Snowflake shares plunged 11% on December 4, 2025, despite beating Q3 earnings—as the cloud data giant warned that aggressive AI investments and steep customer discounts will slow near-term growth. Yet 16 brokerages just raised their price targets. Here’s what investors are missing.
Quick Takeaways
- Snowflake stock crashed 11% on December 4, erasing $10 billion in market value after Q4 revenue guidance disappointed
- Currently trading at $226.78 (down another 3.4% today), but still up 70% in 2025
- Beat Q3 expectations with $1.21 billion revenue (up 28.7% year-over-year) and $0.35 EPS (12.5% above estimates)
- Q4 forecast shows 27% growth—below investor expectations of 30%+—due to discounts on long-term contracts
- Signed $200 million AI deal with Anthropic to integrate Claude models into platform
- Over 7,300 businesses now use Snowflake’s AI features weekly
- 16 brokerages raised price targets despite the selloff, with some seeing upside to $295
What Just Happened?
On December 3, Snowflake reported third-quarter earnings that topped Wall Street forecasts across the board. Revenue hit $1.21 billion (up 29%), and adjusted earnings of $0.35 per share beat expectations by 12.5%. Product revenue—which makes up 95% of total sales—grew 29% to $1.14 billion.
But investors weren’t celebrating. The company guided fourth-quarter product revenue growth at just 27%, falling short of the 30%+ growth rate investors expected after rivals like Datadog, Confluent, and MongoDB posted stronger numbers. CEO Sridhar Ramaswamy explained the company is offering “more advantageous pricing for larger volumes or extended contracts” that won’t boost revenue immediately.
The stock tanked 11% on December 4—its worst single-day drop since February 2024.
The Numbers Behind the Selloff
| Metric | Q3 2025 Result | Analyst Expectation | Beat/Miss |
|---|---|---|---|
| Revenue | $1.21 billion | Below expectations | Beat |
| Product Revenue Growth | 29% | 30%+ | Miss |
| Earnings Per Share | $0.35 | $0.31 | Beat (+12.5%) |
| Q4 Product Revenue Guidance | $1.19–$1.20 billion (27%) | 30%+ growth | Miss |
| Stock Price (Dec 4) | $234.77 (close) | — | Down 11% |
| Stock Price (Dec 5) | $226.78 | — | Down 3.4% |
| YTD Performance | +70% | — | Outperforming |
| Market Cap | $75.9 billion | Lost $10B Dec 4 | — |
| Customers Using AI | 7,300+ weekly | — | Growing |
Why Analysts Are Still Bullish
Despite the stock crash, at least 16 brokerages raised their price targets following the earnings report. Here’s why Wall Street isn’t panicking:
1. AI Adoption Is Exploding—Just Not Showing Up in Revenue Yet
Snowflake announced that over 7,300 businesses now use its AI features weekly, and its new product Snowflake Intelligence gained 1,200 customers within a month of launch. The $200 million multi-year deal with Anthropic brings advanced Claude AI models to Snowflake’s platform for complex reasoning and analysis.
“While AI remains very early innings, we are encouraged by signs of Snowflake showing traction with AI use cases.”
— Truist Securities analysts
2. The Growth Slowdown Is Strategic, Not Structural
Snowflake’s Q4 guidance of 27% growth reflects deliberate pricing choices—not weakening demand. The company is locking in large, multi-year contracts with volume discounts that sacrifice short-term revenue for long-term customer relationships.
Analyst Gil Luria from D.A. Davidson noted: “Given the stock’s big run this year, investors were hoping for guidance above 30%. We believe this growth will materialize in subsequent quarters and allow the stock to continue appreciating”.
3. Snowflake Is Still Crushing the Competition
Despite the disappointed tone, Snowflake’s 27% projected growth still outpaces most enterprise software companies. The company’s net revenue retention rate remains at 125%, meaning existing customers are spending 25% more year-over-year.
Rosenblatt raised its price target to $275, while Oppenheimer maintained an “outperform” rating with a $295 target, stating AI investments may pressure short-term margins but position Snowflake for explosive long-term growth.
The Risk: AI Spending Could Crush Margins
The biggest concern isn’t growth—it’s profitability. Snowflake’s aggressive AI investments are expected to pressure margins in coming quarters, raising fears that the company is spending too much too fast.
The stock trades at a nosebleed valuation of 165 times forward earnings, compared to 65 times for Datadog and 76 times for MongoDB. If AI revenue doesn’t accelerate soon, that premium valuation could collapse.
What Happens Next?
Snowflake’s fate hinges on whether its massive AI bets pay off in 2026. With Microsoft Azure growing 40% on Snowflake’s platform and thousands of businesses adopting AI features, the ingredients for a comeback are in place.
But investors need proof. The next earnings report (likely February 2026) will be critical—if AI revenue accelerates and margins stabilize, the stock could rocket back toward its $280 all-time high. If not, the 70% year-to-date gain could evaporate fast.
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