Snowflake, the data cloud analytics company, recently released its fiscal second-quarter 2025 earnings report which led to a significant drop in its stock price. The company reported $869 million in revenue, surpassing analysts’ expectations of $851 million. However, the main cause of concern for investors was the decelerating product revenue growth compared to previous quarters. Snowflake’s product revenue, which makes up a majority of its sales, increased by 30% year over year. While this growth is impressive, it represents a slowdown from the 34% year-over-year growth reported in the fiscal first quarter.
Net Loss and Analysts’ Reactions
In addition to the deceleration in revenue growth, Snowflake also reported a widened net loss of $317 million, or a loss of 95 cents per share, compared to $227 million in the same period a year earlier. Analysts from Morgan Stanley acknowledge that Snowflake’s results were positive but may not have met investors’ expectations. They raised concerns about the smaller product revenue beat and the overall slowdown in growth. Despite this, the analysts believe that Snowflake’s new generative artificial intelligence portfolio has the potential to drive future revenue growth. However, until then, the company will have to rely on its core data warehousing business.
Investor Sentiment and Future Outlook
Analysts at Barclays maintained an equal weight rating on Snowflake’s stock following the second-quarter results, stating that it should not be a significant catalyst for the company’s investment case. They highlighted that investors were closely monitoring whether Snowflake’s product revenue was impacted by external factors such as a cyberattack and a CrowdStrike outage during the quarter. Fortunately, these potential risks did not materialize, which was seen as a positive indicator for the company. Despite the concerns raised by the decelerating growth rate, analysts believe that Snowflake’s 30% year-over-year product growth is still respectable given the current market conditions and valuation.
Overall, Snowflake’s second-quarter earnings report has sparked mixed reactions among analysts and investors. While the company’s revenue exceeded expectations, the slowdown in product revenue growth and widening net loss have raised concerns about its future performance. However, optimism remains regarding Snowflake’s new AI portfolio and the potential for topline outperformance in the long run. Snowflake will need to address these challenges and focus on sustaining its growth momentum to regain investor confidence and drive shareholder value in the coming quarters.
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