Shares of cloud data warehousing company Snowflake Inc. were hammered in after-hours trading after the company reported revenue and profit for the fourth quarter that beat analysts’ estimates but issued guidance that pointed to a slowdown in its torrid growth rate.

The fourth-quarter loss of $132.2 million, or 43 cents a share, on sales of $383.8 million was better than the 70 cents-per-share loss on revenue of $190 million the company reported a year ago and well ahead of expected earnings of 3 cents per share on sales of $373 million.

Snowflake executives forecast first-quarter product revenue to be in the range of $383 million to $388 million and fiscal 2023 revenue to come in between $1.88 billion to $1.9 billion. That was better than analysts’ forecast of $382 million for the quarter and $1.87 billion for the year, but the fact that Snowflake didn’t beat forecasts by an even larger amount was taken as a negative.

Snowflake has been such a highflier since its record 2020 initial public offering of stock that any slowdown in growth is seen as a warning. Its forecast of 65% to 67% top-line growth is below the annual doubling it has seen to date. In after-hours trading, shares were off more than 22% after initially dropping 30%.

Tony Baer, founder and principal analyst at dbInsight, said competition and customer caution appear to be factors in Snowflake’s slowing growth. “For enterprises, there is obvious hesitancy with committing to new investments,” he said. “There’s also the fact that Snowflake has been a victim of its own success and hype. Growth was bound to hit a wall at some point, and also now they have more competition.”

While some distributed database software vendors have attracted massive investment and positioned themselves as Snowflake competitors, the reality is that the two markets are quite different, said Carl Olofson, research vice president for data management software at International Data Corp. “Distributed databases address a different use case, so they are not competitors to Snowflake,” he said. “Snowflake is partnering with data fabric providers, but also providing data sharing and some distribution based on a kind of data lake platform of their own.”

Snowflake’s disappointing guidance shouldn’t change investor confidence in the company’s sound position, wrote Gregg Moskowitz, senior equity analyst at Mizuho Americas LLC. “It’s important to note that [the lower guidance] is due to a platform enhancement that initially lowers consumption (by giving customers better price-performance) but over time will very likely become a net positive by stimulating more workload growth,” he wrote in a research brief.

Mizuho lowered its price target for Snowflake stock to $370 from $410 but maintained its buy rating. “We firmly reiterate that fundamentals at SNOW remain robust,” Moskowitz wrote.

Product revenue for the quarter jumped 10% from a year ago, to $359.6 million. Remaining performance obligations rose 99%, to $2.6 billion, and net revenue retention rate was a very high 178%. The company said it now has 5,944 total customers and 184 customers with a trailing-12-month product revenue figure of greater than $1 million, up from 148 such customers last quarter. It closed seven deals of $30 million or more in total contract value last quarter, up from just one in the same quarter last year.

Vacation lull?

Nevertheless, executives said January sales were unexpectedly slow, a phenomenon it chalked up to extended holiday vacations. It also said its net revenue retention rate was unrealistically high in the most recent quarter and will likely dip down into the 150% range before stabilizing at about 170%. Both items no doubt contributed to the selloff.

Chief Executive Frank Slootman said the company is shifting its sales model to a vertical industry focus from its previous geographic orientation. “We didn’t think a geographical focus accurately reflected our business,” he said. “Our selling motion is shifting from workloads-oriented thinking to use cases that the customer needs to address. Today, nine of every 10 conversations are very very industry-specific and often not with IT types but with businesspeople and data science types.”

Executives also talked up the importance of its pending acquisition of Streamlit Inc., maker of a framework for creating data-focused applications, which was announced earlier today. Although Streamlit has no revenue, its platform is used by data scientists to build applications without the need for full-stack engineering teams.

“This is part of the focus we’ve had since last to drive business from the data engineering/data warehousing side to the developer side,” Slootman said. “The option is for us to really address the Python developer community. We have to address workloads across the spectrum and this is going to help us do that.” The company didn’t specify a price for the acquisition but executives said about $25 million in expenses will be associated with it.

The acquisition of Streamlit expands the Snowflake ecosystem, said Gartner Inc. analyst Adam Ronthal. “It will make it easier for Snowflake customers to put their data-driven applications into production, which has been a consistent challenge in the data science and machine learning space,” he said. “Streamlit not only provides an application development framework but data visualization capabilities. It strengthens Snowflake’s commitment to full support for Python within the Snowflake platform.”

Slootman also brushed aside analysts’ questions about the growth of its user base. “We don’t focus on the absolute number of customers,” he said. “It’s mostly the quality of customers and Fortune 500 is not a great metric because it’s so U.S.-centric. We’re going after quality large customers. ”

Photo: SiliconANGLE