(Bloomberg) -- Snowflake Inc. surged in late trading after its forecast for quarterly sales topped analysts’ estimates, reassuring Wall Street that companies are still investing in their technology systems to boost efficiency.
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Product revenue at the maker of software to organize and analyze data in the cloud will be as much as $505 million in the period ending in October, the company said Wednesday in a statement. Analysts, on average, estimated $501.1 million, according to data compiled by Bloomberg. Product sales make up the majority of Snowflake’s total revenue and are watched closely by investors and analysts.
Snowflake rose to prominence in September 2020 with one of the biggest U.S. initial public offerings for a software company. Since reaching a record share price of $401.89 in November, the stock has tumbled 60%, as growth has slowed and valuations across the industry have been dented by a weaker overall economic outlook. After the results were announced, the shares jumped 17% in extended trading, having closed earlier at $159.49.
The company charges customers based on how much they use Snowflake’s data storage and analytics products rather than charging a flat-rate subscription. While this consumption-based model can be affected by economic conditions, Snowflake has consistently seen clients re-accelerate spending once uncertainties fade, Derrick Wood, an analyst at Cowen & Co., wrote in a note before the results.
In the fiscal second quarter, product revenue increased 83% to $466.3 million -- better than expected, but still Snowflake’s slowest rate of growth as a public company. Analysts estimated $438.1 million. Snowflake said it had 6,808 customers at the end of the period on July 31, beating analysts’ average estimate.
While software giant Salesforce Inc., which also reported results Wednesday, gave a revenue forecast that missed estimates, saying customers are slowing their purchasing amid concerns about the economy, Snowflake’s sales growth remained strong.
The results are “a likely sign there’s been no pullback in new customer additions and use by existing clients,” said Bloomberg Intelligence’s Mandeep Singh. He added that the company is broadening its database offerings, which could further fuel revenue growth.
Total revenue in the July quarter was $497.2 million, compared with Wall Street estimates of $467.9 million. Snowflake said its net loss widened to $222.8 million, or 70 cents a share, from a loss of $189.7 million, or 64 cents, in the period a year earlier.
(Updates with extended trading in the third paragraph.)
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