Getting your
Trinity Audioplayer ready...By Brody Ford, Bloomberg Snowflake Inc. shares surged by the most in more than five years after the software maker gave a stronger-than-expected annual outlook and signed a $6 billion multiyear agreement to use Amazon.com Inc.’s cloud services and chips.
Product revenue will increase about 31% to $5.84 billion in the fiscal year ending in January 2027, Snowflake said Wednesday in a statement. That’s an increase from a previous outlook of $5.66 billion given in February and topped analysts’ average estimate of $5.68 billion. Product sales make up about 95% of the company’s total revenue.
Snowflake also made a new commitment to spend an additional $6 billion on Amazon Web Services. This includes use of Amazon’s general-purpose Graviton processor chips that compete with Intel Corp.’s offerings. “Our teams work exceptionally well together and we drive a lot of joint business,” Snowflake Chief Executive Officer Sridhar Ramaswamy said of the agreement.
The shares soared as much as 36% to $238.00 on Thursday after trading got underway in New York, their biggest intraday gain since September 2020. The company’s stock had been down about 20% this year heading into Wednesday’s report.
Snowflake is seeing increased demand for its main data products at the same time that its newer AI-focused tools have become “legitimate businesses in their own right,” Ramaswamy said in an interview. Customers using the company’s AI-assisted coding tool doubled from the prior quarter, reaching 7,100, he added.
A maker of software that helps organize, analyze and store corporate data in the cloud, Snowflake is weaving artificial intelligence through its platform. Still, investors have grown increasingly concerned about the potential for the emerging technology to disrupt the software industry’s business model altogether.
“In the last few weeks, we’re seeing a separation between winners and losers in software,” Gil Luria, an analyst at DA Davidson & Co said in an interview on Bloomberg TV. “Snowflake is winning.”
In the fiscal first quarter, which ended April 30, product revenue increased 34% to $1.33 billion, ahead of the average estimate of $1.27 billion. Remaining performance obligations, a measure of bookings, were $9.21 billion, falling short of the average analyst estimate of $9.43 billion.
–With assistance from Matt Day.
(Updates with Thursday share move starting in the first paragraph.)
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