Why Snowflake Strong Results Weren't Enough

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•  04 Dec 2025
 

•   SNOW  
   
  -0.33%

$SNOW Snowflake delivered solid quarterly results that beat analyst expectations, yet the stock fell 11% in its sharpest single-day decline in nine months. For investors who have watched the stock climb 72% this year on AI enthusiasm the drop raises an uncomfortable question:
what happens when good isn't good enough?

The numbers themselves looked respectable. Adjusted earnings came in at 35 cents per share, topping the 31-cent estimate. Revenue hit 1.21 billion dollars, with product revenue representing about 95% of activity at 1.16 billion dollars. The company even announced a 200 million dollar partnership with Anthropic to integrate Claude AI models into its platform. On paper, this should have been a winning quarter.

But markets trade on expectations, not just results. The guidance for the next quarter revealed the gap between where Snowflake stands and where investors hoped it would be. The company projected an adjusted operating margin around 7% for the fourth quarter, below the 8.5% the market anticipated. Product revenue guidance of roughly 1.2 billion dollars, while close to estimates, suggested slower momentum than many had priced in.

The real concern showed up in the growth rates. Product revenue grew 29% this quarter compared to about 32% in the previous quarter. In an environment where comparable cloud companies are showing acceleration, Snowflake deceleration stood out. For a stock that had rallied on the promise of AI-driven growth, this slowdown hit harder than it might have otherwise.

CEO Sridhar Ramaswamy has been steering the company through a strategic shift since taking over, acquiring startups and adding AI capabilities to transform customer data into an engine for intelligent models. The vision is clear: make Snowflake the foundation for how organizations manage data and deploy AI. But analysts noted that sales from the AI products aren't yet approaching investor expectations, even as the company aggressively emphasizes its AI credentials.

There are positive signals beneath the headline disappointment. The net retention rate sits at 125%, indicating that existing customers continue expanding their use of Snowflake core data management systems. The company added over one billion dollars in future orders during a single quarter, with Citi analysts highlighting that the pace of new bookings exceeded normal levels. Total remaining commitments reached 7.88 billion dollars, above market expectations.

Several analysts maintained positive ratings on SNOW following the report. The long-term thesis remains intact: organizations are investing more heavily in AI infrastructure and need tools to store, organize, and activate large volumes of data. Many workloads are expected to shift to cloud platforms capable of supporting generative models in the coming years, potentially strengthening Snowflake position as a central data infrastructure provider.

Yet some analysts struck a more critical tone. Guggenheim suggested the company was pushing its AI narrative aggressively to calm concerns about more traditional performance metrics. The implication was that Snowflake wants to convince the market it's connected to the dominant technological trend, even if the numbers don't yet show a breakthrough.

The company has stable demand for its core products, a growing customer base that's spending more over time, and a clear strategy for the AI era. But it's being judged against elevated expectations that came from this year 72% rally. The stock climbed because investors believed AI would be a powerful growth accelerator. When the actual pace of that acceleration appears modest, the gap between belief and reality becomes expensive.

The question for the months ahead is whether Snowflake can translate its heavy investments in artificial intelligence into faster growth during 2025. That expectation hangs over every cloud software company right now, but it weighs especially heavy on those that have seen their valuations expand on AI promises. Strong execution matters, but so does timing. Markets reward companies that can show they're capturing the AI opportunity not just in strategy presentations, but in revenue growth that validates the hype.

Snowflake path forward depends on whether the next quarters show reacceleration or continued moderation. The partnership with Anthropic signals intent, the booking numbers suggest underlying strength, and the retention rates confirm customer satisfaction. But none of that changes the immediate reality: when a stock rises 72% on expectations of transformative growth, delivering merely solid results creates space for sharp corrections.

The selloff may create opportunity for those who believe the long-term data infrastructure story remains compelling, or it may be the beginning of a valuation reset for a company whose AI monetization is taking longer than the market hoped. Either way, the coming quarters will show whether Snowflake AI strategy can close the gap between its ambitions and its results.

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