Snowflake’s earnings ignite a stock surge: Learn why

Snowflake shares surged 19% during extended trading on November 20, 2024, after the company reported stronger-than-expected fiscal third-quarter earnings and revenue. The data analytics firm posted an earnings per share of 20 cents versus the anticipated 15 cents, with revenue reaching $942 million compared to the $897 million forecast by analysts.

The company’s revenue showed a year-over-year increase of 28% for the quarter ending October 31, but its net loss widened to $324.3 million or 98 cents per share, compared to a $214.3 million loss or 65 cents per share in the same period last year. Of note, approximately 96% of total sales, or product revenue, contributed significantly to the overall figures.

Snowflake’s forecast for fiscal 2025 indicates an expectation of $3.43 billion in product revenue, a rise from the previous estimate of $3.36 billion, showcasing a projected growth of 29%. Additionally, it anticipates an adjusted operating margin of 5%, up from 3% previously guided in August.

Amid these developments, CEO Sridhar Ramaswamy emphasized the company’s focus on operational efficiency, stating, “We’ve been creating centralized, more efficient teams for some areas and removing redundant management layers, which enables us to make decisions faster.” However, CFO Mike Scarpelli noted that there wouldn’t be substantial layoffs despite ongoing efforts to streamline operations.

As of the end of October, Snowflake counted 10,618 customers, having added 369 in the most recent quarter, slightly surpassing the analyst expectation of 10,601. Although the U.S. government currently contributes minimally to Snowflake’s revenue, Scarpelli expressed optimism about growth prospects in this sector, referencing the recent acquisition of Night Shift Development aimed at bolstering their presence in the public sector.

Snowflake operates in a competitive landscape that includes major cloud providers like Amazon and Microsoft, which also function as essential partners. Ramaswamy highlighted, “Through our collaboration with AWS, we have booked over $3.9 billion over the past four quarters.”

In conjunction with its earnings release, Snowflake announced a multiyear partnership with Anthropic, an artificial intelligence startup supported by Amazon, alongside an acquisition of Datavolo for an undisclosed amount.

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As of the close on November 20, Snowflake’s stock had declined approximately 35% in 2024, while the S&P 500 index showed a 24% increase. Analysts now await to see if the company can maintain its momentum after this earnings report as it seeks to regain its footing in the market, particularly given the heightened scrutiny surrounding its valuation and recent executive changes.

After the earnings report, the stock experienced a notable rise, hitting a 20% increase during after-hours trading to settle around $154.70. Investors will closely monitor specified price levels as the company’s chart indicates a potential bullish reversal following a double bottom pattern observed between September and October.

The share price may encounter key resistance levels starting at approximately $145, around the 200-day moving average. A successful move above this level could lead to further gains, with the next significant resistance projected at the $165 mark. Observers may also highlight the $182 level and the psychological $200 mark as crucial targets, should upward momentum continue.

Notably, investors are advised to keep an eye on the $125 price point, which represents a major support level likely influenced by the bullish reversal pattern’s neckline.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Please consult with a qualified financial advisor before making any investment decisions.

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