Snowflake (SNOW) stock is trading notably lower Thursday after the cloud-based data platform reported mixed earnings results for its first quarter of fiscal 2025 and updated its full-year outlook.
In the three months ended April 30, Snowflake's revenue increased 33% year-over-year to $828.7 million, due mostly to a 34% jump in product revenue to $789.6 million. Its earnings per share (EPS) fell to 14 cents from 15 cents in the year-ago period.
"We finished our first quarter with strong performance across many of our key metrics," Snowflake CEO Sridhar Ramaswamy said in a statement. "Our core business is very strong. Our AI [artificial intelligence] products, now generally available, are generating strong customer interest. They will help our customers deliver effective and efficient AI-powered experiences faster than ever."
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The results were mixed compared with analysts' expectations. According to CNBC, Wall Street was anticipating revenue of $786 million and EPS of 18 cents.
Snowflake also updated its full-year outlook. Here's what it now expects compared to its previous expectations:
| Metric | New outlook | Previous outlook |
|---|---|---|
| Product revenue | $3.3 billion | $3.25 billion |
| Product gross profit margin | 75% | 76% |
| Operating income margin | 3% | 6% |
| Adjusted free cash flow margin | 26% | 29% |
For the second quarter, Snowflake said it expects product revenue in the range of $805 million to $810 million, representing year-over-year growth of 26% to 27%, and an operating income margin of approximately 3%.
The second-quarter product revenue guidance came in above analysts’ expectations. According to MSN, Wall Street is anticipating product revenue of approximately $793 million.
Snowflake also announced that it plans on buying certain technology assets and hire key employees from AI observability platform TruEra. The acquisitions will boost SNOW's ability to large language model applications in production.
"The world of AI is rapidly evolving, and we are investing in that because we do think there's a massive opportunity for Snowflake to play there and it will have a meaningful impact on future revenues," said Mike Scarpelli, chief financial officer of Snowflake, in the company's earnings call.
Is Snowflake stock a buy, sell or hold?
The tech stock has struggled on the price charts, down about 20% for the year to date as of this writing. Still, analysts are upbeat toward SNOW, which happens to be a member of the Berkshire Hathaway equity portfolio.
According to S&P Global Market Intelligence, the consensus analyst target price for SNOW stock is $204.50, representing implied upside of nearly 30% to current levels. Meanwhile, the consensus recommendation is a Buy.
However, some analysts are reducing their price targets after the earnings report. Financial services firm Needham, for instance, kept a Buy rating on SNOW but lowered its price target to $210 from $240 after earnings.
The stock's post-earnings selloff is sparked by lowered guidance for the full fiscal year, says Needham analyst Mike Cikos, while adding that this is likely "a short-term view."
But the company "is investing in a rapidly evolving market to ensure long-term positioning, and has a number of new products coming to market later this year" Cikos adds. "At the same time, SNOW is investing in AI initiatives like Cortex and Arctic, which is bolstered by its acquisition of TruEra. We remain Buy-rated."
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