- Shares of Snowflake (NYSE:SNOW) are down 12% today after the company issued gloomy forward guidance
- Comments from Snowflake play into the negative narrative gripping Wall Street and sending stocks lower
- Despite the negative outlook, Snowflake managed to beat analyst expectations across the board with its latest earnings print
Snowflake (NYSE:SNOW) stock is down 12% today after the cloud computing company issued quarterly results that disappointed investors. It also said the current economic environment is likely to negatively impact its business going forward.
Specifically, Snowflake spooked investors by saying that it doesn’t expect a positive adjusted operating margin for the current quarter. Shares were down as much as 16% immediately following the earnings print before moderating somewhat.
Year to date, the stock has declined 65% to now change hands at $120. SNOW stock is now 70% below its 52-week high of $405 a share.
What Happened With SNOW Stock
Snowflake reported revenue of $422.4 million for the first quarter, up 85% from a year earlier. But that strong revenue growth is lighter than growth of 101% in the previous quarter. Q1 revenues outpaced the $412.8 million that Wall Street analysts had penciled in. In terms of earnings, Snowflake announced a net loss of $165.8 million, an improvement over a loss of $203.2 million a year ago. The latest net loss translated into a loss per share of 53 cents.
Looking ahead, Snowflake forecast 71% to 73% revenue growth for the current second quarter and an adjusted operating margin of -2%. Analysts had been looking for 72% revenue growth and an adjusted margin of 0.3%. For all of this year, the company continues to see 65% to 67% revenue growth and a 1% adjusted operating margin, in line with the 66% revenue growth and 1% operating margin that analysts expect.
But on a conference call with analysts, Snowflake CFO Mike Scarpelli said: “Today, some customers face a more challenging operating environment. Specific customers consume less than we anticipated, amid shifting economic circumstances.”
Why It Matters
Snowflake’s gloomy guidance plays into the narrative that the economy is slowing as interest rates rise. Investors are taking Snowflake’s outlook for the year ahead as confirmation that high-growth, unprofitable tech stocks will continue to see their business slow this year. Even before today, SNOW stock had been heavily sold as investors rotate out of technology securities and into more inflation-resistant stocks such as consumer staples.
The comments from Snowflake’s management team follow similar remarks made by other technology companies such as Nvidia (NASDAQ:NVDA) and major retailers such as Walmart (NYSE:WMT) and Target (NYSE:TGT), all of which are experiencing a slowdown in consumer spending in the current economy.
What’s Next for Snowflake
SNOW stock takes it on the chin today as investors hit the sell button.
Investors should keep in mind though that, guidance aside, Snowflake’s latest quarterly results beat Wall Street expectations across the board. While the company remains unprofitable, it is managing to execute on its strategic plan and continues to grow at a strong clip. This stock is one to keep an eye on.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
