Cloud data warehouse company Snowflake Inc. shocked investors today when it announced that its billionaire Chief Executive Frank Slootman will be stepping down immediately, to be replaced by Google LLC’s former ad chief Sridhar Ramaswamy.

The company followed that announcement with soft guidance for the current quarter, and its stock was way down in the after-hours trading session as a result.

Slootman (pictured), who joined Snowflake in 2019 and took the company public one year later, previously led ServiceNow Inc. and Data Domain Corp. But it was Snowflake where he really made his name, as it notably became the biggest software firm to hold an initial public offering. The company set Wall Street alight when it made its debut on the New York Stock Exchange in 2020, with the value of its stock more than doubling on its first day of trading.

Snowflake said Slootman, 65, is stepping down from the company because he has “decided to retire,” but the transition clearly caught Wall Street by surprise, as Snowflake’s stock fell more than 20% in extended trading. Generally, such leadership transitions tend to be announced in advance, so it’s not clear if there were any disagreements behind closed doors.

The company does at least look to have a capable replacement lined up in 57-year-old Ramaswamy, who previously spent more than 15 years in Google’s executive team. Most of his time at Google was spent heading up its ads and commerce business unit, before he left in 2019 to co-found Neeva Inc., a conversational search engine startup. Neeva later shut down its consumer product just a few days before revealing it had been acquired by Snowflake, which has since adapted its search technology for big data.

Slootman, who will remain chairman of Snowflake’s board of directors, insisted there is “no better person than Sridhar to lead Snowflake into this next phase of growth and deliver on the opportunity ahead in AI and machine learning.” He added that Ramaswamy is a “visionary technologist, with a proven track record of running and scaling successful businesses.”

Industry analyst Charles King of Pund-IT Inc. told SiliconANGLE that surprise leadership changes are rarely welcomed by analysts and investors, and that’s especially true in cases where the CEO is closely associated with the company’s success, as is the case with Slootman. Despite that, he thinks investors are overreacting to his sudden departure, as he will continue to be involved with the company as the chairman of its board.

“The company will continue to enjoy Slootman’s experience and strategic vision, and his replacement Sridhar Ramaswamy is hardly a neophyte,” King said.

The analyst said Slootman’s successor looks to be an ideal choice to lead the company going forward. It’s notable that Ramaswamy spent more than a decade in database analytics and machine learning research and development prior to joining Google, King added. He believes that this background, plus his experience in artificial intelligence both at Google and with Neeva, is likely to benefit Snowflake in the future as it works on AI-enabling its own products.

“Given his age and accomplishments, it may be that Slootman has simply decided to take a step back from the day-to-day business headaches to enjoy his considerable achievements and wealth,” King continued. “Though whatever contributed to his decision to leave, it’s clear that the transition could have been managed more gracefully.”

Prior to Slootman taking over the reins, Snowflake was led by the former Microsoft Corp. executive Bob Muglia, who launched the company and helped it achieve a valuation of more than $4 billion. His sudden departure in April 2019 also came as a big shock at the time, with the company keeping tight-lipped as to the reasons why, though some reports claimed that he was ousted.

The leadership shakeup overshadowed the company’s earnings call, which brought both good and bad news to investors. On the one hand, Snowflake smashed the Street’s forecasts, delivering earnings before certain costs such as stock compensation of 35 cents per share on revenue of $774 million, up 32%. Those numbers easily beat the Street’s target of 18 cents per share in earnings and $760 million in sales.

However, Snowflake’s forecast for the current quarter was less than impressive. The company is calling for product revenue of between $745 million and $750 million, which would amount to growth of 26% to 27%. Wall Street, on the other hand, is looking for sales of $768 million.

For fiscal 2024, Snowflake is projecting product revenue of $3.25 billion at the midpoint of its guidance range, some way below the Street’s consensus estimate of $3.43 billion. The company also forecast an operating margin for the full year on an adjusted basis of 6%, trailing the consensus forecast of 9.5%.

Snowflake notably continues to do business at a loss. It posted a net loss for the quarter of $169.9 million, down from a $207.2 million deficit one year ago. Operating losses came to $275.5 million, up from the $239.8 million operating loss one year earlier.

Given that Snowflake is something of a bellwether for the cloud software industry, it’s likely that the soft guidance will weigh heavily on the rest of the market.

Photo: SiliconANGLE