:max_bytes(150000):strip_icc()/GettyImages-2205145572-ce52c8be951d44deb3c2b0b5cae1c00c.jpg "Why Snowflake’s Stock Is Plummeting Thursday")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2205145572-ce52c8be951d44deb3c2b0b5cae1c00c.jpg)
Key Takeaways
- Snowflake shares tumbled Thursday after the firm issued a disappointing margin forecast, raising worries its AI investments could squeeze profits.
- The cloud data analytics company’s quarterly earnings and revenue topped analysts’ estimates, with a boost from AI-driven demand.
Investors are hammering Snowflake’s stock despite quarterly results that topped analysts’ expectations on the top and bottom lines.
Shares of Snowflake (SNOW) were down over 10% in recent trading, a day after the cloud data analytics company issued a disappointing margin forecast. (Read our daily markets coverage here.)
Snowflake posted adjusted earnings of $0.35 per share on revenue that jumped 29% year-over-year to $1.21 billion in the third quarter. Both figures exceeded analysts’ estimates compiled by Visible Alpha.
Operating income came in at $131.3 million, with an 11% margin. However, the firm said it expects a 7% operating margin for the fourth quarter, below the 9% margin it guided for—and surpassed—in the third quarter.
Snowflake’s anticipated margin drop raised some worries on Wall Street about its AI-related spending, with Oppenheimer analysts telling clients after the results that new AI investments could hold back profits in the short term. Still, the analysts said they see gains ahead for the stock, with an “outperform” rating and $295 price target. Morgan Stanley and Bank of America also reiterated bullish ratings, anticipating room for AI-driven growth.
Why This Is Significant
Snowflake’s stock has been a big beneficiary of the AI boom this year, though Thursday’s fall has taken a bite out of its rally, suggesting limited willingness from investors to support a hit to margins.
While Wall Street’s ratings may be in flux after the result, the mean target for Snowflake’s shares is around $280 based on Visible Alpha data. Nineteen of the 21 analysts tracked have issued “buy” calls for the shares, with just one neutral, and one sell rating.
Snowflake CFO Brian Robins 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 substantial gains to be had in just how efficient we are as a company,” CEO Sridhar Ramaswamy said, adding, “I don’t think of this as an either/or. We have had pretty healthy expansions in things like operating margin, but also things like [stock-based compensation] year-over-year, and we will continue to press hard on those things.”
Even with today’s plunge, Snowflake stock is up more than 50% in 2025.
