Decline in Snowflake Stocks as Growth in Product Revenue Slows Down
On Thursday, Snowflake experienced a significant decrease of over 14% in its shares following the release of its fiscal second-quarter 2025 earnings report. Despite surpassing Wall Street’s expectations, the data cloud analytics company displayed a deceleration in product revenue growth compared to previous quarters.
Revenue for Snowflake totaled $869 million, exceeding the anticipated $851 million as per analysts surveyed by LSEG. Product revenue, which constitutes a substantial portion of the company’s sales, amounted to $829.3 million, showing a 30% year-over-year increase. However, this signifies a slowdown from the 34% growth reported during the previous fiscal quarter.
The company’s net loss also widened to $317 million, showing a loss of 95 cents per share, compared to $227 million and a loss of 69 cents per share during the corresponding period the previous year.
Although analysts from Morgan Stanley acknowledged Snowflake’s favorable results, they expressed concerns that the company’s modest product revenue beat and the deceleration in growth may not invigorate fatigued investors.
In light of this, Snowflake may need to rely on its fundamental data warehousing business until its new generative artificial intelligence portfolio can contribute to superior performance. Reacting to the results, analysts at Barclays maintained their equal weight rating on the stock, indicating that the second-quarter results may not significantly impact the company’s investment outlook.
Barclays analysts highlighted that investors closely monitored whether the company’s product revenue was adversely affected by the cyberattack and the CrowdStrike outage that transpired during the quarter. Fortunately for Snowflake, these potential challenges did not have a substantial impact, which was viewed positively by investors.
Despite a slightly slower year-over-year product revenue growth rate of 30%, down from the 33-34% range observed in the last two quarters, analysts commended Snowflake’s performance amidst prevailing uncertainties. They emphasized the resilience of the 30% growth level and raised guidance, especially considering the company’s lower valuation.
This report contains contributions from Michael Bloom at good.
