Snowflake Inc. (SNOW) reported third-quarter earnings after the bell Wednesday, and the results tell a familiar Wall Street story: beat expectations, issue cautious guidance, watch your stock price sink.

The Numbers Look Good

Snowflake delivered Q3 revenue of $1.21 billion, comfortably ahead of the $1.18 billion analysts were expecting. The AI data cloud company posted adjusted earnings of 35 cents per share, beating the 31-cent consensus estimate.

The growth metrics paint a healthy picture. Total revenue jumped 29% year-over-year, while product revenue hit $1.16 billion, also up 29%. The company's net revenue retention rate came in at 125%, suggesting existing customers are spending more over time. Remaining performance obligations totaled $7.88 billion, up 37% from last year.

Snowflake closed the quarter with 688 customers generating more than $1 million in trailing 12-month product revenue, and the company had approximately $1.94 billion in cash and cash equivalents sitting on the balance sheet.

"Snowflake is the cornerstone for our customers' data and AI strategies, driving real business impact at scale. Snowflake Intelligence, our enterprise AI agent, saw the fastest adoption ramp in Snowflake history and is transforming how businesses interact with their data, delivering real-time, actionable intelligence," said CEO Sridhar Ramaswamy.

The Margin Squeeze

Here's where things get interesting. Snowflake expects fourth-quarter product revenue between $1.195 billion and $1.20 billion, representing roughly 27% year-over-year growth. Solid, but not the issue.

The problem? Operating margin guidance. The company expects adjusted operating margin of just 7% in Q4, a notable decline from the 11% it delivered in Q3. That compression is what sent shares down 7.33% in after-hours trading to $245.58.

Strategic Moves

Beyond the numbers, Snowflake announced several partnership updates alongside earnings. The company highlighted collaborations with Amazon Web Services and Accenture, and revealed an expanded $200 million partnership with Anthropic aimed at bringing agentic AI capabilities to enterprise customers worldwide.

Snowflake executives were scheduled to discuss the quarter in more detail during an earnings call at 5 p.m. ET.