Snowflake (SNOW) shares are soaring in Thursday’s session even as the data cloud company beat second-quarter revenue and earnings expectations and raised its full-year product sales forecast.
For the three months ended July 31, Snowflake’s revenue rose 28.9% year over year to $868.8 million, partly due to a 30% increase in product revenue to $829.3 million. Earnings per share (EPS) fell 18.2% to 18 cents compared to the same period last year.
“Snowflake delivered another strong quarter, exceeding the high end of our second quarter product revenue guidance. As a result, we are increasing our product revenue guidance for the year,” Snowflake CEO Sridhar Ramaswamy said in a statement. “The quarter was marked by innovation and product delivery, as well as great traction in the early stages of our new artificial intelligence (AI) products.”
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The results far exceeded analysts’ expectations. Wall Street had expected revenue of $851.3 million and earnings of 16 cents per share, according to Yahoo Finance.
As the CEO mentioned, due to the strong performance in the second quarter, Snowflake has raised its full-year product revenue guidance. The company now expects product revenue in fiscal 2025 to be approximately $3.356 billion, representing year-over-year growth of approximately 26%. The previous guidance was approximately $3.3 billion.
The company added that it continues to expect product gross margin of 75%, operating profit margin of 3% and adjusted free cash flow margin of 26%.
For the third quarter, Snowflake expects product revenue in the range of $850 million to $855 million.
According to Investor’s Business Daily, analysts expect product sales of $851 million for the third quarter.
“The combination of our platform, the network effect of collaboration and our AI innovations presents us with a huge opportunity to deliver even greater value to our customers,” said Ramaswamy.
Finally, Snowflake authorized an additional $2.5 billion in share repurchases and extended the term of its repurchase program through March 2027. As of July 31, $491.9 million remained for repurchases under the previous $2 billion authorization. Share repurchases can help boost the stock price.
Despite all the positives, there may be concern on Wall Street that management is maintaining its 3% operating margin forecast for the third quarter and full year despite higher commissions and R&D costs, says analyst Jason Ader at William Blair.
Should I buy, sell or hold Snowflake stock?
Snowflake has performed poorly on the price charts in 2024, falling 40% year to date. And even though Berkshire Hathaway (BRK.B) threw in the towel on SNOW—it was one of the stocks Warren Buffett sold in the second quarter—Wall Street remains bullish on the technology stock.
Accordingly S&P Global Market IntelligenceThe average analyst price target for SNOW shares is $172.86, implying an upside of more than 45% from current levels. The consensus recommendation, meanwhile, is Buy.
Financial services firm Oppenheimer is one of the more optimistic firms on SNOW stock, with an Outperform rating (equivalent to a Buy) and a price target of $180.
According to Oppenheimer analyst Ittai Kidron, Snowflake has several positive aspects that could lead to stronger growth in the coming fiscal year, including improved execution and completion rates and a leadership role in tackling analytical workloads and use cases.
However, the analyst notes that third-quarter product guidance narrowly missed estimates and that “investor concerns about competition and the company’s execution in the AI space are likely to persist.”
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