(Bloomberg) -- Snowflake Inc. jumped to its largest single-day increase since going public after its forecast for quarterly sales topped analysts’ estimates, reassuring Wall Street that companies are still investing in their technology systems to boost efficiency.
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Product revenue at the maker of software to organize and analyze data in the cloud will be as much as $505 million in the period ending in October, the company said Wednesday in a statement. Analysts, on average, estimated $501.1 million, according to data compiled by Bloomberg. Product sales make up the majority of Snowflake’s total revenue and are watched closely by investors and analysts.
The shares gained 23% to $196.28 at the close Thursday in New York, the biggest rise since Snowflake’s first day of public trading on Sept. 16, 2020, after it debuted with one of the biggest U.S. initial public offerings for a software company. Since reaching a record of $401.89 in November, the stock had tumbled 60% through Wednesday’s close, as growth slowed and valuations across the industry were battered by a weaker economic outlook.
Snowflake charges customers based on how much they use the company’s data storage and analytics products rather than charging a flat-rate subscription. While this consumption-based model can be affected by economic conditions, Snowflake has consistently seen clients re-accelerate spending once uncertainties fade, Derrick Wood, an analyst at Cowen & Co., said before the results.
Read More: Snowflake Rises on Robust Spending on Tech Systems: Street Wrap
Chief Executive Officer Frank Slootman said during a conference call that the consumption model is an advantage in tough economic times because customers know they can slow down spending if needed.
In the fiscal second quarter, product revenue increased 83% to $466.3 million -- better than expected, but still Snowflake’s slowest rate of growth as a public company. Analysts estimated $438.1 million. Snowflake said it had 6,808 customers at the end of the period on July 31, beating analysts’ average estimate.
While software giant Salesforce Inc., which also reported results Wednesday, gave a revenue forecast that missed estimates, saying customers are slowing their purchasing amid concerns about the economy, Snowflake’s sales growth remained strong.
The results are “a likely sign there’s been no pullback in new customer additions and use by existing clients,” said Bloomberg Intelligence’s Mandeep Singh. He added that the company is broadening its database offerings, which could further fuel revenue growth.
Total revenue in the July quarter was $497.2 million, compared with Wall Street estimates of $467.9 million. Snowflake said its net loss widened to $222.8 million, or 70 cents a share, from a loss of $189.7 million, or 64 cents, in the period a year earlier.
(Updates with closing shares in the third paragraph.)
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