Why Snowflake's earnings beat isn't enough to lift its stock

By Emily Bary

An analyst notes that growth in product revenue slowed in the latest quarter. And Snowflake shares have meaningfully outperformed peers this year, raising the bar for results.

Snowflake said it's seeing momentum for its AI offering.

Snowflake saw product-revenue growth slow in the latest quarter, and its shares moved 8% lower in Wednesday's extended session.

Shares of Snowflake (SNOW), which makes data-warehousing software, have been one of the industry's rare bright spots this year, rising more than 70% in a period where many rival stocks got crunched on fears of artificial-intelligence disruption. But that outperformance meant "the bar was high" going into earnings, according to BNP Paribas analyst Stefan Slowinski, and he wasn't surprised to see the stock down after Wednesday's earnings.

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Product revenue amounted to $1.16 billion in the fiscal third quarter, up 29% from a year earlier and ahead of the $1.13 billion FactSet consensus. But Slowinski noted that growth on the metric was below the 32% rate seen in the fiscal second quarter. And some investors might have been looking for more like 30% growth this time around, "especially following strong results from consumption peers like MongoDB," he added.

Further, Snowflake only topped the consensus view for product revenue by 2.7%, which was the smallest beat on the metric in over a year.

Adjusted earnings per share came in at 35 cents versus the 31-cent FactSet consensus.

The company expects $1.195 billion to $1.2 billion in product revenue for the current quarter, which would translate to 27% growth. Analysts tracked by FactSet were looking for $1.184 billion.

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"Given that Snowflake tends to guide conservatively, we believe the [fiscal fourth-quarter] guidance points to steady demand in its core data-warehouse business and growing interest in its data engineering and AI offerings," Evercore ISI's Kirk Materne said in a note to clients.

He noted that Snowflake "continues to ramp with more blue-chip customers where consumption patterns are more predictable." Snowflake operates under a consumption-based model, whereby customers pay for its software based on their usage, rather than by the number of employees, or "seats," with licenses, which is the more traditional industry model.

The company itself called out AI momentum, with CEO Sridhar Ramaswamy saying in the earnings release that Snowflake Intelligence has seen "the fastest adoption ramp in Snowflake history and is transforming how businesses interact with their data, delivering real-time, actionable intelligence."

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Snowflake also made other various announcements, including a $200 million partnership with Anthropic that "establishes a joint global go-to-market initiative focused on deploying AI agents across the world's largest enterprises."

-Emily Bary

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12-03-25 2016ET