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Snowflake Plunges After Revenue-Growth Outlook Disappoints

(Bloomberg) — Snowflake Inc., a software company that helps businesses organize data in the cloud, plunged more than 25% in extended trading after projecting that product sales growth would slow from its previous triple-digit-percentage pace in the fiscal year.

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Product sales will increase as much as 67% to $1.9 billion in the current year, the company said Wednesday in a statement. While in line with estimates, the forecast represents a significant decline in Snowflake’s revenue growth, which has more than doubled year-over-year in each of the past six quarters.

The outlook suggests Snowflake is being hurt by the rising competition in the data storage and analytics sector. Product revenue makes up almost 95% of the company’s total sales.

The forecast “could be due to saturation of new customer additions at large companies,” said Mandeep Singh, an analyst at Bloomberg Intelligence. “Though we believe the company is likely to move toward midsized companies, it may mean adding more capabilities around data visualization,” he said in a note.

Snowflake also agreed to acquire Streamlit, a company that helps developers build and share data applications, in a stock-and-cash deal for $800 million, executives said on a conference call after the results were released.

Snowflake, which helps businesses cull and interpret data, gained prominence by taking the on-premises data warehouse and moving it to the cloud. However, its initial public offering, which was the largest in the U.S. in 2020, and subsequent success have led to a rush of investment in the sector, including into startups such as Databricks Inc. and Starburst Data Inc. that are trying to eliminate the need for Snowflake’s core offering.

But Snowflake is also adding features, like improved analytic capabilities to review corporate data to help predict future behavior, which is ramping up competition in a sector long-dominated by legacy vendors like Oracle Corp.

Fiscal fourth-quarter revenue doubled to $383.8 million. Analysts, on average, estimated $372 million. The company’s net loss narrowed to $132.1 million, or 43 cents a share, from a loss of $198.9 million, or 70 cents, in the period a year earlier.

Snowflake’s stock fell to a low of $184.02 in extended trading after closing at $264.69 in New York. The shares have declined 34% from a November high.

(Updates with deal purchase price in the fifth paragraph.)

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