To The Moon

$Snowflake(SNOW)$ surged 20% after hours after it beat market expectations and lifted guidance in Q3 FY2025.Ever since Warren Buffett's $Berkshire Hathaway(BRK.B)$ liquidated its position in SNOW in Q2, it has been on a path back up.

Financials vs. market expectations

• Q3 revenue was $942 million, up 28.3% year-over-year and significantly ahead of market expectations of $898 million.

• Non-GAAP EPS was $0.20, again beating market expectations of $0.15.

Business Performance by Segment

• Product Revenue: Third quarter product revenue reached $900.0 million, an increase of 29% year-over-year, exceeding market estimates of $856.6 million and reflecting Snowflake's success in product expansion and customer attraction.

  Remaining Performance Obligations: At the end of the reporting period, the company's remaining performance obligations were $5.7 billion, ahead of the average market estimate of approximately $5.2 billion, demonstrating the potential for future revenue.

  Customer base growth: currently has 542 customers that have spent more than $1 million in the last 12 months, up from 510 customers in the prior quarter.

  

Company Guidance

For Q4, the company forecasts product revenues in the range of $906 million to $911 million, well ahead of expectations of $890.7 million, and full-year product revenues of $3.43 billion versus expectations of $3.36 billion.

In addition, the company announced plans to acquire Datavolo to accelerate the creation, management and observability of multimodal data pipelines for enterprise artificial intelligence.And it confirmed the signing of a multi-year strategic partnership with Anthropic that will enable Snowflake to offer Anthropic's Claude large-scale language model to its customers.The Claude 3.5 Sonnet model will be available within Snowflake security and governance on AWS.

Investment Highlights

Reasons for Exceeding Expectations

1. Successful new product launches: Snowflake launched a range of new products, particularly generative AI-based tools that enable customers to analyze unstructured data more efficiently, and the new products were warmly received by the market, which drove sales growth.

   

2. Strong customer demand: Snowflake has been able to attract more large customers as the demand for data analytics in organizations increases.Sridhar Ramaswamy, the company's chief executive officer, cited customer acceptance of its ease of use and robust functionality as important factors driving revenue growth.

3. Effective cost management: the company took stricter measures to control costs, which led to an improvement in operating margins to 6%, further enhancing profitability.

4. Cooperation with Anthropic.

Investor Concerns

1. Increased Competitive Pressure: Snowflake is facing pressure from competitors such as Databricks and Microsoft, which are also active in the cloud computing and data analytics space.Although Snowflake emphasizes the ease of use of its platform, competition remains an issue that cannot be ignored.

2. Influence of Leadership Changes on Confidence: Recent leadership changes in the company may lead to investor skepticism about its strategic direction and ability to execute, which may also affect share price performance.

3. Market acceptance of new products: It will be key to observe how newly launched products perform in the market and their contribution to overall revenue growth.

4. Customer retention and expansion: As the number of customers increases, how existing customers are retained and cross-selling is achieved will have a direct impact on future revenues.

5. Impact of the macroeconomic environment: Uncertainty in the global economy may affect business spending, so attention needs to be paid to the potential impact of macroeconomic changes on Snowflake's business.