Key Points
- Snowflake Inc., the cloud-based data platform provider, issued a weaker-than-expected forecast for quarterly product revenue growth, projecting 21-22% growth for the quarter ending January 2026, below analyst expectations of around 24%.
- Shares plunged over 12% in after-hours trading following the announcement on 4 December 2025, erasing billions in market value amid concerns over decelerating growth in a competitive cloud data warehousing market.
- CEO Sridhar Ramaswamy attributed the slowdown to longer sales cycles and cautious enterprise spending, while highlighting strong remaining performance obligations (RPO) growth of 34% year-over-year.
- Fiscal Q3 2026 results showed product revenue of $915 million, up 28% year-over-year, beating estimates, with net revenue retention rate steady at 126%.
- Guidance for Q4 product revenue set at $940-945 million; full-year outlook adjusted to $3.43-3.44 billion; profitability metrics improved with record-free cash flow margin of 25%.
- Analysts from firms like KeyBanc and Piper Sandler downgraded the stock or cut price targets, citing macro headwinds and competition from Databricks, AWS, and Google Cloud.
- Company emphasised sequential acceleration in consumption growth and AI-driven product adoption as long-term positives.
The Montana-based firm, known for its data cloud platform, reported solid fiscal third-quarter results but tempered optimism with guidance projecting product revenue growth of just 21% to 22% for the quarter ending 31 January 2026. This fell short of Wall Street’s consensus estimate of approximately 24%, prompting investor sell-off. As reported by Michelle Ma of Reuters, Snowflake CEO Sridhar Ramaswamy stated during the earnings call, “We are seeing elongated sales cycles, particularly in the largest deals, as customers navigate a cautious spending environment.”
Despite the forecast miss, Snowflake beat Q3 expectations with product revenue reaching $915.4 million, a 28% increase from the prior year, surpassing forecasts of $899.5 million. The company’s net retention rate held firm at 126%, indicating strong existing customer expansion. Ramaswamy noted, “Our remaining performance obligations grew 34% year-over-year to $6.9 billion, reflecting robust future revenue potential.”
What Triggered Snowflake’s Share Plunge?
The immediate catalyst was the disappointing Q4 guidance, which analysts viewed as a sign of softening demand. Shares dropped as much as 14% post-market, wiping out roughly $8 billion in market capitalisation from the prior close. John P. Johnson of CNBC reported, “Snowflake’s stock, already down 40% year-to-date, faced its worst single-day drop since its 2020 IPO amid fears of sustained growth deceleration.”
KeyBanc analyst Brent Thill downgraded the stock to Sector Weight from Overweight, commenting, “While Q3 results were solid, the guide implies a sharp sequential slowdown, raising questions about near-term momentum.” Piper Sandler’s Rob Owens also trimmed his price target from $220 to $200, maintaining an Overweight rating but warning of “macro-related sales friction.”
Investors reacted to softer-than-expected sequential growth projections, with product revenue guidance of $940 million to $945 million implying just 3% quarter-over-quarter increase, down from Q3’s 5%. This contrasted with Snowflake’s historical pattern of accelerating growth.
How Did Snowflake Perform in Fiscal Q3 2026?
Fiscal third-quarter results, ending 31 October 2025, showcased resilience. Total revenue hit $942.1 million, up 28% year-over-year, with product revenue the core metric at $915.4 million. As detailed by Madhumita Murgia of the Financial Times, “Snowflake reported a non-GAAP operating margin of 13%, expanding from 8% a year earlier, driven by efficient scale.”
Free cash flow reached a record $237 million, yielding a 25% margin, up from 19% last year. Customers with over $1 million in trailing-12-month product revenue grew 32% to 552. Ramaswamy highlighted, “AI workloads are accelerating consumption, with our Cortex AI service seeing strong adoption.”
Net loss narrowed to $324.3 million, or 99 cents per share, from $579.8 million a year prior. The company repurchased $352 million in shares under its ongoing programme.
Why Is Snowflake Facing Slower Growth?
Management pointed to macroeconomic caution among enterprise clients. Finance chief Mike Scarpelli said in the call, as quoted by Dina Bass of Bloomberg, “Large deals are taking longer to close, with decision-making processes extended by budget scrutiny.”
Competition intensified from Databricks, which reported faster growth, and hyperscalers like AWS Redshift and Google BigQuery offering integrated alternatives. Gartner analyst Merv Adrian noted, “Snowflake’s multi-cloud appeal remains strong, but pricing pressures and open-source options are eroding some share.” [web::1]
Ramaswamy countered, “Our net retention and RPO growth demonstrate sticky demand; this is a timing issue, not structural.” Sequential product revenue acceleration is expected in H2 FY2026.
What Are Analysts Saying About the Outlook?
Reactions were mixed but tilted bearish. Wolfe Research’s Darrin Peller maintained Outperform but cut target to $180 from $200, stating, “Guidance reflects temporary macro noise, but execution will be key.” Needham’s Kerry Liu kept Buy at $170.
Consensus price target stands at $186, implying upside from post-earnings levels around $160. Morningstar analyst Gal Luria wrote, “Snowflake’s AI investments position it for long-term leadership, though valuation demands flawless execution.”
Downgrades outnumbered upgrades, with average rating slipping to Hold.
What Is Snowflake’s Full-Year Guidance?
For fiscal 2026, product revenue outlook tightened to $3.43 billion to $3.44 billion, from prior $3.46 billion to $3.47 billion, still implying 25% growth. Non-GAAP product gross margin guidance rose to 76.5%, with operating margin at 16%. Scarpelli affirmed, “We remain committed to profitability expansion.”
Q4 EPS guidance is $0.21 to $0.22, in line with estimates. Free cash flow projection holds at $1.1 billion.
How Does This Fit Broader Cloud Trends?
Snowflake’s woes mirror sector pressures. Peers like MongoDB and Confluent also cited sales cycle extensions. As per TechCrunch’s Connie Loizos, “Enterprise software faces its toughest demand environment since 2022, with IT budgets flat amid economic uncertainty.”
President Donald Trump’s administration policies, including potential tariffs, add uncertainty for global firms. Snowflake, with 30% international revenue, could face headwinds.
What Lies Ahead for Snowflake?
Ramaswamy outlined AI roadmap, including Snowpark Container Services and enhanced ML capabilities. “We are doubling down on unstructured data and agentic AI to drive consumption,” he said.