Snowflake Inc. (NYSE:SNOW) anticipates robust sales growth in the current quarter, signaling confidence in the potential of its new artificial intelligence (AI) products to drive acceleration in revenue.
The company projects product revenue, comprising the majority of its business, to range between $805 million and $810 million for the quarter ending in July, surpassing analysts’ estimates. Analysts had expected $787.5 million on average. Additionally, Snowflake raised its fiscal year product sales forecast to $3.3 billion, up from $3.25 billion.
Sridhar Ramaswamy, Snowflake’s CEO, and former Google executive emphasizes the strong customer interest generated by the company’s AI products, which are now widely available. He believes these products will empower customers to deliver AI-powered experiences more efficiently than ever before.
Following the announcement, Snowflake’s shares surged approximately 5% in extended trading, reflecting investor optimism. Despite a year-to-date decline of 18% in the stock, attributed to concerns about revenue growth and executive transition, the positive outlook signals a potential turnaround.
Ramaswamy’s strategy includes investments in generative AI-oriented products. Although talks to acquire generative startup Reka AI for over $1 billion fell through, Snowflake released its large language model in April and enables customers to utilize third-party AI models within its platform.
Snowflake also plans to “acquire certain technology assets and hire key employees” from AI-focused startup TruEra. This move aligns with the growing popularity of generative AI, prompting major tech companies to engage with startups in this space.
Analysts anticipate gaining insights into Ramaswamy’s long-term vision at Snowflake’s annual conference in June. In the fiscal first quarter, the company saw a 34% increase in product revenue, reaching $789.6 million, surpassing analysts’ expectations. Profit, excluding some items, stood at 14 cents per share, below analysts’ estimate of 19 cents.
Snowflake’s customer base continues to expand, with 485 customers spending over $1 million in the trailing 12-month period, up from 461 in the previous quarter. Additionally, remaining performance obligations totaled $5 billion, exceeding analysts’ average estimate.
Despite challenges in the tech industry, Snowflake’s workforce grew to 7,296 employees by the end of the quarter, nearly 1,000 more than in the same period last year, highlighting the company’s confidence in its growth trajectory.
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