Snowflake’s (SNOW) shares tumbled early Thursday after offering a downbeat short- and long-term product revenue outlook, while the company announced the retirement of its chief executive.
Frank Slootman will step down from his role as head of the cloud-based data platform company, it said late Wednesday. Sridhar Ramaswamy, who previously served as the firm’s senior vice president of artificial intelligence, will succeed Slootman as CEO, effective immediately.
“There is no better person than Sridhar to lead Snowflake into this next phase of growth and deliver on the opportunity ahead in AI and machine learning,” Slootman, who will continue to serve as chairman of the board, said in a statement. The stock dropped 22% in premarket trading.
“We have an enormous opportunity ahead to help all customers leverage AI to deliver massive business value,” according to Ramaswamy. “My focus will be on accelerating our ability to bring innovation to our customers and partners.”
Separately, Snowflake said it anticipates produce revenue to be in the range of $745 million to $750 million for the first quarter of fiscal 2025, while the current consensus among analysts on Visible Alpha is for $750.8 million. for the fiscal full year, product revenue is pegged at $3.25 billion, representing annual growth of 22%, compared with the forecast on Visible Alpha for $3.28 billion.
Consumption trends have improved since the end of last year, but have not returned to pre-fiscal 2024 patterns, Chief Financial Officer Michael Scarpelli said during a conference call, according to a Capital IQ transcript. The company estimates “increased revenue headwinds” related to product efficiency gains, tiered storage pricing and expectations that some of its customers will “leverage Iceberg Tables for their storage,” Scarpelli told analysts.
“Internally, we continue to march towards $10 billion in product revenue,” according to Scarpelli. “Externally, we will not manage expectations to our previous targets until we have more data.”
For three months through Jan. 31, Snowflake posted adjusted earnings of $0.35 a share, rising from $0.14 the year before and topping the Capital IQ-polled consensus of $0.18. Overall revenue climbed 32% to $774.7 million, beating the Street’s view for $759.6 million. Product revenue advanced 33% to $738.1 million.
The fourth quarter represented an “exceptional booking” period for the company, Scarpelli said on the call. The net revenue retention rate was 131%, while remaining performance obligations, or RPO, jumped 41% year over year to $5.2 billion. “Of the $5.2 billion in RPO, we expect approximately 50% to be recognized as revenue in the next 12 months,” the CFO said.
Adjusted operating margin was 9%, up from 6% in the prior-year quarter. Total operating expenses widened to $808.4 million from $623.1 million, the company said.