Snowflake (NYSE: SNOW) stock plummeted over 18% on Thursday after the company projected lower-than-expected annual revenue and disclosed the surprise retirement of its long-serving CEO, Frank Slootman.
Snowflake (SNOW) foresees product revenue to reach $3.25 billion in fiscal year 2025, with projected earnings for the quarter ending April ranging between $745 million and $750 million, falling short of Wall Street’s expectations.
Analysts have pointed out that the increased adoption of the company’s Iceberg Tables product, which facilitates data storage in external services not under Snowflake’s management, might impact storage sales.
However, there are contrasting views among analysts regarding the revenue forecast. Some believe it could be conservative, considering the growth trends observed in data storage and analytics products, particularly with advancements in AI.
D.A. Davidson senior software analyst Gil Luria told ReutersReuters,
“While guidance for the full fiscal year product revenue growth at 22% Y/Y growth is conservative, we note that the guide does not include assumed consumption from recently released products.”
Major cloud services providers like Microsoft (NASDAQ: MSFT), Amazon.com (NASDAQ: AMZN), and Alphabet’s Google (NASDAQ: GOOGL) have indicated a stabilization in the growth of cloud services this year as customers optimized spending last year.
Snowflake’s Leadership Transition
Simultaneously, the announcement of insider Sridhar Ramaswamy taking over as chief executive, following the retirement of former CEO Slootman on February 27, caught investors by surprise.
In a note, Morningstar analyst, Eric Compton said, “Investors are never thrilled with a surprise CEO succession,” noting that this change, coupled with a disappointing revenue forecast, sets up a challenging quarter for the company.
Slootman, instrumental in Snowflake’s successful initial public offering in 2020, previously led other companies to public offerings, including ServiceNow (NYSE: NOW) and Data Domain.
In a related development, Salesforce (NYSE: CRM), a former backer of Snowflake, also announced a revenue forecast below estimates. However, the company revealed plans for a quarterly dividend and an expansion of its share buyback program by $10 billion.
Snowflake (NYSE: SNOW) Stock Reaction
SNOW stock plunged 18.14% to close at $188.28 on Thursday. The traders had exchanged hands with 42,208,047 (42.20 million) shares compared to the average daily trading volume of 5.74 million.
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