On Thursday, Snowflake Inc . (NYSE:SNOW) stock maintained its Neutral rating according to a report from BTIG. The cloud-based data warehousing company surpassed expectations with its third fiscal quarter results, posting a product revenue of $900 million, which marks a 28.9% year-over-year increase.
This figure notably exceeds both the analyst's estimate of $853 million and the Street's $849 million. The performance also surpassed the optimistic scenario of $880 million that was previewed earlier in the week.
Snowflake's gross profit and operating income for the quarter also outperformed estimates, coming in 6.6% ahead of the Street's expectations. The company's updated forecast for fiscal year 2025 now projects a midpoint product revenue of $3,430 million, reflecting a 29% year-over-year growth, which is an uplift from the previously forecasted $3,356 million.
The company's management has indicated that Snowflake's core business is starting to stabilize, with the macro environment remaining consistent with previous quarters. The report highlighted positive developments in new product initiatives, including Snowpark, which is on track to account for 3% of product revenue by the end of FY25.
Additionally, Snowflake is gaining traction with new AI and data engineering products, expecting minimal headwinds from customers transitioning storage to Iceberg Tables.
Snowflake's Q3 results marked the largest product revenue beat since the second fiscal quarter of 2023, with a 6.1% upside compared to Street estimates. Moreover, the forecast for Q4 product revenue growth at 23% is perceived as potentially conservative by the market.
Despite the strong quarter, BTIG maintains a Neutral stance on Snowflake's stock, citing the need for more evidence of stabilization and continued momentum with new product initiatives. With the stock trading at 9.5 times its CY26 enterprise value to sales, the firm views the risk-reward balance as even.
In other recent news, Snowflake Inc. reported a robust fiscal third-quarter performance, with product revenue rising by 29% to $900 million. The company also saw a significant 55% year-over-year increase in remaining performance obligations, totaling $5.7 billion. Additionally, Snowflake's non-GAAP operating margin improved to 6%, while its net revenue retention rate remained stable at 127%.
Snowflake has raised its full-year product revenue guidance to approximately $3.43 billion. The company's recent developments include the acquisition of DataVolo, set to enhance data connectivity and engineering capabilities, and a partnership with Anthropic to integrate powerful AI models into the Snowflake Cortex.
Evercore ISI has updated its financial outlook on Snowflake, raising the price target to $190 from the previous $170 while maintaining an Outperform rating. Evercore ISI noted the company's recent quarterly performance, which exceeded expectations, as a key factor in their updated outlook. The firm also anticipates potential upward revisions to product revenue growth estimates and expects operating margins to improve.
These are among the recent developments for Snowflake, which continues to focus on cost efficiency and innovation in data engineering and AI technologies.
InvestingPro Insights
Snowflake's recent performance, as highlighted in the article, aligns with several key metrics and insights from InvestingPro. The company's strong revenue growth of 28.9% year-over-year in Q3 is consistent with InvestingPro data showing a 31.21% revenue growth over the last twelve months. This robust growth trajectory supports the company's high revenue valuation multiple, as noted in one of the InvestingPro Tips.
Despite the impressive top-line growth, InvestingPro data reveals that Snowflake is not profitable over the last twelve months, with a negative P/E ratio of -41.7. This aligns with the company's focus on growth over immediate profitability, as evidenced by its aggressive share buybacks mentioned in another InvestingPro Tip.
Interestingly, while the company is currently unprofitable, InvestingPro Tips indicate that analysts predict Snowflake will become profitable this year. This expectation could be driving the market's positive response to the company's performance and outlook.
For investors seeking a deeper understanding of Snowflake's financial position and future prospects, InvestingPro offers 7 additional tips, providing a more comprehensive analysis of the company's potential.
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