(Bloomberg) — Snowflake Inc. issued a sales forecast that failed to convince investors the company will gain ground in the market for artificial intelligence software tools. Shares fell in extended trading.
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Sales from products, which make up the bulk of Snowflake’s business, will be $850 million to $855 million in the period ending in October, the company said in a statement Wednesday. Analysts on average had forecast $848 million, though some estimates exceeded $900 million, according to data compiled by Bloomberg. The company also raised its forecast for product sales in the fiscal year to $3.36 billion from $3.3 billion.
Under Chief Executive Officer Sridhar Ramaswamy, Snowflake has launched products focused on generative AI and other new ways to analyze vast amounts of data. The strategy is fueled in part by increased pressure from rivals including Databricks Inc. and cloud infrastructure providers such as Microsoft Corp. Snowflake offers software that helps customers find, organize and use vast amounts of information from disparate sources.
Ramaswamy praised “the product delivery and great traction in the early stages of our new AI products.”
Still, Snowflake faces a challenging environment, including a recent CEO change, security breaches at its customers and a market shift to products outside its traditional area of expertise, TD Cowen analyst Derrick Wood wrote ahead of the results.
In the second fiscal quarter, total revenue rose 29% to $868.8 million, marking the first time in Snowflake’s history as a public company that revenue remained below 30%.
Shares fell about 7% in extended trading after closing at $135.06 in New York. The shares have fallen 32% this year as investors worried about Snowflake’s ability to catch up with AI-focused tools.
Customers including AT&T Inc., Live Nation Entertainment Inc.’s Ticketmaster and LendingTree Inc. were affected by Snowflake accounts being compromised as part of a hacking campaign that began in May. Snowflake has said its own systems were not compromised and has added features that allow customers to implement stronger security settings.
“We clearly had some bad headlines in the quarter,” Ramaswamy said of the customer breaches during a conference call after the results were released. “The problem was not on Snowflake’s side.”
Product revenue rose 30 percent to $829 million in the quarter, compared with the $813 million analysts had expected. Adjusted earnings, excluding some items, were 18 cents a share, just above the average estimate of 16 cents a share.
Snowflake now has 510 customers who have spent more than $1 million in the past 12 months, up from 485 in the previous quarter. Remaining performance obligations — another key benchmark for growth — were $5.2 billion in the period ended July 31, beating the average analyst estimate of about $5 billion.
The company has added about 1,000 employees over the past year at a time when many peers have been shedding workers or selectively hiring. Snowflake said it had 7,630 employees in the second quarter.
(Updated throughout with additional context.)
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