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Cloud stocks Nutanix (NTNX), Snowflake (SNOW) dropped today: here’s why

15:15, 26 May 2022

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Nutanix and Snowflake stocks fell as they issued softer than expected profit guidance – Photo: Shutterstock

Two companies in the cloud-computing sector registered heavy stock price losses on Thursday as they issued softer than expected profit guidance.

Macroeconomic factors that have been seen in other sectors have now spread to tech, with companies postponing purchases of tech goods and services.

In North American mid-afternoon trading, Nutanix (NTNX) stock was down 24% while fellow cloud stock Snowflake (SNOW) dropped by 11% and then recovered to a decline of over 3%.

Nutanix (NTNX) stock price

Incorporated in 2009, Nutanix provides cloud and virtualization services. CEO Rajiv Ramaswami described the company as ‘the Airbnb of the Cloud’ in a recent interview.

Slide showing Nutanix's businessNutanix

Nutanix stock fell as the company reported a weak forward-looking earnings forecast despite beating earnings expectations for its fiscal third quarter.

As with many tech-related companies, Nutanix also said it experienced supply chain issues in the later stages of its prior quarter.

Slide showing Nutanix key Q3 earnings figuresNutanix

For its fiscal third quarter ended 30 April, Nutanix reported an adjusted loss of 5 cents per share on revenue of $403.7m (£321m, €377m).

Analysts had been expecting an adjusted loss of 22 cents per share on revenue of $398m, according to figures widely available on financial news sites.

‘Bleak’ outlook

Looking ahead, the company said it expects fourth-quarter revenue of $340m to $360m and billings of $175m to $185m. Wall Street analysts were expecting revenue of $439m and billings of $215.8m.

Describing the company’s earnings guidance as ‘bleak’, William Blair analyst Jason Ader wrote in a note that the lowered guidance was due to hardware supply constraints and higher than expected attrition amongst Nutanix’s sales staff.

“Though management noted that it has not seen any changes on the demand side, the substantial reduction in full-year guidance for revenue and billings as well as uncertainties surrounding the duration of supply issues and salesforce replenishment cast a doubtful shadow on the company’s prior growth and profitability targets,” Ader wrote.

“Particularly ahead of a potential macro downturn, we believe investors will view Nutanix's stock as dead money, at least in the near term.” - William Blair analyst Jason Ader

“Particularly ahead of a potential macro downturn, we believe investors will view Nutanix’s stock as dead money, at least in the near term.”

William Blair has downgraded Nutanix stock to “Market Perform”.

Snowflake (SNOW) stock price

Snowflake stock also suffered as it unveiled earnings guidance that was below expectations.

Incorporated in 2012, Snowflake provides a cloud-based data platform for various industries including media, financial services and healthcare.

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Slide showing Snowflake's business platformSnowflake

For its second quarter, the Bozeman, Montana-headquartered company expects product revenue of $435m to $440m with analysts expecting $440m.

On an earnings call, Snowflake’s CFO Mike Scarpelli acknowledged that the company was seeing a slowdown in business from its consumer-oriented clients.

"We did see weakness in week-over-week growth in our total revenue by customer in April,” Scarpelli said.

“Management left full-year product revenue guidance effectively unchanged as it factors in potential macro headwinds,” William Blair analyst Kamil Mielczarek wrote in a note.

“However, the company saw renewed signs of strength in recent weeks. While we see risk of continued noise in the model through the end of the year, the company remains well positioned to achieve long-term targets.” ell positioned to achieve long-term targets.” well positioned to achieve long-term targets.”

Q1 earnings

Slide showing key figures from Snowflake Q1 earningsSnowflake

For its fiscal first quarter ended 30 April, Snowflake reported a loss of 53 cents per share on revenue of $422m. Analysts were expecting a loss of 52 cents per share on revenue of $414m.

“This is the lowest beat since its IPO as several large customers, specifically in consumer-facing cloud companies, saw a slowdown in end demand,” the William Blair analyst wrote.

Snowflake also operates a cloud app store, enabling third-parties to offer services on the Snowflake data platform.

Last week privately held payments company Stripe was the newest addition to the company’s data cloud, enable customers to access their payment data directly within Snowflake’s ecosystem.

 

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