Snowflake stock dips near 8% after weak margin outlook

Snowflake reported a lower-than-expected operating margin outlook, causing its stock to drop as much as 7.9% in after-hours trading.

The company said its adjusted operating income margin for the period ending January will be about 7%, below the 8.5% average estimate from analysts.

Snowflake expects product revenue of around US$1.2 billion, slightly above forecasts.

For the fiscal third quarter ended October 31, product revenue rose 29% to US$1.2 billion, with adjusted profit at 35 cents per share, both above analyst expectations.

Remaining performance obligations climbed 37% to US$7.9 billion.

Snowflake has made four acquisitions this year to strengthen its AI offerings and announced a US$200 million partnership with Anthropic to bring Claude AI models to its platform.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

Margin dip comes from AI and Mergers and Acquisitions (M&A) spend

Snowflake guides Q4 adjusted operating margin to 7% vs 8.5% consensus. Recent growth spend includes TruEra (an AI model evaluation startup) and the intended Datavolo (a data connectivity provider) purchase 1. It committed $200 million to an Anthropic partnership to bring Claude to AWS, Google Cloud, and Microsoft Azure 2.
Non-GAAP (excluding expenses like stock-based compensation) operating margin reached 6% in Q3 1, helped by centralizing teams and trimming management layers 3.
Remaining performance obligations rose 37% to $7.9 billion, and AWS partnership bookings reached $3.9 billion in four quarters, up 68% 1.

Consultancies can meet demand for governed AI with Claude and Snowflake

Claude now runs on Snowflake Cortex AI (Snowflake’s built-in AI services) for more customers 2.
Snowflake Cortex AI covers over 1,000 deployed use cases across 3,200 plus accounts 1. Teams need help with prompt engineering and Retrieval-Augmented Generation (RAG) tied to company data, along with cost control as they process trillions of Claude tokens (units of text) monthly 2.
The Snowflake-Accenture Business Group, a joint go-to-market unit with global consulting firm Accenture, is growing 4. System integrators (consultancies that implement and connect complex software) can ship packages that pair Claude at over 90% accuracy on text to SQL 2 with Snowflake governance to clear procurement and compliance hurdles.