Snowflake Reports 28% Revenue Growth

Source The Motley Fool

Snowflake (NYSE:SNOW), a leader in cloud-based data solutions, released its earnings for the fourth quarter of fiscal 2025 on February 26, 2025. The company reported earnings per share (EPS) of $0.30, surpassing analyst expectations of $0.18 by $0.12, a 66.7% surprise. Revenue for the quarter reached $986.8 million, beating the estimate of $956 million. Overall, this quarter demonstrated Snowflake's operational effectiveness, although it continues to face challenges with operating losses.

MetricQ4 FY2025Q4 EstimateQ4 FY2024Y/Y Change
EPS (Non-GAAP)$0.30$0.18$0.35-14.3%
Revenue$986.8M$956M$774.7M+27.4%
Product Revenue$943.3MN/A$738.1M+27.8%
Free Cash Flow$415.4MN/A$324.5M+28.0%

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in 2024-11-20 earnings report.

Overview of Snowflake's Business

Snowflake operates as a cloud-based data platform with a focus on data storage, processing, and analytics services. It significantly benefits from network effects as more organizations join its platform, enabling rich data sharing capabilities. Snowflake's consumption-based business model, where customers pay according to their usage, is integral to its growth strategy.

Recently, Snowflake has been emphasizing network effects, which enhance data collaboration within the Snowflake ecosystem, and its consumption-based model that aligns revenue generation with client usage and encourages scalability. Critical success drivers include strong customer retention, growing industry-specific solutions, and expanding market presence.

Quarterly Highlights

This quarter, Snowflake showed notable financial achievements by exceeding both analyst and internal management expectations. With a reported EPS of $0.30, the company outperformed its guidance of 4% operating income margin, achieving a 9% margin instead. Product revenue was a standout, reaching $943.3 million, and surpassing the guidance range of $906 million to $911 million, indicating a strong 28% year-over-year increase.

Snowflake also saw a rise in its net revenue retention rate of 126%, reflecting strong customer retention and broader usage, although this figure was slightly down from 131% the prior year. Growth in its customer base was evident, with a 27% increase in customers generating over $1 million in annual revenue, totaling 580.

During the quarter, Snowflake focused on enhancing industry-specific data clouds, including Healthcare and Financial Services, to better serve niche markets. These vertical expansions are part of its plan to increase penetration in existing and new markets. However, the company reported a GAAP operating loss of $386.7 million, consistent with ongoing investments in expanding its ecosystem and diversifying its product range.

Despite these developments, persisting operating losses and macroeconomic concerns in the tech sector posed ongoing challenges. Concerns regarding high capital expenditures in tech might affect investor sentiment and Snowflake's operating losses are a continued point of concern. Nonetheless, the company remains committed to its strategic directions, striving to capitalize on its strength and presence in the industry.

Looking Ahead

For Fiscal 2026, Snowflake's management projects continued strong performance, with estimated product revenue expected to reach approximately $4.28 billion. Snowflake aims for a product gross profit margin of 75% and operating income margin of 8%, signaling a focus on efficiency gains.

With ongoing developments in industry-specific solutions and enhanced network effects, Snowflake is well-positioned for future growth. Investors should keep an eye on how Snowflake manages its operating losses while leveraging network effects and consumption-based pricing to enhance value for its customers. Management remains optimistic about the company's trajectory despite market uncertainty.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 892% — a market-crushing outperformance compared to 174% for the S&P 500.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

Learn more »

*Stock Advisor returns as of February 24, 2025

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Outlook 2025As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
Author  TradingKey
Jan 23, Thu
As the Bitcoin market continues to mature, its 2025 outlook appears highly favourable, driven by institutional adoption and regulatory developments.
placeholder
What Crypto Whales are Buying For May 2025Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
Author  Beincrypto
Apr 21, Mon
Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
placeholder
Analysts Highlight 4 Reasons Why ETH Price Could Rebound Strongly in MayEthereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
Author  Beincrypto
May 07, Wed
Ethereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
placeholder
Ethereum Price Ready to Surge—$2,000 Level Could Be Within ReachEthereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
Author  NewsBTC
May 08, Thu
Ethereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
placeholder
Ethereum Price Explodes Past $2,200 with 25% Surge—Momentum Builds FastEthereum price started a fresh surge above the $2,000 zone. ETH is now up over 25% and consolidating gains near the $2,200 zone. Ethereum started a fresh surge above the $2,000 resistance.
Author  NewsBTC
May 09, Fri
Ethereum price started a fresh surge above the $2,000 zone. ETH is now up over 25% and consolidating gains near the $2,200 zone. Ethereum started a fresh surge above the $2,000 resistance.
goTop
quote