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Why Snowflake’s Earnings Beat Caused the Stock to Tumble

Dec 03, 2025 11:18:00 -0500 by Angela Palumbo | #Technology #Earnings Report

Snowflake stock has jumped 72% in 2025. (Michael Nagle/Bloomberg)

Key Points

Snowflake stock tumbled early Thursday after releasing earnings, and its another clear example that a “beat” isn’t always a beat.

Sure, everything looked grand after Snowflake released its third-quarter results. Adjusted earnings of 35 cents a share on revenue of $1.21 billion topped analyst forecasts for 31 cents a share on revenue of $1.18 billion, according to FactSet.

The devil, however, was in the details. Product revenue rose 29% year-over-year in the quarter to $1.16 billion versus estimates of $1.13 billion, but that is a slight slowdown from the 32% year-over-year growth in the last quarter. “The main issue of the print was that F3Q moderating Product growth of < 29% was below what most expected after significant acceleration in the previous period to 31.5%,” according to Guggenheim analyst John DiFucci.

Expectations were also high heading into Snowflake’s earnings report, with shares up 72% this year, and product revenue growth was likely a percentage point below investor expectations, according to KeyBanc analyst Eric Heath. As a result, the stock closed down 11.4% on Thursday.

The market may be concerned, but Wall Street analysts, for the most part, remain positive on Snowflake stock.

“While underwhelming at first glance, we would argue leading indicators on forward growth paint a more encouraging picture,” Citi analyst Tyler Radke said. He added that bookings were “very strong” with more than $1 billion of backlog added quarter-on-quarter. Radke has a Buy rating on the stock with a price target of $310, implying 17% upside to Wednesday’s closing price.

Cantor analyst Thomas Blakey maintained his Overweight rating on the stock and even raised his price target to $278 from $275. “We continue to view Snowflake as well positioned to benefit from secularly-driven AI-related spend as enterprises look to take advantage of GenAI and Agentic AI services throughout their organizations,” he said in a note late Wednesday.

Snowflake said remaining performance obligations—the amount of contracted future revenue that hasn’t yet been recognized—of $7.88 billion rose 37% from the previous year and beat Wall Street estimates of $7.43 billion.

The data warehousing firm said it expects fourth-quarter product revenue to be between $1.195 billion and $1.2 billion, compared with Wall Street estimates of $1.18 billion. For the year, Snowflake expects product revenue to be $4.45 billion, also above analyst estimates of $4.41 billion.

“Snowflake is the cornerstone for our customers’ data and AI strategies, driving real business impact at scale,” CEO Sridhar Ramaswamy said in the earnings release.

On top of reporting financial results for the quarter, Snowflake announced an expanded partnership with AI company Anthropic.

Snowflake said in a news release that the multiyear, $200 million agreement will make Anthropic’s Claude models available in the Snowflake platform to more than 12,600 global customers. Anthropic announced the launching of its latest and best performing AI model—Claude Opus 4.5—on Nov. 24.

Not everyone was impressed. “So, what’s a company to do if the numbers fall a bit short relative to buy-side expectations?” writes Guggenheim’s DiFucci “Talk extensively about AI, of course. Okay, okay, we get it. Companies like Snowflake apparently feel a need to market around AI to ensure customers (and investors) that they’re on top of what could become one of the most important technology advances in our lifetimes.”

Snowflake stock has soared as investors bet that the company, which is a leading vendor of data warehouse and cloud data management solutions, will continue to benefit from AI investments.

Write to Angela Palumbo at angela.palumbo@dowjones.com