Snowflake’s stock surges on earnings crush and revenue beat

Cloud data warehouse company Snowflake Inc. crushed Wall Street’s targets as it delivered its fiscal 2025 fourth-quarter financial results today, and its stock popped in after-hours trading.

The company reported earnings before certain costs such as stock compensation of 30 cents per share on sales of $986.6 million, up 27% from a year earlier. The results were much better than expected, with analysts forecasting a profit of just 18 cents per share on lower sales of $957 million.

In addition, Snowflake delivered product revenue, which is derived from its customers’ consumption of compute, storage and data transfer bandwidth, of $943.3 million, up 28%. That was also well ahead of expectations, with analysts hoping for $914 million in product-based sales.

As impressive as the results were, Snowflake was unable to make progress in terms of profitability. Instead, it went backwards, with its net loss widening to $325.7 million, compared to a loss of $169.9 million in the year-ago period.

Snowflake Chief Executive Sridhar Ramaswamy (pictured) told investors that the company put in “another strong quarter” that firmly establishes it as the “most consequential data and AI company in the world.”

“More than 11,000 customers are already betting their business on our easy-to-use, efficient, and trusted platform,” he said. “We see tremendous opportunities ahead to support our customers throughout their end-to-end data lifecycle.”

Looking to the current quarter, Snowflake is forecasting product revenue of between $955 million and $960 million, which compares poorly with the Street’s target of $961 million. However, its full-year forecast is better. Officials said they’re shooting for product revenue of $4.28 billion in fiscal 2026, ahead of the Street’s guidance of $4.23 billion.

All in all, investors seemed pleased enough, and Snowflake’s stock jumped 9% in extended trading, adding to a small gain made earlier during the regular trading session.

Third Bridge analyst Jordan Berger noted the market’s enthusiasm for the stock, but said the company’s first-quarter guidance suggests it could be troubled by some near-term headwinds. “While our experts indicate Snowflake remains a leader in the rapidly growing data warehousing market, there is significant uncertainty surrounding the materiality of near-term AI tailwinds,” he said.

Snowflake has been fighting hard for a slice of the artificial intelligence pie, positioning its cloud data warehouse as an ideal platform for storing and serving up the massive amounts of information consumed by large language models.

In recent months, the company has launched a wealth of AI development tools, including various enhancements to Cortex AI, a managed service that makes it easier for organizations to discover, analyze and develop AI applications. Last month saw the release of its first AI agents, which are more sophisticated AI models that can perform tasks autonomously on behalf of users with minimal supervision. That came just weeks after the company claimed a major breakthrough in AI inference, significantly reducing the cost and time it takes for large language models to perform computations.

On a conference call with analysts today, Ramaswamy insisted that Snowflake Cortex “is showing significant adoption.”

Investors are waiting with bated breath to see how much of an impact AI can have on Snowflake’s business, for it’s likely that many of them are becoming concerned with the company’s lack of profitability, said Holger Mueller of Constellation Research Inc. The analyst noted that Snowflake’s earnings per share loss virtually doubled in the quarter from the year-ago period, while its net loss grew to over $1.4 billion for the full year.

“It’s racking up further losses while growing its revenue by almost 30%, and that is enough to set off some alarm bells,” Mueller said. “The cost of revenue was up 30% year-over-year, while operating expenses increased 25%. What’s all the more concerning is that Snowflake wasn’t doing anything spectacular in regards of one-time investments.”

Mueller said Ramaswamy “needs to show not just growth, but also progress in the path to profitability. But with product revenue guidance pulling back into the low 20s, that is another concern.”

Investors may have other concerns, too. Though Snowflake’s stock has gained 7% in the year to date, it’s down 28% over the last 12 months, in part because a hefty valuation has left many investors wondering if the company is overpriced, especially with fierce competition with a surging Databricks Inc.

By traditional valuation metrics, Snowflake’s stock is very expensive, trading at 161 times its expected earnings over the next 12 months.

Photo: SiliconANGLE