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The SNOW share plunges with weak prospects amid slowing growth in cloud computing




Parts in Snowflake ( SNOW ) plunged Thursday after the software maker cut full-year guidance for fiscal 2024 due to slowing growth for cloud computing partners such as Amazon.com (AMZN). Investors shrugged off first-quarter earnings for SNOW shares that topped Wall Street targets.




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Snowflake released its first quarter financial results after the market closed on Wednesday. SNOW shares plunged 13.1% to 153.89 in early trading on the stock market today.

For full-year fiscal 2024, Snowflake lowered its forecast for product revenue growth to 34% to $2.6 billion from previous estimates of 44% to 45% growth.

“The debate will be about whether this is the final (guidance) cut,” TD Cowen analyst Derrick Wood said in a report.

Snowflake sells data analysis and management tools that run on cloud platforms such as Amazon Web Services, part of Amazon. Because Snowflake’s business model is consumption-based rather than subscription-based, investors have raised concerns about a slowing U.S. economy slowing demand.

In addition, Snowflake announced the acquisition of artificial intelligence startup Neeva. Terms were not made public.

For the quarter ended April 30, Snowflake earnings came in at an adjusted 15 cents a share, compared with no profit a year earlier. Analysts polled by FactSet expected Snowflake to report earnings of 5 cents per share.

Furthermore, revenue rose 48% to $623.6 million, the software maker said. Analysts had forecast revenue of $609.7 million.

SNOW storage: Outlook lacks estimates

For the current quarter ending in July, Snowflake expects product revenue in the range of $620 million to $625 million. Meanwhile, analysts had expected $647.1 million.

SNOW stock had risen 22% in 2023 heading into the Snowflake earnings report.

Snowflake derives approximately 95% of its total sales from product revenue. It is revenue that comes from cloud-based data analysis and storage services. Snowflake also generates revenue from professional services, such as consulting and training.

Cloud computing growth has slowed for Amazon, a key Snowflake partner, along with Microsoft (MSFT) and Google parent Alphabet (GOOGL). The cloud computing titans hope to get a boost from artificial intelligence workloads in the long run.

The SNOW stock has a relative strength rating of 92 out of a best possible 99, according to IBD Stock Checkup.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cyber security and cloud computing.

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