Snowflake Inc. gave a sales outlook for the current quarter in line with expectations, suggesting that companies are still cautious about expanding their cloud software budgets.
Product revenue will increase about 29% to as much as $675 million in the period ending in October, the company said Wednesday in a statement. Analysts, on average, estimated $674.9 million, according to data compiled by Bloomberg. Product sales make up the majority of Snowflake’s total revenue and are watched closely by investors.
In recent quarters, Snowflake’s results have been dented by companies trimming their spending on cloud computing applications. While that hesitant demand has been seen across the industry, Snowflake was hit harder because it charges customers based on how much they use its data optimization products, a model that is more sensitive to an economic slowdown.
Mark R. Murphy, an analyst at JPMorgan, said a survey conducted by the firm suggested that software customers wouldn’t get back to normal levels of investment for another three quarters. “For Snowflake, even a single large customer making active optimization choices can seemingly result in a guide-down,” Murphy wrote in a note before the results.
Snowflake’s forecast is in contrast with those provided in the past few weeks by other cloud-computing providers and software applications companies, including Amazon.com Inc.’s Amazon Web Services, Twilio Inc., Zoom Video Communications Inc. and Atlassian Corp. Those projections, and quarterly results, suggested a pickup in demand, particularly as businesses seek ways to benefit from advancements in artificial intelligence technology.
Chief Executive Officer Frank Slootman touted the potential for AI to accelerate the business.
“Snowflake as the global epicenter of trusted enterprise data is well positioned to enable the growing interest in AI (and machine learning),” he said in the statement. The company has a partnership with Nvidia Corp., the top maker of chips for artificial intelligence.
The deals with Nvidia and Microsoft Corp. announced at Snowflake’s annual event “we believe is a sign it’s well-positioned to benefit from the proliferation of LLMs (large language models) for industry-specific uses,” wrote Bloomberg Intelligence’s Mandeep Singh after the June event.
The shares gained about 3%, erasing a decline of as much as 4.9%, in extended trading after Nvidia gave results and a sales forecast that far outpaced analysts’ estimates. Earlier, the stock closed at $155.70 in New York and has increased 8.5% this year.
The company also maintained its annual product sales guidance of $2.6 billion. In May, the company reduced its outlook to $2.6 billion, sending shares down to their worst single-day plunge ever. During a June investor day, Snowflake projected $10 billion in product revenue for the fiscal year ending in January 2029, affirming a previous forecast. It also said it is slowing its pace of hiring, and expects to increase its headcount by 1,000 workers this year.
Fiscal second-quarter product revenue increased 37% to $640.2 million. Analysts, on average, estimated $624.9 million. Adjusted profit was 22 cents a share in the period ended July 31, compared with the average projection of 10 cents.
Snowflake had 402 customers that spent over $1 million on products over the last year, up from 373 the previous quarter. Remaining performance obligations were $3.5 billion, exceeding the average estimate of $3.46 billion.
(Updates with Nvidia Corp. partnership in the seventh paragraph.)