Cloud platform company Snowflake (NASDAQ:SNOW) saw an avalanche of sell orders after announcing a weak 2025 outlook and the retirement of CEO Frank Slootman.
Sridhar Ramaswamy will replace Slootman. He joined the company last May when Snowflake acquired his generative artificial intelligence (AI) search startup, Neeva.
SNOW stock fell 22% overnight to about $179 from $230, a loss of about $17 billion in market capitalization.
Snowflake’s AI Outlook
Analysts had no trouble with Snowflake’s quarterly results. These included non-GAAP income of $71 million on revenue of $576 million. But they were unhappy with its guidance, a growth rate of 22% for the coming year with $3.25 billion in revenue. At its February 28 price, that would be a forward price-to-sales ratio of 23.
They may also have had concerns about Ramaswarmy, 57, who shut down Neeva’s search product last year to focus on AI before Snowflake bought it for $185 million.
Slootman is a legend, worth $3.7 billion according to Forbes, having previously taken ServiceNow (NYSE:NOW) public in 2012. Now 65, he lives in Bozeman, Montana, and called that the company’s headquarters. He said in moving the office in 2021 that Snowflake would no longer have a headquarters but would be “distributed.” Neeva was based in Mountain View, California. Slootman explained his decision by saying he was “making room for bigger and better talent.”
Ramaswarmy’s task will be to move Snowflake into the era of GenAI. Before starting Neeva in 2019, he ran Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google ad operations. His previous title with Snowflake was vice president for AI.
Ramaswamy has already had an impact. Snowflake launched an AI service called Cortex in November to help clients build AI services in its cloud. Since then, it has been avidly hiring AI talent.
SNOW Stock: What Happens Next?
SNOW stock is likely to rebound quickly. Like Palo Alto Networks (NASDAQ:PANW), which plunged after earnings on Feb. 20, it is re-architecting around AI. That costs money in the short run but makes strategic sense in the long run.
On the date of publication, Dana Blankenhorn held a LONG position in GOOGL and NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
