Snowflake Faced a Shift with the Departure of CEO, Revenue Outlook, and Market Response

Snowflake Inc. underwent a notable downturn exceeding 20% during Wednesday’s extended session, sparking dismay with its recent forecasts and catching Wall Street off guard with the abrupt exit of its Chief Executive Officer.

Frank Slootman has stepped down from the CEO role “effective immediately,” yet he will continue serving on Snowflake’s board of directors. Sridhar Ramaswamy, formerly the company’s Senior Vice President of AI and a newcomer to Snowflake as of the prior year’s May, has taken on the mantle of CEO.

Evercore ISI analyst Kirk Materne characterized the sudden change in leadership as a “massive surprise,” indicating that it would take Wall Street some time to process the unforeseen development.

Snowflake has been adopting Data Cloud as the cornerstone of its AI and data strategy. (Credits: X- formerly Twitter)

However, Materne highlighted a more substantial underlying concern for Snowflake, centered on its fiscal 2025 forecast of $3.25 billion in product revenue, marking a 22% rise from the preceding year. Initially, analysts tracked by FactSet had projected $3.43 billion, while Snowflake had demonstrated a 38% growth in this aspect during its recently concluded fiscal year.

Chief Financial Officer Mike Scarpelli defended the conservative outlook, explaining that it relied on the assumption of consistent consumption patterns compared to the previous fiscal year and did not incorporate new products currently in public previews.

Responding to the situation, Materne emphasized that Snowflake is confronting a critical question regarding the trajectory of its product revenue. The disparity between the company’s projection and analyst expectations raises concerns about the factors influencing Snowflake’s growth and the potential consequences of conservative estimates.

Despite the hurdles, Snowflake underscored its achievements in engaging with the largest global enterprises. Outgoing CEO Frank Slootman expressed optimism, affirming, “We are successfully engaging the largest enterprises globally, as more companies and institutions adopt Snowflake’s Data Cloud as the cornerstone of their AI and data strategy.”

Despite challenges, Snowflake touts’ engagement with global enterprises, positive performance figures, and a robust customer base. (Credits: X- formerly Twitter)

Snowflake also revealed encouraging statistics regarding remaining performance obligations, which reached $5.2 billion, marking a significant 41% surge from the previous year. Furthermore, the company spotlighted that 461 customers were generating over $1 million in trailing 12-month product revenue, underscoring the breadth and robustness of its customer base.

The sudden shift in leadership and the nuanced forecast for product revenue have introduced a degree of uncertainty into Snowflake’s future trajectory, leading analysts and investors to scrutinize the company’s strategic trajectory and growth prospects in the evolving market environment.

The initial market response reflected apprehensions, evident in the substantial decline of Snowflake’s stock during the extended session. As the company navigates through this transitional phase, the industry will keenly observe its initiatives and strategic choices to gauge its resilience and flexibility amidst the ever-changing business landscape.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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