Cloud data warehouse darling Snowflake Inc.’s stock fell more than 13% in extended trading at one point today after the company offered light product revenue guidance for the coming quarter.

The light guidance came after the company reported its third-quarter financial results, beating Wall Street’s expectations. Snowflake revealed that its earnings before certain costs such as stock compensation came to 11 cents per share, ahead of the four-cent-per-share estimate. Revenue for the period rose 67%, to $557 million, ahead of the $539 million analyst target.

Despite the strong showing, investors may have concerns that Snowflake’s overall net loss widened to $201 million in the quarter, up from a $155 million net loss a year earlier. Part of the reason for the growing loss was that Snowflake’s operating expenses increased by 54% in the quarter, to $572.3 million.

Although Snowflake’s stock fell more than 13% in the minutes after the report came out, it later recovered and was down just 5% later. During the regular trading session prior to the results, the stock had risen about 4%.

Snowflake Chief Executive Frank Slootman (pictured) tried to present the results as a success. “Our non-GAAP product gross margin came in at 75%, and we continue to drive strong growth at scale, coupled with strength in unit economics, operating profit, and free cash flow,” he said. “Snowflake’s Data Cloud maximizes the power and promise of data science and artificial intelligence, a high priority in the modern enterprise.”

Snowflake is a cloud data warehouse provider that enterprises can use to centralize all of their data in a single solution, in order to streamline data analysis, reporting and business intelligence. Enterprises see it as a cost-effective solution as they only have to pay for what they use, and the service can be scaled up as required.

By creating a single system with cloud regions superimposed on the top of the cloud provider layer, some say, Snowflake is laying the groundwork of a new “supercloud” concept. Analysts at SiliconANGLE Media’s market research firm Wikibon describe that as an abstraction layer that resides above and across hyperscale infrastructure, connecting on-premises workloads and eventually stretching to the network edge.

Snowflake’s “supercloud” encompasses all major public cloud infrastructure platforms, but in a recent interview with SiliconANGLE, Slootman said much of the company’s success can be put down to its strong partnership with Amazon Web Services Inc. in particular.

The partnership with AWS has helped to spark rapid growth at Snowflake in recent years, and in the quarter just gone the company revealed that its product revenue jumped 67%, to $523 million. Product revenue makes up the vast majority of Snowflake’s income and is seen as one of the most important metrics by investors, as it recognizes sales based on platform consumption. The company offered some other encouraging metrics too, saying it had 7,292 customers at the end of the quarter, with 287 of those each generating more than $1 million in annual revenue.

But given the importance of Snowflake’s product revenue, some investors may have been disappointed that its growth was lower than the 83% increase it posted in the year-ago quarter. What’s more, they were clearly alarmed at the growth forecast for the next three months.

In its guidance, Snowflake said it expects product revenue of $535 million to $540 million during the fourth quarter, some way short of the $553 million forecast by Wall Street. For the full year, Snowflake anticipates product revenue of $1.919 billion to $1.924 billion.

Snowflake added that its product gross margin, operating income margin and adjusted free cash flow are forecast at 75%, 3% and 21% respectively, for the full year.

Holger Mueller of Constellation Research Inc. said Snowflake’s results show that even the move of data to the cloud is coming under pressure as a result of fears of a recession. That said, he pointed out that Snowflake continued to grow at an impressive rate of more than 60%.

“However, the expectation is that this growth will slow to less than 50% in the next quarter, which may have been a surprise as the company’s operating expenses were up for the previous quarter,” he said. “Investors will be watching now to see if Snowflake can deliver to its lower guidance and what it can do to improve things on the cost side.”

Regarding Snowflake’s after-hours stock decline, Charles King of Pund-IT said that although the light guidance had an impact, investors are likely also mindful of the fact that it has been steadily declining throughout the year, losing more than half of its value since January.

“On the upside, Snowflake nearly doubled its revenue on a year-over-year basis, though it also suffered from a 26% drop in income over the same period,” King said. “In many ways Snowflake remains a robust example of a growth stock, many of which fail to show anything like its strong revenue growth. That’s probably why, after falling sharply after the bell, Snowflake’s shares rebounded. Despite being a company that continues to spend far more money than it takes in, it remains an attractive bet to certain classes of investors.”

Photo: SiliconANGLE