Snowflake Sales outlook is better than expected, stock price rises

Snowflake (SNOW)'s fourth-quarter revenue outlook exceeded market expectations, and its share price surged 18% after hours. The company said it expects fourth-quarter product revenue to be $906 million to $911 million, well above analysts 'consensus estimate of $891 million. At the same time, adjusted operating profit margin is expected to reach 4%, exceeding the market's original forecast of only 1.7%.

Analysts believe that Snowflake's emphasis on product revenue as the main driver of its core business has alleviated market concerns about the slowdown in platform consumption, leadership changes and overall economic pressure.

AI products and acquisition strategies drive business growth

Snowflake has recently concentrated resources to develop generative AI technology and released a number of new products, which has been welcomed by the market. Chief Executive Sridhar Ramaswamy emphasized that the company's product ease of use and integration helped it continue to win new customers and expand its business among existing customers. "We continue to replace our competitors and gain more market share," he said.

In addition, Snowflake announced the acquisition of startup Datavolo, which focuses on processing unstructured data such as pictures and text, which is critical to generative AI. The acquisition will help customers analyze data more effectively and develop AI applications. Although the specific acquisition amount was not disclosed, Datavolo previously received US$21 million in financing from investors including General Catalyst and Citi Ventures. Snowflake also announced a partnership with Anthropic to integrate its high-level language model into the Snowflake platform to help customers build more complex AI agent applications.

Operational data and customer base continue to expand

Snowflake achieved a 29% increase in product revenue in the third quarter to $900 million, exceeding the average analyst forecast of $857 million. Earnings per share were 20 cents, also above analysts 'forecasts of 15 cents.

The large customer base continues to expand to 542 (510 in the previous quarter), and these customers have each spent more than $1 million in the past 12 months. In addition, the company's outstanding performance indicator (RPO) reached US$5.7 billion, higher than market expectations of US$5.2 billion, indicating that there is a good foundation for future revenue growth.

Optimize cost structure to cope with competitive pressure

The chief executive and chief financial officer revealed that the company improved efficiency and cut operating costs by optimizing management levels and terminating some internal projects. This practice has helped companies improve profit margins and relieve pressure from competitors.

Snowflake's main competitors include Databricks and Microsoft, which has strong strengths in generative AI and data analytics. But Ramaswamy believes that Snowflake's product integration and ease of use are a major advantage. He criticizes competitors 'products as "a combination of scattered tools" that require a large number of engineers to deploy, while Snowflake provides out-of-the-box solutions.