What happened
Week to date, shares of Snowflake (SNOW -0.26%) were up 28% as of 9:50 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. Since the beginning of the year, the stock has fallen 42% along with the broader market over concerns about the economy and how much longer businesses will continue spending on cloud services at a rapid clip.
Snowflake squelched those concerns on Wednesday, when it reported stable year-over-year revenue growth of 83% -- only a 1-percentage-point deceleration from the previous quarter.
So what
Management had previously guided for second-quarter revenue growth of 71% to 73% year over year. It easily outpaced that expectation. With consumer spending showing signs of succumbing to the gravitational pull of inflation during the quarter, businesses are still placing cloud services as a top priority, which is benefiting Snowflake.
One factor helping the company maintain strong growth appears to be supply chain issues. Supply chain management has emerged as a major problem that businesses need to address, especially now that companies are getting hit with a second blow of inflationary cost spikes. Just like everything else these days, supply chains run on computer systems and data, and that spells opportunity for Snowflake's Data Cloud platform.
Snowflake also continues to see customers share data with other users, which is further cementing its competitive advantage. Data-sharing relationships more than doubled over the year-ago quarter.
Now what
Management is again forecasting slower growth for the third quarter, but full-year revenue growth is now expected to be between 67% to 68%.
Investors also must be pleased with the company's profitability. Despite investments to support growth, Snowflake continues to maintain a positive operating margin of 2%. This is much better than previous guidance that called for an operating loss of 2% at the start of the year.
