What Happened?
Shares of data warehouse-as-a-service Snowflake (NYSE: SNOW) fell 5.2% in the morning session after anxiety and uncertainty rattled markets as the major stock indices pulled back in the morning session amid concerns about "reciprocal tariffs" to be announced later in the week. The planned tariffs, scheduled for April 2, 2025 (dubbed Liberation Day), were targeted at all countries where the United States had a trade deficit.
Simply put, if a US trading partner imposed higher tariffs on American goods than the US did on theirs, the "reciprocal tariffs" would apply.
The prospect of heightened trade tensions seemed to have stoked fears of stagflation (slower economic growth and elevated inflation) as the anticipated tariffs will likely raise input costs for businesses.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Snowflake? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Snowflake’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 32.4% on the news that the company reported a strong "beat and raise" quarter. It was encouraging to see Snowflake exceed analysts' revenue expectations with a net revenue retention rate (NRR) that didn't fall at all from the previous quarter. During the earnings call, Snowflake emphasized its commitment to simplifying data workflows and integrating AI capabilities, such as Snowflake Cortex. These initiatives drove competitive displacement and increased customer adoption.
Additionally, new products like Snowpark are contributing to revenue growth. Snowpark was expected to account for roughly 3% of total product revenue.
On the AI front, Snowflake reported over 1,000 generative AI use cases deployed in production, and 3,200 customers utilizing its platform for AI and machine learning applications. This is another aspect of the business with a strong potential to accelerate growth as customers recognize the value that AI adds to their operations.
Moving to the bottom line, operating margin in the quarter beat, and combined with the top-line improvements and cost efficiencies, EPS easily surpassed analysts' estimates.
Looking ahead, Q4 product revenue guidance was ahead of analysts' expectations, adding to the good news. For the full year, guidance for product revenue, gross margin, and operating margin were all raised. Overall, this was a very good quarter, a relief for a company that had shown some uneven earnings performance in the previous year.
Snowflake is down 7.7% since the beginning of the year, and at $145.42 per share, it is trading 24.6% below its 52-week high of $192.78 from February 2025. Investors who bought $1,000 worth of Snowflake’s shares at the IPO in September 2020 would now be looking at an investment worth $572.68.
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