Business software specialist Snowflake (SNOW 3.69%) easily beat quarterly earnings expectations and provided an upbeat outlook for the quarters to come. Investors are celebrating a snow day, sending shares up as much as 10% on Thursday and up 5.1% as of 12:45 p.m. ET.
Snowflake saw a flurry of activity in the quarter
Snowflake makes cloud-based tools that help businesses organize data stored across various databases and easily query the data to produce actionable insight. The company in its most recent quarter earned $0.27 per share on revenue of $734.2 million, outpacing Wall Street's forecast of $0.16 per share in earnings on sales of $713.06 million.
Revenue was up 32% year over year, and Snowflake at quarter-end had 436 customers doing at least $1 million worth of business with it over the past year. Overall, more than one-quarter of the Forbes Global 2000 are customers. Snowflake also generated $111 million in adjusted free cash flow, 70% higher than a year ago.
There is no indication in the numbers that momentum is slowing. Snowflake finished the quarter with remaining performance obligations, or future business, of $3.7 billion, representing 23% year-over-year growth. And net revenue retention stands at 135%, meaning that existing customers are expanding their relationships with Snowflake.
Snowflake raised its full fiscal 2024 revenue outlook to 37% growth, from 34% growth, and raised its product gross profit margin view to 77% from 76% and operating margin forecast to 7% from 5%.
Is Snowflake stock a buy after the company's strong quarter?
Perhaps the most important item in the release was CEO Frank Slootman's comment that after a shaky few quarters as businesses adjusted to higher rates, Snowflake now sees a "broadly stabilizing" macro environment.
Snowflake was a Wall Street tech stock darling when it first went public in 2020, but a combination of a more difficult business environment and a change to how the company accounts for revenue temporarily derailed momentum and has left the stock more than 50% below its late 2021 highs.
The latest quarter suggests the turbulence is fading, and the Snowflake growth engine is reaccelerating. The company appears to be set up well to outperform into its fiscal 2025 and beyond, and investors are understandably excited about the potential for the stock to go higher from here.
