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✅ Main takeaway:
Key takeaways
- Shares of Snowflake fell on Thursday after the company issued a disappointing margin forecast, raising concerns that its investments in artificial intelligence could eat into earnings.
- The cloud data analytics company’s quarterly earnings and revenue beat analyst estimates, with artificial intelligence-driven demand boosting.
Investors are attacking Snowflake stock despite quarterly results that beat analysts’ expectations top and bottom line.
Shares of Snowflake ( SNOW ) fell more than 10% in recent trading, a day after the cloud data analytics company issued a disappointing margin forecast. (Read our daily markets coverage here.)
Snowflake reported adjusted earnings of $0.35 per share on revenue that jumped 29% year over year to $1.21 billion in the third quarter. Both numbers exceeded analyst estimates compiled by Visible Alpha.
Operating income reached $131.3 million, a margin of 11%. However, the company said it expects an operating margin of 7% for the fourth quarter, lower than the 9% margin it guided for — and exceeded — in the third quarter.
An expected decline in Snowflake’s margin has raised some concerns on Wall Street about its AI-related spending, with Oppenheimer analysts telling clients after the results that new investments in AI could hamper profits in the short term. However, analysts said they expect gains for the stock going forward, with an “outperform” rating and a price target of $295. Morgan Stanley and Bank of America also reiterated bullish ratings, anticipating room for AI-driven growth.
Why is this important?
Snowflake stock has been a big beneficiary of the AI boom this year, although Thursday’s decline tempered its rise, suggesting limited willingness from investors to support the hit on margins.
While Wall Street valuations may be in flux following the outcome, the average target for Snowflake shares is around $280 based on Visible Alpha data. Nineteen of the 21 analysts tracked issued “buy” calls on the stock, with one neutral rating and only one sell rating.
Snowflake CFO Brian Robbins told analysts during the company’s earnings call not to “read too much” into the company’s fourth-quarter guidance, according to an AlphaSense transcript.
“We will continue to invest in the business, but I think there is also significant gains to be made in terms of how efficient we are as a business,” CEO Sridhar Ramaswamy said, adding: “I don’t think it’s an either/or choice. We’ve had very healthy expansions in things like operating margin, but also things like [stock-based compensation] “Year after year, we will continue to push hard on these matters.”
Even with today’s decline, Snowflake stock is up more than 50% in 2025.
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