By Dhirendra Tripathi
Investing.com – Snowflake (NYSE:SNOW) stock plunged 22% in premarket trading Thursday after its projection of a 65-67% growth in annual product revenue left the Street unimpressed.
The outlook means a rapid deceleration for a company that has doubled its product revenue year-on-year for six consecutive quarters. The company recognizes revenue based on the usage of its software platform compared to the usual industry practice of charging a fixed subscription fee, the former being less predictable.
Demand for Cloud has been booming, though the outlook numbers suggest rising competition from the likes of Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Oracle (NYSE:ORCL).
Product revenue, contributing almost 94% of the company’s sales, climbed 102% year-on-year to $360 million in the fourth quarter and is seen at no more than $1.9 billion in 2022.
The forecast “could be due to saturation of new customer additions at large companies,” Bloomberg quoted Mandeep Singh, an analyst at its Intelligence unit, as saying. Snowflake is likely to move toward finding ways to sell to midsized companies, he said.
Snowflake again delivered a high net revenue retention rate in the fourth quarter, much bigger than the industry average. It was 178% in the quarter ended January 31, and the company attributed this to “continued growth from our largest customers”.
Remaining performance obligations, an indicator of future revenue streams, grew 99% year-over-year to $2.6 billion by end-January.
The company also announced the acquisition of Streamlit, a company that helps developers build and share data applications, in a stock-and-cash deal for $800 million.
Adjusted earnings per share in the fourth quarter were 12 cents on revenue of $383.77 million.
In the current quarter, product revenue is seen up 79-81%.