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Snowflake shares decline after lacklustre product sales forecast

Bloomberg • 2 min read
Snowflake shares decline after lacklustre product sales forecast
“We are pleased with our performance this first quarter as a public company,” says CEO Frank Slootman in a statement.
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Snowflake Inc., a software maker that debuted with the year’s biggest US initial public offering, gave a lacklustre product sales forecast for the current quarter, signalling fierce competition in cloud computing. Shares declined about 5% in extended trading.

Product revenue, which makes up more than 90% of sales, will be US$162 million ($216.8 million) to US$167 million in the period ending in January, the San Mateo, California-based company said Wednesday in a statement. Analysts, on average, estimated US$166 million, according to data compiled by Bloomberg.

Snowflake’s data-warehouse software is like a vacuum sucking up information strewn across different systems, so that businesses can analyze it all together. The company competes against the cloud-computing divisions of Inc., Microsoft Corp. and Alphabet Inc., as well as open-source vendor Cloudera Inc. and database stalwart Oracle Corp. Snowflake has chased major deals with banks, including an agreement with Capital One Financial Corp. valued around US$100 million and a major deal with Goldman Sachs Group Inc., Bloomberg has reported.

Snowflake listed on the New York Stock Exchange in September in a US$3.36 billion IPO, the largest ever for a software maker. The stock has more than doubled since then on optimism it would produce extraordinary growth, closing at US$292.69 Wednesday in New York, and pushing the company’s market value to more than US$82 billion.

In the fiscal third quarter, total revenue more than doubled to US$159.6 million. Analysts projected US$147.1 million. The company reported its net loss widened to US$168.9 million, or US$1.01 a share, from US$88.1 million, or US$1.92 a share, in the period a year earlier.

“We are pleased with our performance this first quarter as a public company,” Chief Executive Officer Frank Slootman said in the statement. “Our vision of the Snowflake Data Cloud mobilizing the world’s data is clearly resonating across our customer base.”

The software maker projected product revenue of as much as US$543 million this fiscal year, beating analysts’ estimates of US$530 million.

The eight-year-old business has substantial supporters. Warren Buffett’s Berkshire Hathaway Inc. and Salesforce Ventures, an arm of Inc., each committed to buy US$250 million of the company’s Class A common stock in a private placement. Berkshire reported in a filing last month that it had purchased 6.13 million shares of Snowflake valued at US$1.54 billion, representing 15% of shares outstanding.

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