Snowflake Outlook Fails to Ease Investor Fears of Competition

(Bloomberg) -- Snowflake Inc. gave a sales outlook that failed to ease investor fears that the company is falling behind in the market for artificial intelligence software tools.

Product revenue, which makes up the bulk of Snowflake’s business, will be $850 million to $855 million in the period ending in October, the company said Wednesday in a statement. Analysts, on average, predicted $848 million, according to data compiled by Bloomberg. The company also raised its fiscal year product sales forecast to $3.36 billion from $3.3 billion.

Under Chief Executive Officer Sridhar Ramaswamy, Snowflake has launched products focused on generative AI and other new ways to analyze large sets of data. The strategy is fueled in part by increased pressure from rivals including Databricks Inc. and cloud infrastructure providers like Microsoft Corp. Snowflake offers software that helps customers find, organize and use huge amounts of information from a variety of sources.

Snowflake is navigating a challenging environment between a recent CEO change, security breaches of its customers and some market shift to products outside its traditional wheelhouse, wrote Derrick Wood, an analyst at TD Cowen, ahead of the results. Still, Wood sees “relatively healthy” trends in customer demand.

The shares declined about 7% in extended trading after closing at $135.06 in New York. The stock has dropped 32% this year, as investors have been concerned about Snowflake’s ability to catch up in AI-oriented tools.

Clients including AT&T Inc., Live Nation Entertainment Inc.’s Ticketmaster and LendingTree Inc. had their Snowflake accounts breached as part of a hacking campaign beginning in May. Snowflake has said its own systems weren’t infiltrated and has added features for customers to implement better security settings.

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