(Bloomberg) — Snowflake Inc. gave sales guidance for the current quarter that beat expectations, suggesting new AI-focused products could help accelerate growth.
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Product revenues — which make up the bulk of Snowflake’s business — will be between $805 million and $810 million in the period ending in July, the company said in a statement Wednesday. Analysts on average forecast $787.5 million, according to data compiled by Bloomberg. The company also increased its product sales forecast for the fiscal year from $3.25 billion to $3.3 billion.
This is the first full quarter that Sridhar Ramaswamy, former Google executive and co-founder of search startup Neeva, has been CEO of Snowflake. He must again accelerate growth at the maker of cloud-based analytics software while fending off competition from rivals including Databricks Inc.
While the outlook was stronger than expected, it still represents slowing revenue growth and may not satisfy investors who are bearish on the stock, wrote Kirk Materne, an analyst at Evercore ISI. The guidance reflects uncertainty about consumer consumption in the second half of the year, said Mandeep Singh, an analyst at Bloomberg Intelligence.
Shares gained about 4% in extended after-close trading at $163.34 in New York. The stock is down 18% this year as investors wary of top management transitions and worry about slowing revenue growth.
Read more: Databricks CEO says rivalry prompted executive swap at Snowflake
A pillar of Ramaswamy’s strategy is investing in generative AI-oriented products. Snowflake was in talks to acquire the generative startup Reka AI for more than $1 billion, but the talks came to nothing. Snowflake released its own major language model in April, allowing customers to use third-party AI models on their data within the business platform.
“Our AI products, which are now widely available, are generating strong customer interest,” Ramaswamy said in the statement. “They will help our customers deliver effective and efficient AI-powered experiences faster than ever.”
The company’s annual conference in June “should provide better insight into the long-term vision of new CEO Ramaswamy,” wrote Tyler Radke, an analyst at Citigroup Inc., before the results were released.
Snowflake also announced it would “acquire certain technology assets and hire key personnel,” from AI-focused startup TruEra, which last raised $25 million in 2022. About 35 employees will join, Snowflake Chief Financial Officer Mike Scarpelli said on a conference call after the conference. results were released. The terms were not disclosed. As the field of generative AI has grown in popularity and hype, several major tech companies have rushed to partner with or acquire startups working on the technology.
In the first fiscal quarter, product revenues rose 34% to $789.6 million, compared to the $749 million expected by analysts. Profit, excluding some items, amounted to 14 cents per share. Analysts estimate 19 cents.
Profitability will be affected by the cost of graphics processing units as the company invests in new AI initiatives, Scarpelli said. “We view these investments as the key to unlocking additional revenue opportunities.”
Snowflake now has 485 customers who spent more than $1 million over a twelve-month period, up from 461 in the previous quarter. Remaining performance obligations – another key measure of growth – were $5 billion in the period ended April 30, higher than the average analyst estimate.
At the end of the quarter, the company had 7,296 employees, almost 1,000 more than in the same period a year earlier. Many other tech companies have cut jobs in the past year.
(Updates with CFO comments beginning in ninth paragraph.)
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