Snowflake Inc. (NYSE:SNOW) Beats Q3 Earnings Estimates but Stock Falls on Guidance Concerns

Snowflake Inc (NYSE:SNOW) delivered a third-quarter earnings report that surpassed analyst expectations on the top and bottom lines, yet the initial market reaction was decisively negative, with shares falling sharply in after-hours trading. The cloud data giant’s results highlight the complex dynamics of high-growth software valuations, where strong absolute performance can still disappoint if it fails to meet elevated investor expectations for growth and future guidance.

Earnings and Revenue: A Beat on Paper

For its fiscal third quarter ended October 31, 2025, Snowflake reported financial metrics that exceeded consensus estimates.

• Revenue: The company posted total revenue of $1.21 billion, a 29% increase year-over-year. This figure came in above the analyst estimate of approximately $1.20 billion.
• Product Revenue: The core product revenue, a key metric for the company, was $1.16 billion, also growing 29% year-over-year.
• Earnings Per Share (Non-GAAP): Snowflake reported non-GAAP earnings per share of $0.35, surpassing the analyst consensus estimate of $0.32.

On the surface, these results represent a clean beat. CEO Sridhar Ramaswamy emphasized the company's role as a "cornerstone for our customers’ data and AI strategies," pointing to strong adoption of its Snowflake Intelligence enterprise AI agent.

Market Reaction: The Guidance Disconnect

Despite the earnings beat, Snowflake's stock dropped over 6% in after-hours trading following the announcement. This negative reaction is primarily attributed to the company's forward-looking guidance, which appears to have underwhelmed the market.

The company provided its outlook for the critical fourth quarter and the full 2026 fiscal year. For Q4, Snowflake guided for product revenue between $1.195 billion and $1.200 billion, representing approximately 27% year-over-year growth. While this indicates continued robust expansion, it may reflect a slight deceleration from the 29% growth just reported and could be at the lower end of some investor expectations for this high-multiple stock.

Furthermore, the full-year product revenue guidance of $4.446 billion, which assumes the high end of the Q4 range, implies a 28% growth rate for the year. Investors are likely scrutinizing this trajectory against the backdrop of Snowflake's massive scale and the significant investments it is making in its AI ecosystem, including a recently announced $200 million partnership with Anthropic.

Key Takeaways from the Quarter

Beyond the headline numbers, several operational metrics from the press release underscore Snowflake's underlying business strength, even as growth moderates from its earlier hyper-scale phase:

• Strong Customer Growth: The company now has 688 customers contributing over $1 million in trailing 12-month product revenue, up 29% year-over-year.
• Healthy Retention: The net revenue retention rate remained high at 125%, indicating existing customers are significantly increasing their spending on the platform.
• Substantial Future Commitments: Remaining Performance Obligations (RPO), a measure of contracted future revenue, grew 37% year-over-year to $7.88 billion, signaling strong sales momentum.
• Profitability Metrics: The company generated $131.3 million in non-GAAP operating income and $136.4 million in adjusted free cash flow, demonstrating its ability to convert growth into cash.

Conclusion: Growth at Scale vs. Market Expectations

Snowflake's Q3 report illustrates the challenges of a maturing growth stock. The company is successfully executing on a massive scale, beating quarterly estimates, and solidifying its position at the intersection of data and AI. However, in a market that prizes acceleration and "beat-and-raise" cycles, guidance that suggests steady but potentially moderating growth can trigger a negative reassessment of valuation.

The after-hours sell-off reflects this recalibration, as investors weigh the company's undeniable operational strength against the premium price attached to its shares. The focus now shifts to whether Snowflake can leverage its strategic AI partnerships and platform evolution to re-accelerate growth in the coming fiscal year.

For a detailed breakdown of historical earnings and future analyst estimates for Snowflake, you can review the data here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor a recommendation to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.