revenue came in slightly below expectations, and while we do not view billings as a key metric for a consumption-based company, this could be contributing to some of the overhang on the shares in the after-market."

He cheered Snowflake's "improving positioning in the AI space, the rapid pace of innovation and broader macro stabilization," though he said that "bears may control the narrative in the near term."