Snowflake (NYSE:SNOW) Delivers Strong Q2 Numbers, Gross Margin Improves

Kayode Omotosho /
2021/08/25 4:13 pm EDT

Data warehouse-as-a-service Snowflake (NYSE:SNOW) reported Q2 FY2022 results that beat analyst expectations, with revenue up 104% year on year to $272.1 million. Snowflake made a GAAP loss of $189.7 million, down on its loss of $77.6 million, in the same quarter last year.

Is now the time to buy Snowflake? Access our full analysis of the earnings results here, it's free.

Snowflake (SNOW) Q2 FY2022 Highlights:

  • Revenue: $272.1 million vs analyst estimates of $256.7 million (6.01% beat)
  • EPS (GAAP): -$0.64
  • Product revenue guidance for Q3 2022 is $282.5 million at the midpoint
  • Free cash flow was negative -$11.96 million, down from positive free cash flow of $12.9 million in previous quarter
  • Net Revenue Retention Rate: 169%, in line with previous quarter
  • Customers: 4,990, up from 4,532 in previous quarter
  • Gross Margin (GAAP): 61%, up from 57.4% previous quarter

“Snowflake saw continued momentum in Q2 with triple-digit growth in product revenue, reflecting strength in customer consumption,” said Snowflake Chairman and CEO Frank Slootman.

Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake provides a data warehouse-as-a-service in the cloud that allows companies to store large amounts of data and analyze it in real time.

The amount of data created in the world is growing at an accelerating pace and hand in hand is growing the importance of understanding it, as the pressures on business efficiency and understanding customer preferences mount. Businesses world wide are moving away from on-premise, fixed cost systems to cloud based solutions that offer them flexibility, and that in effect drives the demand for cloud based data warehouse solutions.

Sales Growth

As you can see below, Snowflake's revenue growth has been incredible over the last year, growing from quarterly revenue of $133.1 million, to $272.1 million.

Snowflake Total Revenue

This was another standout quarter with the revenue up a splendid 104% year on year. On top of that, revenue increased $43.2 million quarter on quarter, a solid improvement on the $38.4 million increase in Q1 2022, and happily, a slight re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 69.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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Customer Growth

You can see below that Snowflake reported 4,990 customers at the end of the quarter, an increase of 458 on last quarter. That is quite a bit better customer growth than last quarter and in line with what we have seen in previous quarters, demonstrating the company has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.

Snowflake Customers

Key Takeaways from Snowflake's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Snowflake’s balance sheet, but we note that with a market capitalization of $83.3 billion and more than $4.13 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Snowflake delivered this quarter. And we were also glad to see the improvement in gross margin. Zooming out, we think this was a great quarter and we have no doubt shareholders will feel excited about the results. The company is up 4.75% on the results and currently trades at $297 per share.

Snowflake may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.