ii view: Snowflake rallies on demand for data modernisation

Second-quarter results to 31 July  

• Revenue up 32% $1.14 billion (£844 million)
• Adjusted Earnings Per Share (EPS) of $0.35, up from $0.18

Chief executive Sridhar Ramaswamy said:

“Snowflake delivered yet another strong quarter. Customers love that our platform is easy to use, connected to enable fluid access to data wherever it sits, and trusted by companies of all sizes and industries. 

“We have an enormous opportunity ahead as we continue to empower every enterprise to achieve its full potential through data and AI.”

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ii round-up:

Snowflake Inc Ordinary Shares (NYSE:SNOW) detailed sales and earnings that beat Wall Street forecasts, with the analyser and moderniser of data for customers such as Experian (LSE:EXPN) and NatWest Group (LSE:NWG) increasing forecasts for annual sales.

Second-quarter revenue rose 32% from a year ago to $1.14 billion (£844 million), driving a near doubling in adjusted earnings to $0.35 per share. Analysts had expected outcomes of $1.09 billion and $0.27 per share respectively. The Montana headquartered company now expects growth in full-year sales of 27%, up from a previous 25%. 

Shares in the New York listed company have risen 18% in response having come into these latest results up around 30% so far in 2025. The tech heavy Nasdaq Composite index is up almost 12% over that time. Cloud data server providers Amazon.com Inc (NASDAQ:AMZN) and Alphabet Inc Class A (NASDAQ:GOOGL) are each up by around a fifth year-to-date.

Snowflake unites and analyses data from servers across the global on behalf of customers such as ExxonMobil and Citigroup. Total customer numbers climbed to 12,062 as of late July, up from 10,147 in Q2 2024.

Group customers with trailing 12-month product revenues of more than $1 million rose to 654 from the prior quarters 606.

Progress for services such as data engineering and AI expansion continued to be made, with customers using at least one of Snowflake’s AI and machine learning (ML) services on a weekly basis growing to more than 6,100 from the prior quarter’s 5,200.

An unadjusted, or fully reported loss of $298 million for the quarter or $0.89 per share improved from a loss of $314 million or $0.95 per share during Q2 last year.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, raising its fair value target to $272 per share from a previous $262 and flagging Snowflake as the best way to play the data modernisation theme within the software space. 

ii view:

Founded in 2012, Snowflake came to the stock market in 2020. Today it employs over 8,700 people, with 751 of the Forbes Global 2,000 company list now active Snowflake customers. Geographically, the Americas account for most sales at 78%, followed by Europe, the Middle East, and Africa at 16% and Asia-Pacific and Japan the balance of 6%. 

For investors, increased costs such as swallowing imposed US trade tariffs to keep prices competitive for customers could see corporations cut IT spend. Snowflake reported a pre-tax loss of $542 million over its last financial year. A share price-to-net asset value ratio at almost twice the three-year average may suggest the shares are not obviously cheap, while the group’s activities are sure to have been noticed by rival tech companies.  

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To the upside, customer numbers and revenues are growing, likely aided by additional AI and ML services. Geographical and product diversity exist. CEO from early 2024, Sridhar Ramaswamy has looked to reinvigorate group strategy including a new focus on product innovation, while staff numbers for R&D increased to 1,200 from 1,152 a year ago. 

In all, a share price now close to the consensus analyst fair value estimate at $234 per share may inject some caution. That said, with corporate AI ambitions requiring data modernisation and transformation initiatives, support for this US tech company looks unlikely to melt away any time soon. 

Positives: 

• Growing customer numbers
• Increasing use of data

Negatives:

• Uncertain economic outlook
• No dividend payment

The average rating of stock market analysts:

Buy