After the market closed yesterday, Snowflake (SNOW 11.45%) reported results for the third quarter of its 2026 fiscal year -- a period which ended Oct. 31. Snowflake posted non-GAAP (adjusted) earnings per share of $0.35 on sales of $1.21 billion, beating the average analyst estimate's call for per-share earnings of $0.31 on sales of $1.18 billion.
Notably, the company also announced that it had entered into a new $200 million contract with Anthropic. The multi-year deal expands on the previous partnership between the companies and will see Snowflake increase the integration of Anthropic's Claude AI with its own Cortex AI platform.
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Despite news of the partnership and substantial sales and earnings beats in fiscal Q3, Snowflake got hit with big sell-offs following the company's earnings release. The stock ended the day's trading down 11.4%.
AI helped power strong growth for Snowflake in fiscal Q3
Anthropic has emerged as a hot player in the artificial intelligence (AI) space, and the announcement of an expanded contract with the company represents a meaningful win for Snowflake. News of the deal arrived with an announcement from Snowflake that it had reached its $100 million AI revenue run rate target one quarter earlier than expected, and growth looked strong overall at the business.
NYSE: SNOW
Key Data Points
Product revenue for fiscal Q3 increased 29% year over year to reach $1.16 billion. Revenue was up approximately 28% year over year in the quarter, and remaining performance obligations (RPO) jumped 37% annually to reach $7.88 billion. Snowflake closed out the period with a net-revenue-retention rate of 125% and managed to add 615 new customers in the period, but that still wasn't enough to support gains for the stock.
Investors sold out of Snowflake in response to a handful of factors
Despite posting an adjusted earnings beat, performance looked less stellar on a GAAP basis. Snowflake posted a total operating loss of $329.5 million in the quarter, and heavy expenditures on sales and marketing put otherwise impressive revenue growth in a less favorable light for some investors. Snowflake has also continued to rely heavily on stock-based compensation in order to fund its operations.
Investors also weren't thrilled with the company's forward guidance. Snowflake is targeting product revenue between $1.195 billion and $1.2 billion for the current quarter. While the guidance range came in above the $1.9 billion in product revenue called for by the average analyst estimate, some shareholders were looking for more aggressive guidance.
