(Bloomberg) -- Snowflake Inc. suffered its worst stock decline ever after the software maker delivered a disappointing sales forecast and announced that Chief Executive Officer Frank Slootman is stepping down from the role.

Product revenue — a closely watched measure — will be $745 million to $750 million in the first quarter, Snowflake said in a statement Wednesday. Analysts had predicted $769.5 million on average, according to data compiled by Bloomberg. A full-year forecast also fell well short of projections. 

Shares plunged 18% to $188.28 on Thursday in New York, the biggest decline since the company went public in 2020. 

Snowflake’s revenue growth slowed sharply in 2023 after many businesses cut back on their software purchases. This trend, termed cost optimization, also affected cloud providers like Amazon.com Inc. and Microsoft Corp. But both those companies, which lead the market for renting out computing power and storage, signaled recently that this cost-cutting behavior among customers had begun to wane.

The challenge of reinvigorating Snowflake will fall to the company’s senior vice president of AI, Sridhar Ramaswamy, who is taking over the CEO role. He joined Snowflake last year with the company’s acquisition of Neeva, an AI-powered search engine. Ramaswamy previously ran Google’s ad products.

Read More: Google Ad Chief Ramaswamy Exits; Search, AI Veteran Replaces Him

His elevation underscores a focus on AI for Snowflake. The company, which makes data analysis and storage software, stands to benefit from new projects tied to generative artificial intelligence, Mandeep Singh and Damian Reimertz of Bloomberg Intelligence said ahead of earnings. Snowflake’s products may be attractive when “enterprises aim to use their proprietary data to fine-tune foundational large language models without having to move the data to public clouds.”

The CEO change is effective immediately, and Ramaswamy is joining the board. The 57-year-old will be awarded about $100 million in stock awards over the next five years, in addition to a $750,000 annual salary, according to a filing Wednesday. He’ll also get an annual incentive bonus targeted at 100% of his salary. 

Slootman, who has run the company since 2019, will remain chairman. He took Snowflake public and turned the business into a major force in the software industry. It was the third initial public offering for Slootman, who previously oversaw IPOs at ServiceNow Inc. and Data Domain Inc. 

It’s “a big loss for Snowflake,” said Mike Spencer, investor relations chief at fellow software maker Salesforce Inc. “Just look at his track record — the guy’s been an amazing executive over the years, taken three companies public. He’s a proven winner.” Spencer added that he’s heard good things about Ramaswamy.

Slootman has long been known as one of tech’s toughest leaders. He said that a CEO needs to be “insanely confrontational” in an episode of the No Priors podcast in 2023, adding that leaders must push for more urgency. In 2021, he drew outcry for saying that diversity goals were secondary to merit in hiring. Slootman later apologized, saying he didn’t intend to imply that diversity and merit were “mutually exclusive.”

His departure from the top job at Snowflake is a “massive surprise,” Evercore ISI analyst Kirk Materne said in a note, adding that Ramaswamy had “big shoes to fill.”

On a call with analysts Wednesday, Ramaswamy said that AI spending would benefit the company.

“There’s no AI strategy without a data strategy, and this has opened a massive opportunity,” he said. “We must have clear focus and move even faster to bring innovation on the Snowflake platform to our customers and partners. This will be my focus.”

In contrast with the weak forecast, Snowflake’s results were stronger than anticipated. In the fiscal fourth quarter, product revenue increased 33% to $738.1 million. Analysts estimated $723.3 million on average. Profit, excluding some items, was 35 cents a share in the period, which ended Jan. 31. That compared with the average projection of 18 cents.

The “halo effect” of generative AI helped drive data modernization efforts among Snowflake customers, Guggenheim Securities analyst John DiFucci said in a note ahead of earnings.

Snowflake now has 461 customers that spent more than $1 million over a trailing 12-month period, up from 436 the previous quarter. Remaining performance obligations — another key benchmark of growth — were $5.2 billion, topping estimates.

Consumption trends are “improving, but not back to the pre-fiscal 2024 levels,” Chief Financial Officer Mike Scarpelli said on the conference call. The finance chief, who joined the company in August 2019, said he has committed to staying with Snowflake for at least another three years.

(Updates shares starting in third paragraph.)

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