What's going on?
Snowflake reported better-than-expected earnings earlier this week, and the software company’s investors were as giddy as kids celebrating Christmas come early.
What does this mean?
Snowflake provides data warehousing software that helps businesses crunch more numbers more quickly, and overloaded companies couldn’t get enough last quarter: Snowflake had 52% more customers than the same time last year, and 128% more customers that spent $1 million-plus in the previous 12 months. Mix in successful launches across a variety of international markets, and Snowflake’s revenue grew by a barnstorming 110%. The company’s revenue outlook for this quarter came in better than expected too, which meant investors could finally chill out: they initially sent its stock up 13%.
Why should I care?
The bigger picture: Hedge funds are fans.
Stocks like Snowflake’s have been in high demand lately, with Goldman Sachs pointing out that hedge funds’ investments in the software sector hit a five-year high in October. That could be because companies are piling into software to make up for labor shortages right now, or it could be because it’s all but guaranteed that big data, cloud computing, and cyber security will be the bread and butter of future industry.
Zooming out: Low production, low demand.
Snowflake’s investors might just be glad the company isn’t in the hardware business, which has been subject to the whims of the unrelenting chip shortage this year. Just look at Apple, which had to make massive production cuts to its new iPhone back in October. Still, maybe a blessing in disguise: Apple admitted this week that demand for its new handset this Christmas mightn’t be as strong as it thought after all.