Snowflake (Nasdaq: SNOW) shares were mostly unchanged following the company's Q1 earnings results which topped analysts' expectations on the top line but missed on the bottom line. Shares initially opened lower as the company's guidance for Q2 and the full year were lighter than expected, however, shares trended higher due to a strong day on Wall Street.
Snowflake was one of the largest IPOs during this cycle and of recent history. It's especially notable for its very rich valuation, and it certainly didn't hurt that it came near the peak of the cycle. At this point, Snowflake's initial price to sales multiple of over a 180 looks egregious. Even with triple-digit revenue growth and a lower stock price, it remains quite expensive at 28.
Inside the Numbers
In Q1, Snowflake reported a loss of $0.53 per share which was above expectations of a loss of $0.44 per share. Revenue came in higher than expectations at $422.4 million, vs. $412.8 million. This was an 85% increase from last year's Q1 but a deceleration from 101% growth in Q4.
The company also disappointed analysts by reporting no adjusted operating margin. In total, its net loss was a bit slimmer than last year at -$166 million vs -$203 million
The company noted some impact from the slowdown in tech as they used Snowflake's services and products less than expected. They singled out consumer-facing cloud companies as one notable source of weakness and that these companies are growing albeit at a much slower rate.
Due to this, the company lowered its guidance for Q2. It also announced steps to offer more niche products for certain industries like retail and healthcare. The company is also shifting to a vertical-focused sales model from a geographic one.
In Q2, the company sees operating margins of -2% and revenue growth of 72. This was slightly below expectations. For the full year, it sees revenue growth of 65% and 1% operating margins. This is in line with expectations.
The company also said that it sees the weakness in tech as a potential opportunity to add talent especially if there is more distress in private markets or startups.