Financial Report Outlook | Is AI expected to help reignite revenue growth, Can Snowflake (SNOW.US) replicate Palantir's success?

Cloud database software company Snowflake (SNOW.US) will announce its third-quarter earnings after the US stock market closes on November 20th. According to analysts' average expectations, the company's Q3 revenue is expected to reach $889.77 million, a year-on-year increase of 22.4%, with earnings per share of $0.15, a decrease of about 40% year-on-year. Since the beginning of the year, Snowflake's stock price has fallen by over 36% due to its slowing revenue growth. For example, in the same period last year, the company's revenue growth reached 32%. However, during the second-quarter earnings call, Snowflake raised its revenue guidance for the fiscal year 2025, as the company continues to attract enterprises to use its AI-driven cloud platform. The company now expects product sales of $3.36 billion for fiscal year 2025, higher than the previous estimate of $3 billion. In recent quarters, Snowflake has been heavily investing in developing its large language model Snowflake Artic. The company has partnered with Meta (META.US) to integrate the latter's Llama model and enhance customer engagement on its cloud platform. Analysts believe that Snowflake's expanding AI product portfolio can reignite revenue growth and increase customer retention. Following the success of Palantir? Investment firm Moness, Crespi, Hardt & Co.'s Brian White upgraded its rating from "Neutral" to "Buy," with a target price of $140. In a research report, White wrote, "To us, the 2023 AI era hype has proven to be a 'mirage' of 2024 software industry revenue, this is not surprising. However, we believe that in the next 12-18 months, the industry and Snowflake will begin to gain incremental activity from this long-term trend." The company's stock price fell by 15% after announcing its second-quarter financial results. Despite profits and revenue exceeding expectations, the stock plummeted due to squeezed operating profit margins. The company was also impacted by a significant data breach in early 2024, where a large amount of user data from AT&T (T.US) and Live Nation Entertainment (LYV.US) was stolen. However, White wrote that this year's decline in the stock price provides an attractive entry point, as the company can continue to grow. William Blair analyst Louie DiPalma gave the company an "Outperform" rating, stating that Snowflake is the closest competitor to software company Palantir (PLTR.US). DiPalma gave Palantir an "Underperform" rating, despite the company's announcement of better-than-expected third-quarter results. The analyst speculated that the strong performance of competitors, combined with the decline in stock price, could be a good sign for Snowflake ahead of its earnings announcement. DiPalma wrote, "Palantir has a market value of $118 billion, while Snowflake's market value is $38 billion, but Snowflake has higher revenue ($3.5 billion, $2.8 billion this fiscal year) and a similar growth rate in the same data analytics terminal market."