Snowflake (NYSE:SNOW) Surprises With Q4 Sales

Adam Hejl /
2023/03/01 4:12 pm EST
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Data warehouse-as-a-service Snowflake (NYSE:SNOW) announced better-than-expected results in the Q4 FY2023 quarter, with revenue up 53.5% year on year to $589 million. Snowflake made a GAAP loss of $207.5 million, down on its loss of $132.2 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 FY2023 Highlights:

  • Revenue: $589 million vs analyst estimates of $575.4 million (2.36% beat)
  • EPS (non-GAAP): $0.14 vs analyst estimates of $0.05 ($0.09 beat)
  • Product revenue guidance for Q1 2024 is $570.5 million at the midpoint
  • Free cash flow of $205.3 million, up from $65 million in previous quarter
  • Net Revenue Retention Rate: 158%, down from 165% previous quarter
  • Customers: 7,828, up from 7,292 in previous quarter
  • Gross Margin (GAAP): 65.1%, in line with same quarter last year

“Snowflake finished fiscal 2023 with 70% year-over-year product revenue growth, totaling $1.9 billion. Non-GAAP adjusted free cash flow margin for the year was 25%,” 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 $190.5 million in Q4 FY2021, to $589 million.

Snowflake Total Revenue

And while we saw even higher rates of growth previously, the revenue growth was still very strong; up a rather splendid 53.5% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $32 million in Q4, compared to $59.8 million in Q3 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

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 7,828 customers at the end of the quarter, an increase of 536 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 $49.6 billion, more than $4.01 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 and free cash flow Snowflake delivered this quarter. On the other hand, it was less good to see the deterioration in revenue retention rate and gross margin also deteriorated a little. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But the market was likely expecting more and the company is down 3.09% on the results and currently trades at $149.75 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.