Snowflake ( SNOW Quick Quote SNOW - Free Report) reported second-quarter fiscal 2023 non-GAAP earnings of 1 cent per share, beating the Zacks Consensus Estimate by 150%. The company had reported a loss of 4 cents in the year-ago quarter. Revenues of $497.2 million beat the consensus mark by 6.7% and jumped 82.7% year over year. Snowflake shares were up more than 15% in pre-market trading. The company’s shares have declined 60.8% compared with the Zacks Computer & Technology sector’s loss of 24.7% year to date. Top-Line Details
Snowflake’s product revenues accounted for 93.8% of total revenues. The figure was $466.3 million, up 83.1% year over year, comfortably beating the company’s guidance range of $435-$440 million.
Professional Services and other revenues contributed 6.2% to total revenues. The figure was $31 million, up 76.3% year over year.
In the fiscal second quarter, Snowflake witnessed a net revenue retention rate of 171% for existing customers, better than the 169% reported in the year-ago quarter, but slightly lower than the 174% reported in the previous quarter.
Snowflake reported 36% year-over-year growth in the number of customers, reaching 6,808 in the reported quarter. The company added 12 Forbes Global 2000 customers. Snowflake signed 15 new customers with $1 million in trailing 12-month product revenues in the reported quarter. Snowflake had 246 customers (with more than $1 million in product revenues), up 112% year over year, in the reported quarter. Product revenues from customers in the health care and life sciences vertical grew more than 100% year over year in the reported quarter. Operating Details
The non-GAAP gross margin expanded by 110 basis points (bps) year over year to 70.8%.
The product gross margin continued to expand, driven by product improvements, favorable cloud agreement pricing, improving scale and a growing enterprise customer base. Research & development expenses, as a percentage of revenues, decreased 190 bps on a year-over-year basis to 16.9%. General & administrative expenses, as a percentage of revenues, were 9.2%, down 370 bps year over year. Sales and marketing expenses, as a percentage of revenues, declined 480 bps on a year-over-year basis to 41.2%. Total operating expenses, as a percentage of revenues, were 67.3% compared with the 77.8% reported in the year-ago quarter. The operating income was $17.5 million in the reported quarter against the year-ago quarter’s operating loss of $21.9 million. Balance Sheet & Cash Flow
As of Jul 31, 2022, Snowflake had cash, cash equivalents and short-term investments of $3.95 billion compared with $3.82 billion as of Apr 30, 2022.
The remaining performance obligations at the end of the second quarter of 2023 were $2.7 billion, up 78% year over year. The adjusted free cash flow was $58.6 million in the reported quarter compared with the previous quarter’s $181.4 million. Guidance
For the third quarter of fiscal 2023, Snowflake expects product revenues in the range of $500-$505 million. The projection range indicates year-over-year growth of 60-62%.
The operating margin is expected at 2% for the third quarter. For fiscal 2023, Snowflake now expects product revenues in the range of $1.905 billion-$1.915 billion, suggesting year-over-year growth of 67-68%. The non-GAAP product gross margin is expected at 75% and the non-GAAP operating margin is expected at 2%. The non-GAAP adjusted free cash flow margin is expected at 17% in fiscal 2023. Zacks Rank & Stocks to Consider
Snowflake currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Computer & Technology sector are Agilent ( A Quick Quote A - Free Report) , Airbnb ( ABNB Quick Quote ABNB - Free Report) and Amphenol ( APH Quick Quote APH - Free Report) . All three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Shares of Agilent, Airbnb and Amphenol are down 16.3%, 12% and 31.3%, respectively, on a year-to-date basis.