Snowflake (NYSE:SNOW) Q2 Sales Beat Estimates, Stock Jumps 15.7%

Adam Hejl /
2022/08/24 4:15 pm EDT

Data warehouse-as-a-service Snowflake (NYSE:SNOW) beat analyst expectations in Q2 FY2023 quarter, with revenue up 82.6% year on year to $497.2 million. Snowflake made a GAAP loss of $222.8 million, down on its loss of $189.7 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 FY2023 Highlights:

  • Revenue: $497.2 million vs analyst estimates of $467.3 million (6.4% beat)
  • EPS (GAAP): -$0.70
  • Product revenue guidance for Q3 2023 is $502.5 million at the midpoint
  • Free cash flow of $53.8 million, down 68.7% from previous quarter
  • Net Revenue Retention Rate: 171%, in line with previous quarter
  • Customers: 6,808, up from 6,322 in previous quarter
  • Gross Margin (GAAP): 65.1%, up from 61% same quarter last year

“During Q2, product revenue grew 83% year-over-year to $466 million dollars. Our non-GAAP product gross margin exceeded 75%, and we continue to generate non-GAAP operating income and free cash flow,” 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 year, growing from quarterly revenue of $272.1 million, to $497.2 million.

Snowflake Total Revenue

This was another standout quarter with the revenue up a splendid 82.6% year on year. On top of that, revenue increased $74.8 million quarter on quarter, a very strong improvement on the $38.5 million increase in Q1 2023, and a sign of acceleration of growth, which is very nice to see indeed.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 53.2% 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.

Customer Growth

You can see below that Snowflake reported 6,808 customers at the end of the quarter, an increase of 486 on last quarter. That is a fair bit better customer growth than last quarter and a fair bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Snowflake Customers

Key Takeaways from Snowflake's Q2 Results

Sporting a market capitalization of $48.6 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.

We were impressed by the exceptional revenue growth Snowflake delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, there was a deterioration in revenue retention rate. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 15.7% on the results and currently trades at $185 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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