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Strong Q3 Results Fail to Boost Stock
Snowflake (SNOW) reported its fiscal Q3 results yesterday. The period ended on October 31. The cloud data company surpassed analyst expectations. Adjusted earnings per share hit $0.35. Sales reached $1.21 billion for the quarter. These numbers beat the average estimates. However, the positive news did not prevent a sell-off. Snowflake stock fell by 11.4% following the announcement.
Major AI Partnership Announced
The company shared news of a significant partnership. Snowflake signed a new $200 million contract with Anthropic. This is a multi-year agreement. It expands the previous collaboration between the two companies. Snowflake will integrate Anthropic’s Claude AI into its Cortex AI platform. This deal represents a major win for the company. It confirms their commitment to artificial intelligence.
AI Powers Revenue Growth
The AI focus has driven strong growth for Snowflake. The company hit a $100 million AI revenue run rate. This goal was reached one quarter ahead of schedule. Product revenue increased by 29% year over year. This figure reached $1.16 billion. Overall revenue saw a 28% jump annually. Remaining performance obligations (RPO) climbed 37% to $7.88 billion. The company added 615 new customers. Still, these strong metrics failed to support Snowflake stock.
Why Investors Sold Off Snowflake Stock
Investors were focused on several key concerns. The company posted a large GAAP operating loss. This loss totaled $329.5 million for the quarter. Heavy spending on sales and marketing worried some shareholders. There is also a reliance on stock-based compensation. These factors put pressure on the company’s valuation.
Disappointing Forward Guidance
Concerns about forward guidance also affected Snowflake stock. The company targets product revenue between $1.195 billion and $1.2 billion. This guidance range was technically above the average analyst estimate. However, some shareholders had hoped for a more aggressive forecast. This lack of aggressive guidance contributed to the sell-off.
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