What happened

Shares of Snowflake (SNOW 1.02%) traded higher Thursday morning, jumping as much as 5.3%. As of 10:48 a.m. ET, the stock was still up 2.8%.

The catalyst that sent the cloud stock higher was the company's financial report, which was much better than expected.

So what

For its fiscal 2023 third quarter (ended Oct. 31), Snowflake generated revenue of $557 million, up 67% year over year, driven by product revenue that also grew 67%. This resulted in adjusted earnings per share (EPS) of $0.12, up 200%. 

For context, analysts' consensus estimates were calling for revenue $539.6 million and EPS of $0.05, so Snowflake beat expectations by a wide margin. 

Other metrics suggest the company's solid growth will continue. Remaining performance obligation (RPO) -- a leading indicator of a company's future revenue -- grew to $3 billion, up 66% year over year.

Snowflake's total customer count grew to 7,292, up 34% year over year. At the same time, the company's most valuable customers -- those spending more than $1 million in trailing-12-month revenue -- grew 94%. Snowflake also continued to expand its business with existing customers, as evidenced by its net revenue retention rate of 165%.

Now what

Investors were initially unimpressed with Snowflake's guidance for the fourth quarter, though management pointed out that the economic uncertainty required a conservative forecast. Snowflake is guiding for product revenue in a range of $535 million to $540 million, or growth of roughly 50% year over year -- quite a slowdown from the 67% growth it generated in Q3. For context, Wall Street was expecting sales of about $584 million, so investors had wanted more. 

It isn't surprising that the downturn in the economy could eventually catch up with Snowflake, though it remains to be seen just how conservative management was in its forecast.

It's also important to note that investors still have lots of growth baked into Snowflake's valuation. The stock is currently trading at 15 time next year's sales, when a reasonable price-to-sales ratio is between 1 and 2. Investors often award a premium to high-growth stocks and Snowflake has a bright future, but any slowing of its growth spurt could cause Snowflake's stock to tumble.