Snowflake Earnings: Revenue Outlook Disappoints; New CEO Taking Over

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $187.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

Snowflake SNOW reported decent fiscal fourth-quarter earnings, but its outlook for fiscal 2025 was disappointing. Combined with the surprise retirement of CEO Frank Slootman, this created a challenging quarter. Slootman will be replaced by Sridhar Ramaswamy, who has only been with the company since May 2023. As we factor in slower growth than we previously expected, driven by the disappointing outlook, we are lowering our fair value estimate to $187 from $231. We thought shares were fairly valued heading into today’s earnings, and based on the drop in share price of roughly 20% after hours, our updated fair value estimate implies shares are fairly valued once again.

Quarterly results weren’t terrible, as Snowflake had a slight beat on revenue, 2% higher than our estimates and the FactSet consensus. At the same time, adjusted earnings per share came in at over double FactSet expectations. However, the company guided for fiscal 2025 growth of only 22%, while consensus was looking for growth closer to 30%, and our expectations were even higher. Maintaining the current growth momentum is key for a fast-expanding company like Snowflake.

As we adjust our forecasts, this slowdown in growth is particularly damaging to our valuation, where we had hoped for growth of over 30% for years to come. The company also pulled its longer-term guidance, which had previously gone out to 2029, again signaling that confidence in the outlook has weakened. A combination of lower storage pricing, increased use of iceberg tables (which allow more data to be stored outside of Snowflake’s environments), and lower consumption patterns are affecting results. For the company to bounce back, we think improved product consumption and its ability to enhance products and drive new workload volumes will be essential.