Snowflake's forecast has brought down the stock. Do they have any chance of continuing the rally?
Snowflake, a cloud platform for storing, processing and analyzing data, presented an operating margin forecast that was below analysts' expectations. This increased investors' concerns about the profitability of new tools based on artificial intelligence, Bloomberg writes.
Snowflake said its adjusted operating margin for the fourth quarter of fiscal 2026, ending in January, will be about 7%. Analysts on average had expected a figure of 8.5%, according to data compiled by Bloomberg. The company expects product solutions revenue of $1.19 billion to $1.2 billion in the fourth quarter, a 27% increase. That forecast was above analysts' estimate of $1.18 billion, according to LSEG data cited by Reuters.
The company's shares were down nearly 9% after the forecast was released. Since the beginning of the year, they have risen more than 70%, outperforming the Nasdaq index of technology companies, which is up nearly 22%.
What else the company said in the report
For its fiscal third quarter, which ended in October, product solutions revenue grew 29% to $1.16 billion. Product solutions sales accounted for about 95% of the company's total revenue.
Adjusted earnings came in at 35 cents per share, while on average analysts had expected earnings of 31 cents per share on product revenue of about $1.14 billion, Bloomberg notes.
What are the analysts saying?
"Longer term, we are encouraged by the focus on innovation and execution quality under the leadership of the new CEO (Sridhar Ramaswamy, appointed in early 2024 - Oninvest). However, we remain concerned about increasing competition in their key market," Bernstein analyst Firoz Valligi wrote ahead of the results release.
"Given the rapid rise in the share price this year, investors were expecting a growth forecast above 30 percent. We believe this growth will manifest itself in the next quarter, allowing the stock to continue to appreciate," Reuters quoted D.A. Davidson analyst Gill Luria as saying.
Out of 51 analysts tracking the company's securities, 84% advise to buy them. About 12% take a neutral stance, 4% advise to sell.
This article was AI-translated and verified by a human editor
