What’s Behind the Sudden Surge in Snowflake (SNOW) Shares Today?

Data warehouse-as-a-service provider, Snowflake (NYSE:SNOW), saw a significant rise in its shares by 32.4% following the announcement of a promising Q3 for fiscal year 2025. The company’s revenue not only met but exceeded anticipated predictions, maintaining a steady net revenue retention rate.

Snowflake’s success can be attributed to its focus on streamlining data workflows and incorporating AI features, such as Snowflake Cortex, which have led to an increase in customer adoption and competitive advantage. Revenue has also been boosted by the launch of new products, like Snowpark, which alone is predicted to make up about 3% of the total product revenue.

From an AI perspective, Snowflake’s platform supports over 1,000 generative AI applications in production, with 3,200 customers for AI and machine learning. This is a crucial business component with the potential to stimulate more growth as customers experience the benefits of AI in their operations.

In terms of financial performance, the operating margin exceeded expectations for the quarter, with top-line growth and cost efficiencies leading to an EPS that was well above analyst predictions.

As we look towards Q4, the product revenue guidance is promising and exceeds current expectations. Forecasts for the full year’s product revenue, gross margin, and operating margin have all received a positive revision.

Despite inconsistent earnings performance in the past year, this quarter has proven to be a high point for Snowflake. For a comprehensive analysis of Snowflake’s performance, download our free report.

Market Indicators

Snowflake’s share prices have shown some volatility, with 12 significant swings of more than 5% in the past year. Nevertheless, shifts of this magnitude are unusual for Snowflake, indicating that the recent news has greatly influenced market perception.

One of the most impactful negative events was a 24.9% stock drop nine months ago when Snowflake disclosed weak Q4 results and issued a disappointing Q1 product guidance. Revenue retention also declined, which Snowflake attributed to significant holiday impacts and unrevertable consumption trends. Another factor affecting stock performance was the news of CEO Frank Slootman’s retirement.

On a positive note, Snowflake’s high free cash flow and growth in revenue exceed 30%, a truly commendable accomplishment.

Currently, Snowflake’s shares are 8.4% down year-to-date. At $173.40 per share, the price is 26.5% below its 52-week high of $236 from February 2024. Investors who bought $1,000 worth of Snowflake’s shares during the IPO in September 2020 would now have an investment worth $681.94.