San Francisco, Calif. – Snowflake Inc. faces a significant drop in its shares following a disappointing sales forecast and the announcement of CEO Frank Slootman stepping down from his position.
The software maker revealed that product revenue for the upcoming quarter is expected to range between $745 million and $750 million, falling short of analysts’ average prediction of $769.5 million. The full-year forecast also missed expectations by a considerable margin. As a result, shares plummeted by 22% in premarket trading, marking the largest decline in Snowflake’s history.
The slowdown in revenue growth in 2023 was attributed to businesses scaling back on software purchases, a trend known as cost optimization that impacted cloud providers like Amazon.com Inc. and Microsoft Corp. However, industry leaders have indicated a shift away from this cost-cutting behavior among customers.
Sridhar Ramaswamy, Snowflake’s senior vice president of AI, will assume the CEO position, tasked with revitalizing the company. With a background in AI-driven technologies, Ramaswamy’s focus on leveraging artificial intelligence could position Snowflake for success as enterprises seek innovative solutions.
The CEO transition comes with significant financial incentives, with Ramaswamy set to receive about $100 million in stock awards over the next five years in addition to a $750,000 annual salary. Meanwhile, Slootman, who took Snowflake public in 2020, will remain chairman of the company.
Industry experts view Slootman’s departure as a major loss for Snowflake, given his successful track record in leading tech companies to public offerings. Ramaswamy’s appointment is seen as an opportunity for the company to capitalize on the growing importance of AI in data analysis and storage solutions.
Ramaswamy emphasized the pivotal role of AI in Snowflake’s future success, highlighting the synergy between data and AI strategies to drive innovation and cater to customer needs. Despite the disappointing forecast, Snowflake’s strong quarterly results indicate positive growth trends, with an increase in product revenue and profitability.
Snowflake continues to attract high-value customers, with growing revenue from key clients and a significant rise in remaining performance obligations. As the company navigates through evolving consumption trends, the focus remains on delivering innovative solutions and maintaining customer satisfaction.
Overall, the leadership transition at Snowflake reflects a strategic shift towards AI-driven technologies under Ramaswamy’s guidance. The company’s commitment to innovation and customer-centric approach will play a crucial role in shaping its future trajectory in the software industry.