Snowflake(SNOW.US)Revenue guidance exceeds expectations but stock price declines; growing AI demand cannot hide market concerns

Bloomberg News has learned that Snowflake (SNOW.US), a provider of cloud data analytics platforms, released its latest earnings report on Wednesday Eastern Time. Despite the company’s forecast for product revenue in fiscal 2027 exceeding Wall Street expectations and ongoing AI demand driving business growth, its stock price temporarily fell more than 3% in after-hours trading. Market concerns about whether traditional software companies can maintain growth momentum in the AI era still linger.

AI-Driven Performance Growth

The earnings report shows that Snowflake expects its product revenue for the fiscal year ending January 31, 2027, to reach $5.66 billion, surpassing the analyst average forecast of $5.50 billion. The company’s forecast for first-quarter product revenue also exceeded market expectations, estimated between $1.26 billion and $1.27 billion, compared to the previous analyst estimate of $1.23 billion.

Currently, more enterprise customers are migrating workloads to the cloud and increasing investments in developing AI applications, providing sustained growth momentum for companies like Snowflake.

Snowflake primarily offers software for organizing, analyzing, and storing enterprise data in the cloud. CEO Sridhar Ramaswamy has been focused on expanding the company’s product portfolio, especially by adding tools within its platform that utilize AI technology on stored data.

According to Ramaswamy, the Snowflake Intelligence platform launched last November now has over 2,500 customers. The company also signed what it called “the largest single deal in history,” worth over $400 million, though the customer’s name was not disclosed.

In competition with AI unicorn Databricks, Snowflake has recently taken a series of strategic actions. The company has signed multi-year, $200 million agreements with AI firms OpenAI and Anthropic to integrate their advanced models into its platform to promote enterprise AI applications. Additionally, Snowflake invested $600 million to acquire Observe, an application monitoring platform, to enhance troubleshooting capabilities for software, systems, and data performance.

As of January 31, in the fourth quarter, Snowflake’s product revenue grew approximately 30% year-over-year to $1.23 billion, surpassing the expected $1.18 billion. Adjusted earnings per share were 32 cents, higher than the anticipated 27 cents.

Market Concerns Remain

However, these positive figures have not fully alleviated market worries. Snowflake’s stock has declined about 23% so far this year, reflecting Wall Street’s general concern about the software industry’s prospects in the AI era.

Moreover, many analysts believe that AI’s contribution to Snowflake’s platform revenue remains relatively limited. In December last year, the company revealed that its annual recurring revenue from AI products had exceeded $100 million.

“Investors are currently skeptical of all software companies,” said D.A. Davidson analyst Gil Luria. “But as Snowflake continues to accelerate growth for the rest of this year, we believe investors will eventually realize that the company is benefiting significantly from AI growth.”

The company’s new CFO, Brian Robins, emphasized that the quarterly results reflect the effectiveness of its strategy focused on two fundamental growth drivers: expanding new customers and developing them into strategic, long-term clients.

In the fourth quarter, remaining performance obligations (RPO), a measure of booked revenue, reached $9.77 billion, significantly higher than the average expectation of $8.28 billion. The company currently has over 13,000 customers, including well-known firms like Figma (FIG.US) and BlackRock (BLK.US).