Data warehouse-as-a-service Snowflake (NYSE:SNOW) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 25.7% year on year to $1.04 billion. Its non-GAAP profit of $0.24 per share was 13.1% above analysts’ consensus estimates.
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Snowflake (SNOW) Q1 CY2025 Highlights:
- Revenue: $1.04 billion vs analyst estimates of $1.01 billion (25.7% year-on-year growth, 3.4% beat)
- Adjusted EPS: $0.24 vs analyst estimates of $0.21 (13.1% beat)
- Adjusted Operating Income: $91.66 million vs analyst estimates of $52.66 million (8.8% margin, 74.1% beat)
- Product Revenue Guidance for Q2 CY2025 is $1.04 billion at the midpoint, higher than expectations of $1.02 billion
- Operating Margin: -42.9%, in line with the same quarter last year
- Free Cash Flow Margin: 0%, down from 42.1% in the previous quarter
- Customers: 606 customers paying more than $1 million annually
- Net Revenue Retention Rate: 124%, down from 126% in the previous quarter
- Billings: $770.7 million at quarter end, up 36.2% year on year (2% miss vs expectations of $786 million)
- Market Capitalization: $61.02 billion
Company Overview
Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake (NYSE:SNOW) provides a data warehouse-as-a-service in the cloud that allows companies to store large amounts of data and analyze it in real time.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Snowflake grew its sales at an exceptional 39.6% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.
This quarter, Snowflake reported robust year-on-year revenue growth of 25.7%, and its $1.04 billion of revenue topped Wall Street estimates by 3.4%.
Looking ahead, sell-side analysts expect revenue to grow 22.8% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is admirable and implies the market sees success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Snowflake’s billings punched in at $770.7 million in Q1, and over the last four quarters, its growth was fantastic as it averaged 26.6% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Snowflake’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 126% in Q1. This means Snowflake would’ve grown its revenue by 26% even if it didn’t win any new customers over the last 12 months.
Despite falling over the last year, Snowflake still has an excellent net retention rate. This data point proves that the company sells useful products, and we can see that its customers are satisfied and increasing usage over time.
Key Takeaways from Snowflake’s Q1 Results
It was encouraging to see Snowflake beat analysts’ revenue expectations this quarter. Additionally, profitability was much stronger than expected, leading adjusted operating profit and adjusted EPS to beat handily. Looking ahead, Q2 product revenue was slightly higher than Wall Street Consensus. On the other hand, its billings missed and its net revenue retention decreased. This wasn't a perfect quarter, but it was still very solid. The stock traded up 5.7% to $189.30 immediately after reporting.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.