Snowflake’s Impressive Earnings Spike Stock by 32.8%

Snowflake (SNOW) saw its shares soar by 32.8% after reporting strong third-quarter fiscal 2025 results on Nov. 20. In this quarter, it achieved non-GAAP earnings of 20 cents per share, surpassing the Zacks Consensus Estimate by 33.33%. This growth is attributed to solid operational performance and a broader customer base.

SNOW has outperformed the Zacks Consensus Estimate in three of its last four quarters, with an average earnings surprise of 35.39%. However, the stock has experienced a 13.8% decline year-to-date, contrasting with the 27.7% growth seen in the Zacks Computer & Technology sector. Snowflake has faced challenges, including intense competition from companies like Databricks, along with rising pricing pressures and increased GPU costs, as it invests heavily in AI.

Year-to-Date Performance Analysis

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Despite these challenges, Snowflake has a solid outlook supported by a strong product lineup and a growing network of partners.

In the most recent quarter, Snowflake established partnerships with Microsoft (MSFT) and ServiceNow (NOW) to enhance data interoperability. This move will facilitate easier data movement for customers, allowing them to build applications more quickly.

The pressing question is how investors should respond to SNOW stock following the latest fiscal results. Let’s explore further.

The Strength of SNOW’s Portfolio: A Key Driver

Snowflake has a powerful product suite that includes Marketplace, Listing Auto-Fulfillment & Monetization, account replication and failover, Query Acceleration Service, geospatial analytics, Snowpark, and Snowpipe Streaming.

In the third quarter of fiscal 2025, Snowpark made a notable contribution to SNOW’s revenue and is projected to represent around 3% of total sales. New features like Iceberg tables, Hybrid tables, and advanced language model (LLM) capabilities enhance its offerings significantly.

Over 3,200 accounts embraced SNOW’s AI and ML features in this quarter, while approximately 500 accounts adopted Iceberg technology. The company’s expanding partner network includes major firms like Amazon, Microsoft, ServiceNow, NVIDIA (NVDA), Fiserv, EY, Deloitte, LTMindtree, Next Pathway, and S&P Global.

Snowflake’s partnership with NVIDIA aims to integrate its AI Enterprise software into Snowflake Cortex AI. This integration will facilitate seamless connections between custom models and diverse business data to provide precise responses.

Furthermore, a new collaboration with Anthropic allows Snowflake to incorporate advanced AI models into its platform. This partnership will enable businesses to develop secure, state-of-the-art AI applications with ease.

Notable clients such as Disney, Accor, Comcast, Chipotle, Kraft Heinz, NBC Universal, Sanofi, and Toyota underscore Snowflake’s growing customer base, with Disney utilizing the platform for in-park optimization.

During the quarter, Snowflake also sought to enhance its capabilities through its planned acquisition of Datavolo, which will improve the platform’s support for both structured and unstructured data.

Positive Outlook for Q4 and Fiscal Year 2025

Looking ahead, Snowflake anticipates product revenues between $906 and $911 million for the fourth quarter of fiscal 2025, indicating about 23% growth year-over-year. The Zacks Consensus Estimate for these revenues currently stands at $952.55 million, which also suggests a year-over-year growth of 22.96%. The consensus earnings estimate is set at 17 cents per share, reflecting a significant 41.67% increase over the past week, although it suggests a 51.43% decline from the previous year.

For the entirety of fiscal 2025, SNOW expects a year-over-year revenue increase of 29%, targeting $3.43 billion. The non-GAAP product gross margin expectations stand at 76%, with an operating margin projected at 5% and adjusted free cash flow margin at 26%.

The consensus estimate for fiscal 2025 revenues is currently pegged at $3.59 billion, which represents growth of 28% year-over-year. The earnings estimate is projected at 68 cents per share, showing a decrease of 30.61% compared to the previous year.

Price and Consensus Trends for Snowflake Inc.

Snowflake Inc. price-consensus-chart | Snowflake Inc. Quote

Trading Trends Indicate Premium Valuation for SNOW

Snowflake’s current value score of F points to a potentially high valuation. At present, SNOW shares are priced at a forward 12-month Price/Sales ratio of 13.6X, significantly higher than the sector’s 6.13X and the Internet Software Industry’s 3.02X.

Price/Sales Ratio (F12M)

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Currently, SNOW trades above both its 50-day and 200-day moving averages, which signals a bullish trend in the stock’s performance.

An Overview of Moving Averages for SNOW Shares

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Investment Considerations: Buy, Sell, or Hold?

Snowflake presents a risky investment in the short term, given its moderate growth expectations and elevated valuation. However, current shareholders may find comfort in the company’s promising growth outlook stemming from its robust product offerings and partner relationships.

Presently, SNOW holds a Zacks Rank #3 (Hold), suggesting it may be prudent to wait for a more favorable entry point. For those interested in enhancing their portfolios, a complete list of today’s Zacks #1 Rank (Strong Buy) stocks is available.

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To access the latest stock analysis and reports, including those for Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA), ServiceNow, Inc. (NOW), and Snowflake Inc. (SNOW), click for your free reports.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.