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Snowflake stock flies away. Sales growth crushed estimates.

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Snowflake’s strong quarter should bolster confidence in the health of demand for cloud-based IT services.

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Snowflake

Shares soared after the cloud-based data warehousing company reported better-than-expected fiscal second-quarter results and raised its full-year guidance.

The strong quarter should bolster confidence in the health of demand for cloud-based IT services, bolstering strong results from leading cloud providers Amazon Web Services, Microsoft Azure and Google Cloud.

For the July quarter, Snowflake (ticker: SNOW) reported revenue of $497.2 million, up 83% from the prior year period, ahead of the Wall Street consensus at $467.5 million. Product revenue was $466.3 million, up 83%, and above the company’s guidance range of $435 million to $440 million. Non-GAAP operating margin was 4%, well above the company’s guidance of minus 2%. Adjusted free cash flow was $58.6 million, for a margin of 12%. The company posted a GAAP loss in the quarter of 70 cents per share.

Remaining performance obligations, a measure of future work, were $2.7 billion, up 78%. Net revenue retention, a measure of customer loyalty, increased by 171%. Snowflake said it now has 6,808 total customers, 246 of which have more than $1 million in revenue.

For the third quarter, the company forecast product revenue of $500 million to $505 million, up 60 to 62 percent, with an operating margin of 2 percent.

Snowflake now reports annual product revenue of $1.905 billion to $1.915 billion, up 67% to 68%, with product gross margin of 75%, operating margin of 2% and flow margin free cash flow adjusted by 17%. Previous guidance called for product revenue of $1.885 billion to $1.9 billion.

Wall Street’s first quarter reading was bullish and relieved.

“Snowflake has recorded a very strong pace in terms of revenue, operating margins and cash flow, demonstrating the robustness of the business model,” Evercore ISI analyst Kirk Materne wrote in a research note.

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Tyler Radke also wrote that the company appears to be executing and forecasting better than it has been despite a more “unstable” macroeconomic environment. “We expect the stock to trade significantly given the bearish sentiment,” he wrote.

Shares of Snowflake rose more than 17% in premarket trading Thursday to $186.90.

Write to Eric J. Savitz at [email protected]