What Happened?
Shares of cloud data platform provider Snowflake (NYSE: SNOW) jumped 20.6% in the afternoon session after the company reported second-quarter results that surpassed Wall Street's expectations on several key metrics.
The company posted revenue of $1.14 billion, up 31.8% year-over-year, and adjusted earnings of $0.38 per share, both comfortably beating analyst consensus estimates. Profitability was a significant highlight, with adjusted operating income of $127.6 million smashing expectations by over 44%. Furthermore, Snowflake's billings, an indicator of future revenue, grew an impressive 40.2% year-over-year to $1.09 billion. The company also saw its net revenue retention rate improve to 125%, indicating that existing customers are increasing their spending on the platform. Overall, the strong performance across revenue, profit, and customer metrics fueled investor optimism.
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What Is The Market Telling Us
Snowflake’s shares are quite volatile and have had 15 moves greater than 5% over the last year. But moves this big are rare even for Snowflake and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 3.5% on the news that investors showed optimism ahead of its second-quarter earnings report.
The pre-earnings rally was likely influenced by strong results from competitor MongoDB, which saw its own stock surge after a blowout report.
Analysts were forecasting significant growth for Snowflake, with Wall Street expecting earnings of $0.27 per share, up from $0.18 in the year-ago period. Revenue was projected to climb 25% year-over-year to $1.09 billion. This optimism was supported by the company's history of beating earnings per share estimates in the last four consecutive quarters, and several analysts have recently reiterated positive ratings on the stock.
Snowflake is up 57.1% since the beginning of the year, and at $247.73 per share, has set a new 52-week high. Investors who bought $1,000 worth of Snowflake’s shares at the IPO in September 2020 would now be looking at an investment worth $974.23.
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