Snowflake Misses Earnings and Operating Margin Guidance; Shares Drop
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Key Takeaways
Cloud storage provider Snowflake missed first-quarter profit expectations and scaled back its full-year operating income guidance when it reported earnings after the bell Wednesday.
Snowflake’s revenue came in better than analysts expected, however, benefiting from continued strong artificial intelligence (AI) product demand.
Snowflake shares rose in early trading Thursday, before reversing course to finish lower.
Snowflake (
SNOW
) shares declined Thursday after the cloud data storage provider missed profit estimates and lowered its
operating margin
guidance, even as sales jumped amid continued surging demand for
artificial intelligence (AI)
products.
The company reported fiscal 2025 first-quarter adjusted
earnings per share (EPS)
of 14 cents, less than analysts had been looking for. But revenue rose 33% year-over-year to $828.7 million, better than forecasts. Product revenue jumped 34% to $789.6 million, also more than expected.
Snowflake’s net revenue retention rate—the percentage of revenue earned from existing customers at the beginning of a period after accounting for added revenue and
churn
—was 128%, down from 151% in the year-ago period.
Benefitting From Strong Interest in AI Products
Snowflake CEO Sridhar Ramaswamy, who took over the position in February, said Snowflake’s core business is strong, and that its AI offerings, which are now generally available, “are generating strong customer interest.
They will help our customers deliver effective and efficient AI-powered experiences faster than ever.”
However, the company slashed its full-year operating income outlook in half, to 3% from 6%. It raised its estimate for product revenue to $3.3 billion from $3.25 billion previously.
More Collaboration With AI Chipmaker Nvidia Ahead
Ramaswamy said Wednesday that Snowflake would be collaborating further with AI chip giant
Nvidia
(
NVDA
), noting in an interview on CNBC that the two companies have worked together on a number of fronts, and “there’s a lot to come.” He added that Snowflake would be discussing AI and new products at its Data Cloud Summit conference next month.
Snowflake also said Wednesday that it had acquired the AI observability platform of TruEra, a technology company that tests AI
large language model (LLM)
applications. It said the deal “will help organizations drive AI quality and trustworthiness by evaluating, monitoring, and debugging models and apps across the full lifecycle, in both development and production.” Financial terms of the purchase weren’t disclosed.
Shares of Snowflake closed 5.4% lower at $154.58 Thursday, and have lost about 22% since the start of the year.
