Thought I’d rehash an old idea (https://discussion.fool.com/fsly-and-updating-beliefs-34643625.a…) as I digest these numbers from Snowflake.
Prior Belief: Snowflake would add fewer customers percentage-wise, but the decline would be slow.
Update: After adding almost 15% sequentially on average all 4 quarters of last year, they added 9.5% last quarter and 10.1% this quarter. That’s more decline than I’d like to see.
Prior Belief: NRR would remain incredibly strong at 160% (honestly 165%+)
Update: No update. This happened – 169%, in fact.
Prior Belief: Snowflake’s Revenue growth would be 19% or so sequentially.
Update: No update.
Prior Belief: Full Year guide would be at least 1.060b but not 1.080b+.
Update: No update. It was 1.070b.
Prior Belief: Snowflake’s RPO would grow not at 40%+ sequentially like it did in Q2, Q3, and Q4 last year, but certainly faster than the 7% sequentially it did in Q1 and maybe as fast as 20%+ sequentially.
Update: Wow, they only came in at 7% again. Not what I was expecting at all.
Prior Belief: Snowflake would show continued strong growth in $1m+ customers
Update: I’m surprised these only grew 11.5% sequentially after growing 16%, 18.5%, and 35% the last 3 quarters. Maybe I was expecting too much.
Bonus Prior Belief (not mine): WSM expected $275m+ revenue. (https://discussion.fool.com/bear-can-i-ask-specifically-what-num…)
Update: It was 272.2m.
Everything I believed before Snowflake reported was either unchanged or negatively updated. That means I have to lower my expectations…in other words, I don’t think we can consider this quarter as Snowflake “holding serve” (to borrow a term from my friend StockNovice). At least not based on what I was expecting. Therefore the options are hold, trim, or sell. I wouldn’t be adding, obviously.
This is an impressive company with impressive growth and impressive visibility into that growth. I think they’ll hit 100% next quarter and 95%+ in Q4. As the CFO says, their NRR will come down from ~170, but if data consumption trends continue it will stay at 150+ next year, so even if customer growth continues to underwhelm this year revenue will probably still grow around 80% next year which would mean around $2b+ revenue. Further, I believe 10 years they’ll be something like a $500b company. So I’m seeing a nice 5x as likely long term…but I feel I can grow my money faster elsewhere in the near term. Maybe at some point the valuation will entice me more, but I’m out for now.
I reiterate that anyone who wants an easy long-term win will likely do well to keep their money in Snowflake. That can also be said (with more certainty…but less upside) of owning an S&P index fund.