Warren Buffett’s Berkshire Hathaway once backed Snowflake, a cloud data company that debuted in 2020 amid strong AI and cloud enthusiasm. But since its IPO, Snowflake’s stock has fallen roughly 50% from its peak, and Buffett sold all Berkshire’s shares last year.
Snowflake’s early hype was driven by its cloud-based platform that unifies diverse data sources, helping companies manage and analyze data more efficiently.
This made it a standout in the growing AI and cloud markets. However, the company’s stock valuation at IPO was extremely high, with a price-to-sales ratio reaching 183. The market initially overlooked this because Snowflake’s sales were growing rapidly, supported by low interest rates that fueled borrowing and expansion.
Problems arose as Snowflake’s growth slowed and competition, especially from Databricks, intensified. Rising interest rates also led customers to cut back spending. These factors caused Snowflake’s stock price to decline sharply from its lofty valuation.
Despite these challenges, Snowflake’s business remains promising. Its usage-based billing model supports growth, and it reported a strong net revenue retention rate of 126% in early 2025. The company’s revenue continues to grow, hitting nearly $1 billion in a recent quarter, with a 27% increase year-over-year. Snowflake now serves over 11,000 customers, including 745 from the Forbes Global 2000 list.
However, concerns persist. Snowflake is still unprofitable, largely due to high stock-based compensation costs, which amount to about 40% of revenue. This dilutes shareholder value and has contributed to increasing net losses, even as revenue growth slows to 26% annually.
Buffett’s decision to exit Snowflake may reflect these financial issues. While the company’s role in the AI-driven data economy is significant, its inability to convert growth into profits makes it a risky buy at present. Investors might consider waiting for clearer signs of improved profitability before buying the stock.
In summary, Snowflake’s story is still compelling given its position in cloud data and AI, but its financial hurdles and slowing growth suggest caution. Like Buffett, investors may want to hold off until the company demonstrates stronger financial health.
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