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Snowflake (SNOW) Q2 Earnings Top Estimates, Revenues Up Y/Y
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Snowflake (SNOW - Free Report) reported second-quarter fiscal 2024 non-GAAP earnings of 22 cents per share, crushing the Zacks Consensus Estimate of 9 cents. The company reported earnings of 1 cent per share in the year-ago quarter.
Revenues of $674 million beat the consensus mark of $662 million and jumped 35.5% year over year. Americas, EMEA and APJ accounted for 79%, 16% and 5% of revenues, respectively.
In the reported quarter, Snowflake added more than 400 Snowpark customers and consumption grew roughly 70% on a sequential basis.
Snowflake shares were up 4.05% in after-hours trading. The company’s shares have returned 11.7% compared with the Zacks Computer & Technology sector’s growth of 34.6% and the Zacks Internet Software industry’s return of 42.8%, year to date.
Snowflake’s product revenues accounted for 95% of total revenues. The figure was $640.2 million, up 37.3% year over year.
Professional Services and other revenues contributed 5% to total revenues. The figure was $33.8 million, up 9.1% year over year.
In the fiscal second quarter, Snowflake witnessed a net revenue retention rate of 142% for existing customers, down from 151% reported in the previous quarter and 169% reported in the year-ago quarter.
The company reported 25% year-over-year growth in the number of customers, reaching 8,537 in the reported quarter. It now has 402 customers with trailing 12-month product revenues greater than $1 million (up 62% year over year) and 639 Forbes Global 2000 customers (up 16.6% year over year). Of the Global 2000 customers, 63% are using Snowpark on a weekly basis.
Snowflake provided an update on its upcoming solutions, which include Document AI and Snowflake Container Services. Document AI is currently in private preview and through the Container Services, it is bringing large language models like Reka and NVIDIA’s NeMo into Snowflake.
Operating Details
The non-GAAP gross margin expanded 230 basis points (bps) year over year to 79%.
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, increased 450 bps on a year-over-year basis to 21.4%.
General & administrative expenses, as a percentage of revenues, were 7.5%, down 170 bps year over year.
Sales and marketing expenses, as a percentage of revenues, declined 400 bps on a year-over-year basis to 37.2%.
Total operating expenses, as a percentage of revenues, were 66.2% compared with 67.3% reported in the year-ago quarter.
Operating income was $54.2 million in the reported quarter compared with the year-ago quarter’s $17.5 million. The company benefited from strong product margins and controlled headcount additions.
Balance Sheet & Cash Flow
As of Jul 31, 2023, Snowflake had cash, cash equivalents and short-term investments of $3.95 billion compared with $4 billion as of Apr 30, 2023.
The remaining performance obligations at the end of the second quarter of fiscal 2024 were $3.54 billion, up 30% year over year. Snowflake expects nearly 57% to be recognized as revenues over the next 12 months.
The adjusted free cash flow was $88.2 million in the reported quarter compared with the previous quarter’s $287 million.
Guidance
For the third quarter of fiscal 2024, Snowflake expects product revenues in the range of $670-$675 million. The projection range indicates year-over-year growth of 28-29%.
The operating margin is expected to be 4% for the fiscal third quarter.
The Zacks Consensus Estimate for fiscal third-quarter revenues is currently pegged at $713.76 million, indicating 28.14% year-over-year growth. The consensus mark for earnings has been steady at 14 cents per share over the past 30 days, indicating 27.27% year-over-year growth.
For fiscal 2024, the company still expects product revenues to increase 34% year over year to $2.6 billion.
The non-GAAP product gross margin is expected at 76% and the non-GAAP operating margin is expected at 5%.
The non-GAAP adjusted free cash flow margin is expected at 26% in fiscal 2024.
Snowflake plans to hit $10 billion in product revenues by fiscal 2029. Non-GAAP gross margin is expected to reach roughly 78% while operating margin is estimated to be approximately 25%.
Shares of Workday and Paylocity have gained 38.6% and 2.9%, respectively, on a year-to-date basis. Model N shares have declined 31.7% over the same time frame.
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Snowflake (SNOW) Q2 Earnings Top Estimates, Revenues Up Y/Y
Snowflake (SNOW - Free Report) reported second-quarter fiscal 2024 non-GAAP earnings of 22 cents per share, crushing the Zacks Consensus Estimate of 9 cents. The company reported earnings of 1 cent per share in the year-ago quarter.
Revenues of $674 million beat the consensus mark of $662 million and jumped 35.5% year over year. Americas, EMEA and APJ accounted for 79%, 16% and 5% of revenues, respectively.
In the reported quarter, Snowflake added more than 400 Snowpark customers and consumption grew roughly 70% on a sequential basis.
Snowflake shares were up 4.05% in after-hours trading. The company’s shares have returned 11.7% compared with the Zacks Computer & Technology sector’s growth of 34.6% and the Zacks Internet Software industry’s return of 42.8%, year to date.
Snowflake Inc. Price, Consensus and EPS Surprise
Snowflake Inc. price-consensus-eps-surprise-chart | Snowflake Inc. Quote
Top-Line Details
Snowflake’s product revenues accounted for 95% of total revenues. The figure was $640.2 million, up 37.3% year over year.
Professional Services and other revenues contributed 5% to total revenues. The figure was $33.8 million, up 9.1% year over year.
In the fiscal second quarter, Snowflake witnessed a net revenue retention rate of 142% for existing customers, down from 151% reported in the previous quarter and 169% reported in the year-ago quarter.
The company reported 25% year-over-year growth in the number of customers, reaching 8,537 in the reported quarter. It now has 402 customers with trailing 12-month product revenues greater than $1 million (up 62% year over year) and 639 Forbes Global 2000 customers (up 16.6% year over year). Of the Global 2000 customers, 63% are using Snowpark on a weekly basis.
Snowflake provided an update on its upcoming solutions, which include Document AI and Snowflake Container Services. Document AI is currently in private preview and through the Container Services, it is bringing large language models like Reka and NVIDIA’s NeMo into Snowflake.
Operating Details
The non-GAAP gross margin expanded 230 basis points (bps) year over year to 79%.
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, increased 450 bps on a year-over-year basis to 21.4%.
General & administrative expenses, as a percentage of revenues, were 7.5%, down 170 bps year over year.
Sales and marketing expenses, as a percentage of revenues, declined 400 bps on a year-over-year basis to 37.2%.
Total operating expenses, as a percentage of revenues, were 66.2% compared with 67.3% reported in the year-ago quarter.
Operating income was $54.2 million in the reported quarter compared with the year-ago quarter’s $17.5 million. The company benefited from strong product margins and controlled headcount additions.
Balance Sheet & Cash Flow
As of Jul 31, 2023, Snowflake had cash, cash equivalents and short-term investments of $3.95 billion compared with $4 billion as of Apr 30, 2023.
The remaining performance obligations at the end of the second quarter of fiscal 2024 were $3.54 billion, up 30% year over year. Snowflake expects nearly 57% to be recognized as revenues over the next 12 months.
The adjusted free cash flow was $88.2 million in the reported quarter compared with the previous quarter’s $287 million.
Guidance
For the third quarter of fiscal 2024, Snowflake expects product revenues in the range of $670-$675 million. The projection range indicates year-over-year growth of 28-29%.
The operating margin is expected to be 4% for the fiscal third quarter.
The Zacks Consensus Estimate for fiscal third-quarter revenues is currently pegged at $713.76 million, indicating 28.14% year-over-year growth. The consensus mark for earnings has been steady at 14 cents per share over the past 30 days, indicating 27.27% year-over-year growth.
For fiscal 2024, the company still expects product revenues to increase 34% year over year to $2.6 billion.
The non-GAAP product gross margin is expected at 76% and the non-GAAP operating margin is expected at 5%.
The non-GAAP adjusted free cash flow margin is expected at 26% in fiscal 2024.
Snowflake plans to hit $10 billion in product revenues by fiscal 2029. Non-GAAP gross margin is expected to reach roughly 78% while operating margin is estimated to be approximately 25%.
Zacks Rank & Stocks to Consider
Snowflake currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same industry are Model N (MODN - Free Report) , Paylocity Holdings (PCTY - Free Report) and Workday (WDAY - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Workday and Paylocity have gained 38.6% and 2.9%, respectively, on a year-to-date basis. Model N shares have declined 31.7% over the same time frame.