Snowflake Stock Struggles with Growth and Investor Exits

Snowflake's stock, once peaking at $401.89, has now fallen to $170 as growth slows and major investors sell off. Analysts suggest potential for future gains, yet current financial metrics indicate challenges.

Date: 07-03-2025

AI Rating: 5

Snowflake's Financial Struggles and Investor Sentiment

Snowflake's stock has shown significant volatility since its IPO, initially soaring to $401.89 but now trading around $170. The main concerns affecting its stock price stem from the deceleration in product revenue growth and the loss of key investors such as Salesforce and Berkshire Hathaway.

The report indicates that Snowflake's product revenue growth has slowed considerably from over 70% in fiscal 2023 to 38% in fiscal 2024, signaling a strong decline. In Q1 of fiscal 2025, the growth rate is projected to be only 21% to 22%, highlighting concerns about its revenue trajectory. Furthermore, the net revenue retention rate, a crucial metric that indicates growth from existing customers, fell from 168% in fiscal 2021 to 131% in fiscal 2024, suggesting customer spending is waning amid broader economic challenges.

**Profit Margins and Free Cash Flow**: Snowflake's financial health shows some signs of stabilizing, with adjusted product gross margins reported at 78%. However, as of Q1 2025, its adjusted operating margin is only 4%, indicating potential inefficiencies. The adjusted free cash flow (FCF) margin of 44% reveals that while cash generation has stabilized, there is still a notable decline compared to previous measures. The overall sentiment among investors could be influenced by these margins and the company's ability to generate sustainable free cash flow moving forward.

While there are projections for continued growth, especially with emerging trends in AI, the current metrics may dampen investor confidence. Analysts predict a 39% growth in adjusted earnings per share for fiscal 2026, but with a hefty price-to-earnings ratio already baked into its stock price, the pathway for substantial appreciation remains contentious for investors.

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