Data warehouse-as-a-service Snowflake (NYSE:SNOW) reported Q1 FY2024 results topping analyst expectations, with revenue up 47.6% year on year to $623.6 million. Snowflake made a GAAP loss of $226.1 million, down on its loss of $165.8 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) Q1 FY2024 Highlights:
- Revenue: $623.6 million vs analyst estimates of $608.7 million (2.45% beat)
- EPS (non-GAAP): $0.15 vs analyst estimates of $0.05 ($0.10 beat)
- Product revenue guidance for Q2 2024 is $622.5 million at the midpoint
- Net Revenue Retention Rate: 151%, down from 158% previous quarter
- Gross Margin (GAAP): 66.4%, up from 65% same quarter last year
“During Q1, Snowflake’s product revenue grew 50%, totaling $590 million. Non-GAAP adjusted free cash flow was $287 million for the quarter, up 58% year-over-year,” said Frank Slootman, Chairman and CEO, Snowflake.
Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake (NYSE:SNOW) 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.
Data is the lifeblood of the internet and software in general, and the amount of data created is growing at an accelerating pace. Likewise, the importance of storing the data in scalable and efficient formats continues to rise, especially as the diversity of the data and associated use cases expand from analyzing simple, structured data to high-scale processing of unstructured data, images, audio and video.
Sales Growth
As you can see below, Snowflake's revenue growth has been incredible over the last two years, growing from quarterly revenue of $228.9 million in Q1 FY2022, to $623.6 million.
And unsurprisingly, this was another great quarter for Snowflake with revenue up 47.6% year on year. On top of that, revenue increased $34.6 million quarter on quarter, a solid improvement on the $32 million increase in Q4 2023, and even a sign of slight acceleration of growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 37.4% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Large Customers Growth
You can see below that at the end of the quarter Snowflake reported 373 enterprise customers paying more than $1m annually, an increase of 43 on last quarter. That's in line with the number of contracts wins in the last quarter and quite a bit again above what we have typically seen over the last year, confirming the company is sustaining a good pace of sales.
Key Takeaways from Snowflake's Q1 Results
Sporting a market capitalization of $56.9 billion, more than $3.95 billion in cash and with positive free cash flow over the last twelve months, we're confident that Snowflake has the resources it needs to pursue a high growth business strategy.
It was good to see Snowflake beat revenue expectations and improve their gross margin this quarter. On the other hand, it was less good to see the deterioration in revenue retention rate. A large negative was guidance. Both next quarter and full year guidance for product revenue and operating income margin missed expectations. Overall, it seems to us that this was a complicated quarter for Snowflake with negative outlook. The company is down 12.8% on the results and currently trades at $154.35 per share.
Should you invest in Snowflake 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.