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Snowflake plunges almost 30% on slowing revenue growth

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CEO of Snowflake Frank Slootman arrives at the Allen & Company Sun Valley Conference on July 6, 2021, in Sun Valley, Idaho.
Kevin Dietsch | Getty Images News | Getty Images

Snowflake shares dropped as much as 30% in extended trading on Wednesday after the data-analytics software company showed the slowest revenue growth since at least 2019.

Here’s how the company did:

Earnings: Loss of 43 cents, adjustedRevenue: $383.8 million, vs. $372.6 million as expected by analysts, according to Refinitiv.

Snowflake’s revenue grew 101% year over year in the quarter, which ended Jan. 31, according to a statement. In the previous quarter growth reached 110%. The company reported a $132 million net loss, narrowing from almost $199 million in the year-ago quarter.

Its adjusted gross margin of 70% came in below the StreetAccount consensus of 70.9%, although it’s up from 62% two years ago, in part thanks to discounts on the third-party cloud infrastructure it relies on to deliver its service to customers.

CEO Frank Slootman has been working to expand the ranks of the business. Its headcount neared 4,000 at the end of the quarter, up 60% in the past year.

Executives said engineers have been rolling out efficiency improvements to the company’s software that have lowered consumption of customers credits. “This is not philanthropy,” Slootman said on a conference call with analysts. As economics improve, customers might be inclined to move more workloads to Snowflake, executives said.

The vast majority of Snowflake’s revenue comes from product revenue, which reflects the use of its service for storing and running queries on a variety of data. Other revenue sources include consulting and training. Snowflake said it expects 79% to 81% product revenue growth in the fiscal first quarter. Analysts polled by StreetAccount had predicted 78% product revenue growth. In the fiscal fourth quarter, product revenue increased by 102%.

For the 2023 fiscal year, management called for 65% to 67% product revenue growth. Analysts on average were expecting growth of 66%, according to FactSet.

Also on Wednesday Snowflake said it was acquiring data start-up Streamlit. Terms of the transaction weren’t disclosed.

Prior to the after hours move, Snowflake stock has declined 21% since the start of 2022, while the S&P 500 was down about 8% over the same period.

This is breaking news. Please check back for updates.

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