In 2020, Berkshire Hathaway made an unusual investment by buying shares in Snowflake, a cloud data company that did not fit Warren Buffett’s typical investment style.
The company lacked steady earnings and was not profitable, traits Buffett usually avoids. Berkshire acquired Snowflake shares at around $120 per share before its initial public offering (IPO).
Last year, Berkshire sold all its Snowflake shares during the second quarter of 2024, realizing only a modest gain. The stock was sold at prices between approximately $125 and $155 per share, resulting in a profit estimated between $30 million and $210 million on about 6 million shares.
Since Berkshire’s sale, Snowflake shares have surged by 47%, reaching around $200 per share. However, this rise does not necessarily imply that Buffett’s decision to sell was wrong.
Snowflake’s core business is its data cloud platform, which helps companies integrate data from multiple cloud providers like Amazon Web Services and Microsoft Azure.
This integration enables more comprehensive data analysis and supports the development of artificial intelligence (AI) applications. Snowflake launched Cortex AI in late 2023, offering businesses access to large language models from top AI developers.
This platform also includes tools that automate data extraction and create custom virtual assistants, significantly reducing manual workloads.
Despite these innovations, Snowflake’s revenue growth is slowing. In the first quarter of fiscal 2026, product revenue grew 26% year-over-year to nearly $1 billion, marking its slowest growth since going public. Meanwhile, operating costs also rose by 26%, leading to a net loss of $430 million, which was 35% higher than the previous year’s loss.
The company forecasts even slower revenue growth ahead and has seen a slight decline in its order backlog, signaling potential future challenges.
From a valuation standpoint, Snowflake’s stock is expensive, trading at a price-to-sales ratio of 17.3, much higher than other cloud and AI leaders like Amazon and Microsoft.
This high valuation, combined with ongoing losses, likely influenced Berkshire’s decision to exit the position. Moreover, the stake represented a small fraction of Berkshire’s $276 billion portfolio, minimizing the impact of the sale.
In conclusion, while Snowflake’s stock price has risen significantly since Berkshire Hathaway sold its shares, the company’s slowing growth and high valuation justify Buffett’s cautious approach.
The sale aligns with Berkshire’s long-term investment philosophy, which favors stable, profitable companies over speculative bets. Investors should focus on business fundamentals rather than short-term price movements when evaluating such decisions.
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