Snowflake shares rise by the most in four years after strong outlook

On By Littum

(Bloomberg) — Snowflake Inc. shares rose the most in more than four years after the company posted a sales outlook that beat investors’ expectations, suggesting new products are attracting strong demand.

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Product revenue, which makes up the bulk of Snowflake’s business, will be $906 million to $911 million in the period ending in January, the company said Wednesday in a statement, far beating analysts’ estimates of $890.7 million. Adjusted profit margin will be around 4%. Analysts expected 1.7 per cent.

Snowflake’s software pulls in, organizes and analyzes data from a variety of sources. Under CEO Sridhar Ramaswamy, the company has introduced products that use generative AI and allow people to study multiple types of data. Product consistency and ease of use “lead us to win new logo after new logo, expand within our customer base and displace our competition time and time again,” Ramaswamy said in the statement.

The company’s shares rose as much as 33.8% to $172.75 on Thursday, their biggest intraday gain since September 16, 2020.

As part of Snowflake’s efforts to release more AI-powered products, Snowflake announced that it has agreed to acquire Datavolo Inc., a startup that allows easier ingestion of unstructured data, which is unorganized information from other sources that are often used to fuel generative AI.

The deal will make it easier for customers to analyze more information in Snowflake and build AI-based applications on that data, Ramaswamy said in an interview. Earlier this year, Datavolo announced more than $21 million in funding from investors including General Catalyst, Citi Ventures and Rob Bearden, the former CEO of Cloudera Inc. No terms were disclosed for the purchase.

Large language models made by AI company Anthropic will now be available on Snowflake’s platform, the company said Wednesday in a separate statement. While basic models are fine for many uses, advanced efforts such as building AI agent products are best done with powerful models from OpenAI or Anthropic, Ramaswamy said.

The stock had plunged 35% this year through Wednesday’s close on investor sentiment, which Brent Bracelin, an analyst at Piper Sandler, described as “frigid” ahead of the results. Some were concerned about slowing spending on the platform, recent leadership changes, competition and broader economic pressures, he added.