Snowflake expects strong Q2 as AI push boosts demand for cloud services

FILE PHOTO: A banner for Snowflake Inc. is displayed celebrating the company's IPO at the NYSE in New York

(Reuters) -Snowflake on Wednesday forecast second-quarter product revenue above Wall Street estimates and raised its expectations for the year, on strong demand for its cloud-based services amid a surge in use of generative artificial intelligence.

Shares rose 4% after the bell as the data cloud analytics company also said it plans to acquire technology assets and hire 35 employees from TruEra, an AI observability platform. It did not share further details.

"Our core business is very strong. Our AI products, now generally available, are generating strong customer interest. They will help our customers deliver effective and efficient AI-powered experiences faster than ever," CEO Sridhar Ramaswamy said.

The company had in April launched Snowflake Arctic, a large language model that draws from massive amounts of text to generate responses to queries and is optimized for complex enterprise workloads.

Companies are increasingly moving from traditional to cloud-based solutions, looking to integrate digital and more cost-effective processes since the pandemic, benefiting cloud-related services firms such as Snowflake.

"Snowflake results exceeded expectations and guidance was strong as well as the company benefits from an accelerated shift to the cloud and Generative AI volumes," said D.A. Davidson analyst Gil Luria.

The company forecast product revenue in the range of $805 million to $810 million for the second quarter, above analysts' average estimate of $785 million, according to LSEG data.

For 2025, Snowflake expects product revenue at $3.30 billion, up from a prior forecast of $3.25 billion.

For the first quarter ended April 30, Snowflake posted a 34% rise in product revenue to $789.6 million, beating expectations of $747.9 million. Total revenue came in at $828.7 million.

(Reporting by Juby Babu in Mexico City; Editing by Mohammed Safi Shamsi)