Snowflake Falls Below IPO Price: Time to Buy or Sell?

Snowflakehis (SNOW 1.85%) The stock fell 15% on August 22 after it released its latest earnings report. For the second quarter of fiscal 2025, which ended July 31, the cloud storage company’s revenue rose 29% year over year to $869 million and beat analysts’ estimates by 19 millions of dollars. Adjusted net income fell 21% to $64 million, or $0.18 per share, but still beat the consensus forecast by two cents.

Snowflake beat Wall Street expectations, but its declining retention rates, weak outlook and recent data breach weighed on the stock. The sudden departure of CEO Frank Slootman in February and Berkshire HathawayIts recent exit from the stock has cast even more dark clouds over its future. Snowflake is now trading slightly below its $120 IPO price, but is it a good time to buy or sell the stock?

Image source: Getty Images.

What does Snowflake do?

Large organizations often spread their data across a wide range of software, services and computing platforms. This fragmentation can create ineffective “silos” and make data-driven decision making difficult. To remedy this, companies often direct their data to cloud-based data warehouses, which clean and organize all this information so that it can be easily accessed by third-party data visualization and analysis applications.

Amazon, Microsoftand other cloud leaders already integrate data warehouses into their own infrastructure platforms, but their services often lock their customers into their broader ecosystems. This is not an ideal solution for companies that rely on multiple cloud infrastructure platforms.

Snowflake addresses this problem by running its cloud-based data warehouse on Amazon Web Services (AWS), Microsoft Azure, and other cloud platforms. This flexibility, along with a usage-based pricing system that charges customers only for the storage and computing power they actually need, drove its initial growth.

Why is Snowflake’s stock melting?

Snowflake’s revenue, which makes up the bulk of its top line, grew 120% in fiscal 2021 (which ended in January 2021) and 106% in fiscal 2022. Its net revenue retention rate , which measures year-over-year growth per customer. over a 12-month period, it also rose from 168% in FY2021 to 178% in FY2022.

These growth rates drew a bull run to Snowflake when it went public on September 16, 2020. It doubled from its IPO price of $120 to $245 in the first trade and eventually climbed to an all-time high of $401.89 in November. 16, 2021. But at its peak, the enterprise was valued at $119 billion — or 43 times the revenue it would generate in fiscal 2023.

Those nosebleed ratings set him up for a steep decline as his revenue growth cooled. In fiscal 2023, its product revenue still grew 70% — but its net revenue retention rate fell to 158%. In fiscal 2024, its product revenue grew just 38% as its net earnings retention rate fell to 131%. This deceleration has continued over the past year.

Data source: Snowflake. YOY = Year Over Year.

For the third quarter, Snowflake expects its product revenue to grow just 22% year-over-year. Analysts expect its total revenue to rise 24% for the full year. Snowflake attributes this slowdown mainly to macro headwinds and insists that recent data breaches related to its data warehouses have not had a significant impact on its business. During the 2025 second quarter conference call, CEO Sridhar Ramaswamy said that “the problem was not on Snowflake’s side” and the company found “no evidence” that its platform was “breached or compromised.” Instead, he blamed the intrusion on cybersecurity weaknesses at some of his customers.

However, Snowflake’s margins are still shrinking as its growth cools. In the second quarter, adjusted gross product, operating and free cash flow (FCF) margins narrowed year-over-year — suggesting it is losing pricing power in its niche market.

Data source: Snowflake.

Snowflake expects adjusted operating margin to fall to just 3 percent in the third quarter as it ramps up investments in research and development and go-to-market. Analysts expect adjusted EPS to fall 37% for the full year as it remains unprofitable on a generally accepted accounting principles (GAAP) basis. That red ink could limit his gains as long as interest rates remain high.

Is It Time to Buy or Sell Snowflake Stock?

At $115, Snowflake stock still looks expensive at 10 times this year’s sales. It also likely won’t bottom out until its revenue growth, retention rates and margins stabilize for several consecutive quarters.

That’s probably why its members sold more than four times as much stock as they bought in the past 12 months, and why Berkshire liquidated its stake this year. So for now, I think it’s still smarter to avoid or sell Snowflake than to buy it.