Summary
Snowflake's fiscal 2024 second quarter, ended July 31, 2023, showed continued strong top-line growth but a wider GAAP loss. Total revenue was $674.0 million, up 35.5% from the prior-year quarter. Gross profit was $455.6 million, up 40.6%, and gross margin rose to 67.6% from 65.2%. The operating loss widened to $285.4 million from $207.7 million, and operating margin slipped to -42.3% from -41.8%. Net loss widened slightly to $226.9 million from $222.8 million, while diluted loss per share narrowed to $0.69 from $0.70.
Customer metrics were mixed. Net revenue retention was 142% as of July 31, 2023, and the MD&A also cites 158% as of January 31, 2023. Total customers reached 8,537 as of July 31, 2023, increasing from 7,854 as of January 31, 2023. Customers with trailing 12-month product revenue above $1 million numbered 402, up from 248 a year earlier. Forbes Global 2000 customers were 639, up from 548 a year earlier. Remaining performance obligations were $3.5 billion, up 29.6% from the prior-year quarter. Deferred revenue, current portion, was $1.52 billion, up 33.0%. The RPO balance includes deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized in future periods. Snowflake said it expects about 57% of RPO to be recognized as revenue in the twelve months ending July 31, 2024.
Cash generation improved. Operating cash flow was $83.2 million, up 29.1% from the prior-year quarter. Capital expenditures were $6.3 million, up 63.7%. Non-GAAP free cash flow was $69.0 million, while adjusted free cash flow was $88.2 million, up 50% year over year. Free cash flow is a non-GAAP measure and is not a substitute for operating cash flow. The company also repurchased 1.4 million shares for $191.7 million under its $2.0 billion stock repurchase program, leaving $1.8 billion available.
On a year-to-date basis, revenue was $1.30 billion, up 41.1%, and gross profit was $869.8 million, up 45.3%. Gross margin was 67.0%, up 2.0 percentage points, while operating margin was -43.1%, flat versus the prior-year period. The operating loss widened to $558.6 million from $396.5 million, and net loss widened to $452.5 million from $388.6 million. Year-to-date operating cash flow was $382.6 million, up 53.6%. Capital expenditures were $13.3 million, up 17.8%.
Guidance for the third quarter of fiscal 2024 points to product revenue of $670 million to $675 million, or 28% to 29% growth, with a non-GAAP operating margin of 4%. For the full fiscal year 2024, management guided product revenue to $2,600 million, or 34% growth. The full-year outlook also calls for a non-GAAP product gross profit margin of 76%, a non-GAAP operating margin of 5%, and an adjusted free cash flow margin of 26%. The company said it expects positive operating cash flow for the fiscal year ending January 31, 2024. The guidance is for the next quarter and the full fiscal year, respectively.
Risks remain. Macroeconomic conditions are pressuring customers to rationalize budgets, prioritize cash flow management, and shorten contract durations. Customers are also optimizing consumption, including by reducing storage through shorter data retention policies. Snowflake faces competition, execution risk in new products such as Snowpark, and variability in consumption because revenue is recognized as customers use the platform. Management also noted that improvements in software or hardware could make the platform more efficient, enabling customers to use fewer resources for the same workloads, which could lower revenue if new workloads do not offset the efficiency gains. The company also committed to spend at least $1.0 billion between June 2023 and May 2028 on third-party cloud infrastructure services. That obligation could matter if demand growth slows.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $674.0M | $623.6M | +8.1% | $422.4M | +59.6% |
| Gross profit | $455.6M | $414.2M | +10.0% | $274.4M | +66.0% |
| Gross margin | 67.6% | 66.4% | +1.2 pp | 65.0% | +2.6 pp |
| Research & development | $314.0M | $277.4M | +13.2% | $150.8M | +108.2% |
| Sales & marketing | $343.3M | $331.6M | +3.5% | $243.9M | +40.7% |
| General & administrative | $83.7M | $78.5M | +6.8% | $68.5M | +22.3% |
| Total operating expenses | $741.0M | $687.4M | +7.8% | $463.2M | +60.0% |
| Operating income (loss) | -$285.4M | -$273.2M | -4.5% | -$188.8M | -51.2% |
| Operating margin | -42.3% | -43.8% | +1.5 pp | -44.7% | +2.3 pp |
| Net income (loss) | -$227.3M | -$226.1M | -0.6% | -$165.8M | -37.1% |
| Net margin | -33.7% | -36.3% | +2.5 pp | -39.3% | +5.5 pp |
| Diluted EPS | -$0.69 | -$0.70 | +$0.01 | -$0.53 | -$0.16 |
Risks
Adverse macroeconomic conditions are causing customers to rationalize budgets, prioritize cash flow management, shorten contract duration, and optimize consumption, including through shorter data retention policies. MD&A states these conditions have impacted and may continue to impact the business and financial condition.
Because revenue is recognized on consumption and customers control the timing of their usage, the company has limited visibility into revenue recognition timing. Risk factors note consumption increased at a slower pace than expected during April 2023 and part of May 2023, and MD&A says actual results may differ from forecasts if consumption is slower than expected.
Net revenue retention rate decreased to 142% as of July 31, 2023 from 158% as of January 31, 2023, and the company expects it to decrease over the long term as older customers become a larger portion of the base. This indicates slower expansion within existing customers.
AWS, Azure, and GCP are both key suppliers and competitors, and a substantial majority of the business runs on AWS. They could embed competing capabilities, bundle products, offer unfavorable pricing, or leverage public cloud customer relationships to exclude Snowflake.
The platform operates exclusively on public clouds from AWS, Azure, and GCP, so costs and gross margins are significantly influenced by negotiated prices with these providers. In June 2023, the company amended a cloud infrastructure agreement committing to spend at least $1.0 billion between June 2023 and May 2028, with payment required if the minimum is not met.
The increasing prominence of artificial intelligence is changing competitive dynamics and customer requirements. Failure to innovate or to incorporate AI and machine learning effectively could harm the business; the company acquired Neeva in May 2023 for $185.4 million and continues investing in AI-related workloads.
Operating loss widened to $285.4 million for the quarter from $207.7 million in the prior-year quarter, and net loss attributable to Snowflake widened to $226.9 million from $222.8 million. Research and development expenses increased 71% and sales and marketing expenses increased 25% for the quarter, partly due to stock-based compensation.
Sales to large enterprises involve longer sales cycles, stronger customer leverage in pricing, complex customer requirements, and substantial upfront costs. Large enterprise consumption growth has historically taken longer than for smaller enterprises, and the company continues to focus selling efforts on large organizations.
The company must attract and retain highly qualified personnel, especially engineers experienced in cloud data platforms and artificial intelligence and experienced sales professionals. As of July 31, 2023, total compensation cost related to unvested stock-based awards not yet recognized was $3.0 billion, and volatility or decline in equity award value may hurt recruitment and retention.
Historically, the company receives a higher volume of orders in the fourth fiscal quarter, sees higher free cash flow in the first and fourth fiscal quarters, and has its highest sequential RPO growth in the fourth fiscal quarter. This seasonality may become more pronounced with increased focus on large enterprise customers.
Doing business with federal, state, local, and foreign governments and highly regulated organizations creates risks from complex procurement processes, budget delays, certification requirements, bid protests, audits, and termination for convenience. The company has made significant investments to support government sector sales, including obtaining certifications.
Customer accounts outside the United States generated 23% of revenue for each of the three and six months ended July 31, 2023. Further international expansion, including into China, requires new partner relationships and localization, and heightens exposure to data sovereignty, political, economic, and regulatory risks.
SaaS KPIs
All quarters →Net Revenue Retention Rate
Total Customers
Remaining Performance Obligations
Non-GAAP Operating Margin
Adjusted Free Cash Flow Margin
Free Cash Flow Margin
Adjusted Free Cash Flow
Product Revenue
Customers with Trailing 12-Month Product Revenue Greater than $1 Million
Forbes Global 2000 Customers
Free Cash Flow
Non-GAAP Product Gross Margin
Customers with Trailing 12-Month Product Revenue Greater than $5 Million
Customers with Trailing 12-Month Product Revenue Greater than $10 Million
Summary, forecast, risks and KPIs are extracted from Snowflake Inc.'s SEC filings for Q2 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.