Snowflake (NYSE:SNOW) Q4 Sales Beat Estimates But Stock Drops 28.5%

Jabin Bastian /
2022/03/02 4:18 pm EST

Data warehouse-as-a-service Snowflake (NYSE:SNOW) reported Q4 FY2022 results topping analyst expectations, with revenue up 101% year on year to $383.7 million. Snowflake made a GAAP loss of $132.1 million, improving on its loss of $198.9 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) Q4 FY2022 Highlights:

  • Revenue: $383.7 million vs analyst estimates of $372.8 million (2.92% beat)
  • EPS (GAAP): -$0.43
  • Product revenue guidance for Q1 2023 is $385.5 million at the midpoint
  • Management's product revenue guidance for upcoming financial year 2023 is $1.89 billion at the midpoint, in line with analyst estimates and translating to 66% year on year growth
  • Free cash flow of $70.7 million, up from $9.46 million in previous quarter
  • Net Revenue Retention Rate: 178%, up from 173% previous quarter
  • Customers: 5,944, up from 5,416 in previous quarter
  • Gross Margin (GAAP): 65%, up from 56.4% same quarter last year

“Snowflake finished fiscal 2022 with record-breaking consumption and bookings results, including triple-digit product revenue growth,” 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 $190.4 million, to $383.7 million.

Snowflake Total Revenue

This was another standout quarter with the revenue up a splendid 101% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $49.3 million in Q4, compared to $62.2 million in Q3 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

For the upcoming financial year management expects product revenue to be $1.89 billion at the midpoint

There are others doing even better than Snowflake. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Snowflake reported 5,944 customers at the end of the quarter, an increase of 528 on last quarter. That is a fair bit better customer growth than last quarter and quite a 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 Q4 Results

With a market capitalization of $80.6 billion, more than $3.85 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth Snowflake delivered this quarter. And we were also glad to see the improvement in net revenue retention rate. Overall, we think this was a good quarter, that should leave shareholders feeling positive. But investors might have been expecting more than sales guidance just in line with estimates considering the high valuation and the company is down 28.5% on the results and currently trades at $190.01 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.