Snowflake's product revenue growth slows, causing stock to decline 13%

• On Thursday, Snowflake's stock price decreased, following the release of their fiscal second-quarter 2025 earnings report which indicated a slowdown in product revenue growth compared to previous quarters.
• Snowflake's total revenue, primarily driven by product revenue, reached $829 million for the year, representing a 30% increase compared to the previous year.
• Snowflake's results were deemed satisfactory by Morgan Stanley analysts, yet they believed there was room for improvement.

On Thursday, shares of the data cloud analytics company dropped 13% after reporting fiscal second-quarter 2025 earnings that surpassed Wall Street's expectations but exhibited a slowdown in product revenue growth compared to previous quarters.

Snowflake reported $869 million in revenue, exceeding the $851 million forecast by analysts surveyed by LSEG. The company's product revenue, which accounts for the majority of its sales, increased by 30% year over year. However, this growth rate was lower than the 34% increase reported in the fiscal first quarter.

During the same period a year ago, the company's net loss was $227 million, or a loss of 69 cents per share, but it widened to $317 million, or a 95 cent loss per share, in the following year.

Morgan Stanley analysts stated that Snowflake's results were satisfactory, "yet possibly not sufficient." They added that the company's smaller product revenue and slowing growth rate may not motivate weary investors.

While the analysts believe that Snowflake's new generative artificial intelligence portfolio has the potential to contribute to outperformance in the future, it will initially depend on its core data warehousing business for revenue.

The analysts wrote in a note Thursday that the 2% product revenue beat in Q2, down from 5% in Q1, and the product revenue growth dipping further to 29.5% YoY likely sows enough doubt in the investor conversation to keep shares under pressure in the near-term.

The analysts at Barclays stated that Snowflake's second-quarter results would not significantly impact the company's investment case. They kept their equal weight rating on the stock.

The analysts reported that investors closely monitored the company's product revenue after the cyberattack and CrowdStrike outage during the quarter. However, they noted that the potential large headwinds did not materialize, which was a positive sign for the company.

Although the 30% y/y product growth rate is lower than the 33-34% growth seen in the previous two quarters, the analysts view the 30% level and raised guide as impressive, particularly given the lower valuation.

--CNBC's Michael Bloom contributed to this report