why is snowflake stock falling: key reasons

A clear, data-driven look at why Snowflake (SNOW) shares dropped after its December 2025 quarterly report—covering guidance, margins, valuation, consumption lumpiness, analyst reactions, and key me...

2025-08-24 09:33:00

By Emma Shah

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Why is Snowflake Stock Falling

Short answer: Snowflake (SNOW) shares fell after a December 2025 quarterly report and forward guidance that signalled slower near-term consumption growth and tighter operating margins than many investors expected. The selloff reflected a mix of guidance shortfalls, margin concerns tied to AI investments, valuation sensitivity, and the inherent lumpiness of a consumption-based revenue model.

Company background

Snowflake Inc. operates a cloud data platform—often described as a "data cloud"—that lets enterprises store, process and analyze data across cloud providers using a consumption-based pricing model. Investors view Snowflake as an AI and data-infrastructure play because the platform supports large-scale data workloads, Snowpark (developer tools), Cortex and enterprise AI agents (announced/expanded integrations). Snowflake’s product mix centers on product revenue (consumption and related services) plus subscription and support components, and key enterprise indicators include net revenue retention (NRR), remaining performance obligations (RPO) and consumption trends tied to customer cloud spending.

As of December 2025, the market treated Snowflake as a high-growth, premium software name—making the stock especially sensitive to any signs of growth deceleration or margin pressure.

Recent catalyst — earnings and guidance (December 2025)

Reported results

As of December 11, 2025, according to Snowflake's fiscal Q3 2026 release and public reporting by major outlets, the company reported topline results that broadly beat consensus estimates for the quarter but exposed a clear sequential deceleration in product revenue growth. Media coverage (e.g., Yahoo Finance, Barron's, TheStreet) pointed to the following headline takeaways from the quarter:

Revenue and product revenue: revenue beat consensus while product revenue growth slowed to roughly the high-20s percentage range year-over-year (reports cited ~29% product revenue growth), a notable step down from prior quarters' higher growth rates.
Adjusted EPS: adjusted non-GAAP EPS showed mixed results — the company managed to remain near or slightly above consensus on an adjusted basis, though investors focused less on EPS than on underlying revenue composition and forward commentary.
RPO and NRR: remaining performance obligations (RPO) continued to grow, indicating contracted future revenue, and net revenue retention stayed elevated relative to legacy enterprise software levels, but analysts flagged the pace of RPO expansion as slower than some models assumed.

Multiple outlets reported that, although the quarter technically beat on some metrics, the sequential slowdown in consumption-driven product revenue and the guidance commentary changed investor expectations.

Forward guidance and margin outlook

In its December 2025 guidance, Snowflake provided a Q4 product-revenue guidance range and a near-term operating-margin outlook that was noticeably more conservative than many investors had expected. Reports from Investopedia, MarketScreener, and SiliconANGLE highlighted that:

Product-revenue guidance for the upcoming quarter implied slower YoY product revenue growth versus the recent run rate, creating an expectations gap for a company priced for acceleration.
Management signalled a willingness to invest more heavily in AI partnerships and infrastructure, and provided margin guidance that suggested a temporary compression of operating margins in the near term.

The combination of slower top-line guidance and a lower near-term margin profile was central to the negative market reaction.

Announcements and strategic deals

The company disclosed strategic partnerships and AI integrations—coverage cited a multiyear partnership with Anthropic-style providers and continued work to commercialize enterprise AI agents via Snowpark and Cortex. While these deals support the longer-term narrative that Snowflake sits at the intersection of data and AI, management also flagged that monetization of some AI offerings would take time and require upfront investment. Media reporting framed these announcements as positive for long-term positioning but as contributors to near-term spending and margin pressure.

Primary reasons the stock fell

Slower-than-expected product revenue growth / growth cooldown

A primary driver of the decline was the sequential deceleration in product revenue growth. Many investors had priced Snowflake for rapid consumption acceleration as enterprises migrated AI workloads to Snowflake’s platform. When product-revenue growth came in near the high-20s percentage range (about ~29% YoY as widely reported), that created a material expectations gap for a premium growth stock. For context, companies trading at high forward multiples depend on sustained high growth to validate valuation; even moderate slowdowns can trigger outsized share-price reactions.

The question "why is snowflake stock falling" often leads back to this growth mismatch: investors were reacting not to a failing business but to a company that, for the near term, may not grow as quickly as the market had priced in.

Weak near-term guidance and “normalisation” expectations

Management’s forward guidance signalled a slower ramp or more lumpy consumption patterns than had been expected. Reports emphasized that guidance implied a normalization of consumption-based revenue after a period of stronger acceleration. For a high-multiple stock, guidance that points to a slower acceleration is frequently interpreted as a forward earnings and growth risk—and that risk was a core reason investors sold shares.

Margin concerns and increased AI-related spending

Snowflake’s commentary on margins—specifically guidance implying lower near-term operating margins—raised concerns that the company will prioritize growth and AI investments over short-term profitability. While many investors accept temporary margin compression to capture long-term market share, the market reaction reflected worries that AI-related spending (compute, partnerships, sales and engineering to support enterprise AI workloads) might be larger or more prolonged than models assumed. Thus, margin guidance acted as a catalyst for the selloff.

High valuation and sensitivity to any growth softness

Snowflake has historically traded at premium forward multiples relative to many enterprise software peers because of its growth profile and strategic position in data and AI infrastructure. That valuation profile makes the stock highly sensitive to misses or softer guidance. When a company has very high future growth expectations priced in, even small downgrades to growth or margin assumptions can lead to sizable percentage price declines.

Consumption-model lumpiness and enterprise budget pacing

Snowflake’s consumption-based model—where customers pay as they consume storage, compute and value-added services—can produce volatile quarter-to-quarter revenue compared to subscription-only models. Enterprise spending on cloud and AI workloads is often influenced by budget timing, project cycles and optimization efforts. The market interpreted some of the reported softness as the result of pacing or lumpiness in large customers’ cloud and AI deployments, which can cause uneven jumps and dips in reported product revenue. This structural characteristic increases headline volatility and explains part of "why is snowflake stock falling" when quarter-to-quarter consumption cools.

Market sentiment, technicals and peer comparisons

Short-term selling pressure was amplified by market sentiment and technical factors. After a strong year-to-date run, profit-taking was evident. Technical breaches of key trading levels triggered additional selling in a volatile market. Some contemporaneous peer reports (with other cloud/AI infrastructure players showing stronger consumption acceleration) prompted relative-performance selling, even though Snowflake’s long-term positioning remains intact. Combined, these forces intensified the downward move after the December report.

Analyst and market reactions

Analyst responses were mixed across buy/hold/sell recommendations. Several firms reiterated bullish long-term theses—citing strong RPO, healthy net revenue retention and strategic AI partnerships—while others issued more cautious notes, lowering near-term estimates or trimming price targets to reflect slower-than-expected consumption growth and margin pressure. Coverage from Investor’s Business Daily and Barron’s documented a range of reactions: some analysts emphasized that the quarter was a “soft patch,” while others argued the guidance required re-rating expectations.

Market commentary noted that the average of analyst price targets moved modestly lower in the days after the report, and headline downgrades from a handful of influential sell-side firms added to negative sentiment. The overall narrative from analysts split along a timing axis: bullish on the long-term TAM (total addressable market) for data+AI, cautious on the pace of near-term monetization and margin recovery.

Financial and operational indicators to watch

Investors and analysts following Snowflake should watch a set of metrics that most directly reflect consumption dynamics, contract health and profitability:

Product revenue growth (YoY and sequential): the primary measure of consumption demand.
Remaining performance obligations (RPO): shows contracted future revenue and the health of signed deals.
Net revenue retention (NRR): indicates whether existing customers are expanding or contracting spend.
Consumption trends and average spend per customer: to detect whether AI workloads are adding sustained consumption.
Operating margin (adjusted and GAAP) and any management commentary on the timing of margin recovery.
Stock-based compensation and non-GAAP adjustments: to reconcile adjusted profitability with GAAP cash costs.
Free cash flow: to see if the company can fund investments organically.
Major customer activity and concentration: large customers’ pacing can explain lumpiness.

Tracking these indicators alongside management’s quarterly commentary will help answer the ongoing question of "why is snowflake stock falling" as future releases provide more clarity on consumption and margin trajectories.

Short-term vs. long-term implications

Short-term implications

Volatility: expect continued price swings as the market digests successive quarters of guidance and results.
Further downside risk: if subsequent guides continue to show deceleration or larger-than-expected margin pressure, the stock may face additional downside.
Trading opportunities: short-term traders may react to technical levels and headline risk; longer-term investors often see such volatility as an entry point if fundamentals align with their thesis.

Long-term considerations

Structural position in data + AI: Snowflake’s platform remains strategically positioned to capture growth in data workloads and enterprise AI, which supports a constructive long-term view for many investors.
Contracted RPO and recurring revenue characteristics: durable contract metrics can provide a floor to downside in extended uncertainty.
Pace of AI monetization: the timeline for converting AI integrations and partnerships into steady consumption revenue is a crucial long-term variable.

The distinction is important: short-term price movements often reflect changing expectations and technical momentum, while long-term outcomes hinge on execution, customer adoption of AI workloads on Snowflake, and margins over time.

Risk factors and uncertainties

Several risks could continue to weigh on Snowflake’s stock performance:

Continued slowdown in enterprise cloud spend or delayed AI project rollouts could reduce consumption.
Longer-than-expected timelines to monetize AI integrations and partnerships could compress margins and delay revenue realization.
Intensifying competition from other data and cloud infrastructure providers may pressure pricing or feature parity.
Macro and market risk (interest rates, risk-on/risk-off sentiment) can amplify price moves in high-multiple growth names.
Execution risk on new product commercialization, including technical integration, customer adoption speed, and professional services capacity.

These uncertainties contribute to why many investors asked, in the days after the announcement, whether the company faced structural headwinds or merely a temporary growth normalization.

Timeline of recent price movements (event-based)

December 11, 2025 — Earnings release and call: Snowflake reported fiscal Q3 2026 results and provided Q4 guidance. Coverage by Yahoo Finance, Barron’s and TheStreet summarized the beat-and-guide story.
After-hours Dec 11, 2025 — Initial selloff: shares dropped meaningfully in after-hours trading as guidance signalled slower product revenue growth and margin pressure. Multiple outlets recorded a notable percentage decline in after-hours trade.
Dec 12, 2025 — Pre-market continuation: early trading reflected continuation of the after-hours move before regular session volatility moderated some intraday swings.
Dec 12–14, 2025 — Analyst note revisions and media commentary: several analysts issued notes reiterating long-term views or lowering near-term estimates; media discussion highlighted AI spending and consumption lumpiness as framing explanations for the move.

(Exact percent moves and intraday volumes were covered by market reports; see the Further reading and primary sources section for dispatch dates and outlets.)

What investors asked and common market narratives

After the release, common investor questions and narratives included:

"Is AI investment hurting profitability?" — Management’s commentary that AI investments would continue to accelerate led some investors to ask whether short-term margin compression was baked in.
"Is growth structurally slowing or just lumpy?" — The key debate centered on whether the deceleration reflected a one- or two-quarter pacing effect versus a structural slowdown in demand.
"Is the valuation justified?" — Given the premium multiples Snowflake trades at, investors probed whether a re-rate was warranted if growth stays at lower levels for longer.
"How durable are RPO and NRR?" — Analysts and investors looked to signs that contract flows and retention would re-accelerate.

These narratives shaped the market’s thinking about both immediate price action and implications for longer-term expectations.

Analyst and media excerpts (selected, dated)

As of December 12, 2025, Yahoo Finance reported that Snowflake’s guidance and margin commentary prompted a notable after-hours selloff, characterizing the move as investor disappointment over near-term dynamics.
As of December 13, 2025, Barron’s coverage summarized analyst responses highlighting the split between long-term optimism on AI positioning and short-term caution on monetization speed.
As of December 14, 2025, Investopedia and Finimize published explainers focused on consumption-model volatility and valuation sensitivity as core reasons behind the share decline.

Notes on scope and evidence

The immediate share decline after Snowflake’s December 2025 report was driven largely by a combination of near-term guidance that implied slower product revenue growth and margin commentary that highlighted increased AI-related spending. Media reporting at the time emphasized that the company’s long-term strategic position in enterprise data and AI remained a positive, but investor reaction focused on the timing and pace of monetization and margin recovery. This article presents a neutral summary of prevailing market analysis and does not offer investment advice. Sources referenced include company filings and public reporting by the outlets listed above (with coverage dated across December 11–14, 2025).

How to continue researching

If you are tracking the company and the question "why is snowflake stock falling," monitor the next quarterly release for updated product revenue growth, RPO trends, NRR, and management commentary on AI monetization and margins. For trading or custody, Bitget provides spot trading services and custody features; for on-chain wallet needs, consider Bitget Wallet for managing digital assets and related integrations.

Further reading: review Snowflake’s investor relations materials and the December 2025 analyst notes compiled by major financial outlets for detailed, dated figures.

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