Data warehouse-as-a-service Snowflake (NYSE:SNOW) beat analysts' expectations in Q3 FY2024, with revenue up 31.8% year on year to $734.2 million. It made a GAAP loss of $0.65 per share, down from its loss of $0.63 per share in the same quarter last year.
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Snowflake (SNOW) Q3 FY2024 Highlights:
- Revenue: $734.2 million vs analyst estimates of $713.5 million (2.9% beat)
- RPO (remaining performance obligations, a leading indicator of revenue) of $3.7 billion (23% year on year growth) a slight miss
- EPS (non-GAAP): $0.25 vs analyst estimates of $0.16 ($0.09 beat)
- Product Revenue Guidance for Q4 2024 is $718.5 million at the midpoint (beat vs. expectations of $702.5 million)
- Free Cash Flow of $102.3 million, up 48.2% from the previous quarter (beat vs. expectations of $80.1 million)
- Net Revenue Retention Rate: 135%, down from 142% in the previous quarter (beat vs. expectations of 133%)
- Gross Margin (GAAP): 68.8%, up from 65.8% in the same quarter last year
“During Q3, product revenue grew 34% year-over-year to reach $698 million and non-GAAP adjusted free cash flow was $111 million, representing 70% year-over-year growth. These results reflect strong execution in a broadly stabilizing macro environment," 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 Storage
Data is the lifeblood of the internet and software in general, and the amount of data created is accelerating. As a result, the importance of storing the data in scalable and efficient formats continues to rise, especially as its diversity and associated use cases expand from analyzing simple, structured datasets to high-scale processing of unstructured data such as images, audio, and video.
Sales Growth
As you can see below, Snowflake's revenue growth has been exceptional over the last two years, growing from $334.4 million in Q3 FY2022 to $734.2 million this quarter.
Unsurprisingly, this was another great quarter for Snowflake with revenue up 31.8% year on year. On top of that, its revenue increased $60.16 million quarter on quarter, a solid improvement from the $50.42 million increase in Q2 2024. This is a sign of slight re-acceleration of growth.
Looking ahead, analysts covering the company were expecting sales to grow 27.3% over the next 12 months before the earnings results announcement.
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Large Customers Growth
This quarter, Snowflake reported 436 enterprise customers paying more than $1m annually, an increase of 34 from the previous quarter. That's quite a bit more contract wins than last quarter and quite a bit above what we've typically observed in past quarters, demonstrating that the business 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.
Key Takeaways from Snowflake's Q3 Results
Sporting a market capitalization of $56.56 billion, more than $3.55 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Snowflake is attractively positioned to invest in growth.
This was a beat and raise quarter that is always welcome by shareholders. Specifically, it was good to see Snowflake beat analysts' revenue expectations this quarter due to beats on both total customers as well as net revenue retention rate. We were also glad its gross margin improved and its non-GAAP operating profit outperformed expectations by a healthy margin. To add to the positives, Q4 guidance for product revenue was higher than Wall Street estimates, and the company raised its full year guidance for product revenue, gross and operating profit, and free cash flow. Overall, this was a very good quarter for Snowflake. The stock is up 6.6% after reporting and currently trades at $186.85 per share.
So should you invest in Snowflake right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here.
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