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Why is Snowflake (NYSE:SNOW) stock down today?


Source: various photographs / Shutterstock

Various cloud computing stocks are moving in sync during today’s session following one of the most high-profile earnings reports in Microsoft (NASDAQ:MSFT). Shares of Snowflake (NASDAQ:SNOW) sank alongside Microsoft this morning, with SNOW shares trading down around 2% at the time of writing. This decision exceeds that of Microsoft, which saw its shares move into positive territory this afternoon.

Microsoft’s earnings report certainly provided a mixed bag for investors. For one, the company beat estimates on adjusted earnings, taking into account a $1.2 billion charge for the company’s recent layoffs. However, the company’s overall revenue fell short of expectations and its cloud segment, Azure, reported revenue in line with expectations. Thus, these results highlight some positive and negative aspects that investors should take into account.

Initially, shares of MSFT jumped on the news, with most of the collective attention seemingly on the company’s cloud business. Shares of SNOW followed suit before falling in pre-market and early trading today on concerns about a broader downturn. This is partly due to comments made by Microsoft in its earnings call, noting that a “deceleration” in Azure’s growth was likely.

Let’s dive into what all of this means for Snowflake investors.

SNOW Stock plunges on Microsoft earnings

It is truly amazing how the collective mind of the market digests complex earnings reports such as Microsoft’s recent release. The initial surge and subsequent fall in comments about the outlook for the company’s cloud business reflects how difficult it can be to take those retrospective numbers at face value.

Microsoft’s numbers and forecasts aren’t necessarily particularly accurate for Snowflake. Indeed, Snowflake is positioned differently in the market with a different growth profile.

That said, there appears to be more widespread cause for concern among cloud players given the disconcerting tone that Microsoft CEO Satya Nadella displayed on the call. If cloud spending declines, high-growth stocks like Snowflake could be hit harder. That seems to be what many investors are pricing today, leading to the stock’s relative underperformance.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative long-term investment outlook.

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Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
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