Snowflake Reports Solid Q3 Growth, But Weakening Economy Dampens Regional, Industry Segment Sales

The data cloud service provider will continue hiring in the next fiscal year, albeit at a slower pace, with plans to onboard as many as 1,000 new employees, especially in sales and product engineering.

Snowflake is seeing a slowdown in some segments amidst the economic uncertainty, but the data cloud giant sees its rapid revenue growth – 67 percent in the just completed quarter – continuing in the current quarter and into the new year.

And at a time when some IT vendors are freezing hiring or cutting staff, Snowflake added 801 workers to its employ roster during the fiscal 2023 third quarter, ended Oct. 31, for a total employee headcount of 5,547.

And while slowing its rate of hiring, the company expects to hire as many as 1,000 additional employees – especially sales personnel – in its fiscal 2024 that begins Feb. 1, 2023, company executives said Wednesday on a call with financial analysts to discuss the fiscal Q3 results.

[Related: Snowflake Doubles Down On Data App Development, ISV Partners]

“We are aware of the weakening macro economy. Customer behavior informs our outlook and investment approach. In Q3 we demonstrated our ability to execute through different economic environments,” CEO Frank Slootman (pictured) said on the call. Saying that Snowflake’s focus is on “balancing revenue growth with free cash flow generation,” the CEO described the company as “well positioned to drive efficient and durable growth.”

For the fiscal 2023 third quarter (ended Oct. 31, 2022) Snowflake reported total revenue of $557.0 million, up nearly 67 percent from $334.4 million in the same quarter one year earlier. The company reported a net loss of $200.9 million (63 cents per share) compared to a loss of $154.9 million (51 cents per share) one year ago.

Snowflake reported product revenue of $522.8 million in the quarter, representing 67 percent year-over-year growth. The company has 7,292 customers of which 287 have trailing 12-month product revenue greater than $1 million.

“While we acknowledge a weakening global macro context, we remain resilient in terms of our results. We believe this resilience reflects the importance of data strategy in modern enterprises and institutions,” Slootman said.

This year Snowflake has been expanding its offerings beyond its core data management, analysis and sharing services to include data applications, tools for application development, and packages of services targeting vertical industries such as healthcare and life sciences, financial services, retail and media.

“Snowflake continues to deepen and strengthen its industry orientation. We expect to understand our customer challenges, solve their problems and speak their language,” the CEO said of the company’s expansion into new markets. “Our strategy is a global data sharing network coupled with unlimited workload enablement. Work needs to find its way to the data instead of the historical habit of moving data to the work.”

Snowflake continued to see strong demand for its data services in the financial services industry during the quarter while the technology segment “underperformed,” CFO Mike Scarpelli said on the call. He also cited reduced demand from several major customers, including “consumer Internet companies” that he did not name.

Regionally, business in North America and EMEA (Europe, Middle East and Africa) remained strong while the Asia-Pacific/Japan region showed signs of weakness, the CFO said. And sales to SMB customers, about 10 percent of Snowflake’s overall revenue, also slowed in the quarter.

So far Snowflake has increased its employee headcount by 1,500 this fiscal year. While the company’s plans are to slow its hiring pace in fiscal 2024, it still expects to hire as many as 1,000 net-new employees. “We view the current hiring market is favorable for Snowflake, and we‘ll continue to focus hiring in product engineering and sales,” Scarpelli said.

For the current (fourth) quarter of fiscal 2023, which ends Jan. 31, 2023, Snowflake is forecasting that product revenue will be in the range of $535 million to $540 million, up 49 to 50 percent year over year. For all of fiscal 2023 the company is forecasting product revenue growth of 68 to 69 percent to between $1.919 billion and $1.924 billion.

Snowflake stock closed trading Wednesday at $142.90, up $6.34 or 4.64 percent. But the share price dropped in after-hours trading by $7.65 or 5.35 percent as of 7 p.m. EST.