Sometimes being good isn't good enough. Snowflake Inc. (SNOW) learned that lesson the hard way on Thursday, watching its shares tank in early trading despite posting results that would normally deserve applause. The cloud data platform beat third-quarter estimates, but when you're following stellar performances from Datadog Inc. (DDOG), Confluent Inc. (CFLT), and MongoDB Inc. (MDB), apparently just "good" doesn't cut it anymore.

What the Analysts Are Saying

The analyst community remained generally optimistic, with a wave of firms raising their price targets even as the stock struggled. Here's the scorecard:

Cantor Fitzgerald's Thomas Blakey kept his Overweight rating and bumped the price target from $275 to $278. Scotiabank's Patrick Colville maintained Sector Outperform and raised his target from $280 to $290. Canaccord Genuity's Kingsley Crane stuck with his Buy rating and lifted the target from $260 to $270.

KeyBanc Capital Markets analyst Eric Heath reaffirmed Overweight and pushed his target from $275 to $285. JPMorgan's Mark Murphy held onto his Overweight rating while increasing the price target from $255 to $268. Goldman Sachs analyst Kash Rangan maintained his Buy rating and took the target higher from $260 to $275.

Wedbush's Dan Ives kept his Outperform rating with a $270 target unchanged. DA Davidson's Gil Luria maintained his Buy rating and $300 price target. BTIG's Gray Powell stuck with his Buy rating and $312 target. Needham analyst Mike Cikos held his Buy rating and $280 price target steady. Guggenheim Securities' John DiFucci reiterated his Neutral stance, while BofA Securities analyst Brad Sills reaffirmed his Buy rating and $310 price target.

The Bookings Boom

Here's where things get interesting. Snowflake posted some genuinely impressive numbers that would have been headline-worthy in any other quarter. The company brought in $7.9 billion in remaining performance obligations (RPO), with growth accelerating to 37.5% from 32.5% the previous quarter.

Bookings absolutely snowballed—pun intended. The company added nearly $1 billion in net new RPO during the quarter, an 89% jump from the year-ago period. Cantor Fitzgerald's Blakey highlighted that customers continue expanding their usage on the platform, a sign of genuine product stickiness.

The real headline: Snowflake announced $100 million in AI annual recurring revenue one quarter earlier than expected. The company's AI products, including Cortex and Snowflake Intelligence, represent the fastest ramping new product in Snowflake's history. According to Canaccord Genuity's Crane, AI products drove roughly 50% of bookings in the third quarter. That's not a typo—half of all new business came from AI-related products.

The Deceleration Disappointment

So why did the stock tank? Context matters. Scotiabank's Colville pointed out that Snowflake's year-over-year product revenue growth decelerated sequentially by around 3 percentage points, and "the magnitude of the beat wasn't as strong as last quarter." After watching Datadog, Confluent, and MongoDB deliver blockbuster results, investors were primed for another jaw-dropping performance from Snowflake.

Product revenue grew 29% year-over-year to $1.16 billion, beating the consensus estimate of $1.18 billion according to some analysts (KeyBanc's Heath cited revenue of $1,213 million versus consensus of $1,182 million). The issue? That growth rate dipped below 30%, and investors had gotten used to better.

JPMorgan's Murphy noted that the product revenue beat was lower than the previous quarter's outsized upside. "Q3 product revenue upside of approximately 3% versus the midpoint of guidance is still a healthy beat, in our view," he wrote, but acknowledged that investors were surprised after the second quarter's stronger performance.

Goldman Sachs' Rangan pointed out that product revenue came in 2.3% above consensus, while fourth-quarter guidance was 1.1% higher than estimates. Operating margin of 7% missed expectations of 8.4%, another potential concern for investors focused on profitability.

The Guidance and Margin Story

Management guided to fourth-quarter product revenue of $1,195-$1,200 million, above the consensus of $1,181 million, according to KeyBanc's Heath. The fiscal 2026 product revenue guidance got raised to $4,446 million, up $51 million from the prior outlook and ahead of consensus expectations of $4,396 million.

Scotiabank's Colville noted that "Snowflake's operating margin beat in 3Q was a bit skinny and management is raising the F26 guide by less than the beat." Still, he said the company's guidance reflects a "rapid snap back" in the fourth quarter.

The margin picture drew mixed reactions. DA Davidson's Luria observed that non-GAAP operating margins contracted to 10.8% from 11.1% in the previous quarter. Meanwhile, Wedbush's Ives noted that non-GAAP operating margin of 10.8% still beat consensus of 9.3%, and argued that the company is well-positioned to "stabilize margins in the near-term as it invests to capture the massive growth opportunity taking place."

The AI Debate

Artificial intelligence dominated the conversation, but not everyone's buying the hype equally. Goldman Sachs' Rangan emphasized that "Snowflake Intelligence is seeing the fastest adoption ramp of any new product," and the company hit $100 million in AI ARR one quarter earlier than projected.

BofA Securities' Sills highlighted an important strategic point: "Management noted that AI projects are being funded from large, digital transformation budgets rather than IT budgets, expanding Snowflake's opportunity to grow wallet share." That's a significant distinction that could open up larger deal sizes.

But Guggenheim's DiFucci threw some cold water on the AI enthusiasm. While acknowledging that AI could become "one of the most important technology advances in our lifetimes," he pointed out that it's currently only around 2% of the company's revenue run-rate. He even suggested Snowflake may never see much benefit from the AI wave—a decidedly contrarian take.

Customer Growth and Deal Activity

The operational metrics told a story of solid execution. Wedbush's Ives noted that total customer count grew 20% year-over-year to 12,621, coming in above Street expectations of 12,062. Canaccord Genuity's Crane highlighted that "RPO bookings were a highlight with four 9-figure deals signed, and +615 total net new customers were a record."

KeyBanc's Heath emphasized that "bookings were notably strong, up 50% year-over-year, and an acceleration from approximately 30% year-over-year in F1H, helped by four 9-figure expansion deals." BTIG's Powell called this "a huge quarter," with RPO bookings up 50% year-over-year against tough comparisons.

Canaccord Genuity's Crane said the results indicated good sales execution, consumption "turning a corner," and a ramp up in AI workloads. Product revenue grew 29% year-over-year, operating margins expanded by around 460 basis points, and net revenue retention remained stable at 125%.

Fundamental Strength vs. Sky-High Expectations

Several analysts acknowledged the disconnect between solid fundamentals and investor disappointment. Needham's Cikos noted that Snowflake saw a deceleration in product revenue growth to 29% in Q3 from 32% in the previous quarter, but said investor expectations were "elevated into the print." He maintained that "the company continues to execute strongly against the core business."

JPMorgan's Murphy argued that Snowflake continues to execute well, drive product adoption, and "improve its positioning within the data modernization and AI mega trends." Wedbush's Ives noted that the strong results and fourth-quarter product revenue guidance are overshadowed by elevated expectations heading into the report.

BTIG's Powell offered an interesting perspective on the beat size. He noted that Snowflake outperformed its product revenue guidance by $31 million in Q3, which is lower than the average of $42 million in the previous three quarters. However, he pointed out that the second quarter results were boosted by some large customer migrations, providing context for the comparison. Applying the $31 million beat to guidance suggests Snowflake could exit fiscal 2026 with more than 30% product revenue growth.

DA Davidson's Luria noted that "management continued to reiterate the strength of their AI/ML and data engineering products with customers, while also mentioning that they're continuing to rapidly bring new products into general availability." Management's fiscal 2026 product revenue guidance indicates roughly 28% growth at the midpoint.

The Bottom Line

Snowflake delivered a quarter that showcased genuine progress: accelerating bookings, record customer additions, massive nine-figure deals, and AI products ramping faster than any previous launch. The company is executing on its core business while positioning itself in the AI revolution. But in today's market, beating expectations isn't enough when your peers are crushing them.

The stock closed down 10.05% at $235.83 on Thursday, a reminder that in the world of high-growth tech stocks, you're only as good as your last quarter—and sometimes, even that's not good enough if the bar keeps rising.