Snowflake Announced a $200 Million Deal With Anthropic, but It Wasn't Enough for Investors. Here's Why.

After the market closed yesterday, Snowflake (NYSE: SNOW) reported results for the third quarter of its 2026 fiscal year -- a period which ended Oct. 31. Snowflake posted non-GAAP (adjusted) earnings per share of $0.35 on sales of $1.21 billion, beating the average analyst estimate's call for per-share earnings of $0.31 on sales of $1.18 billion.

Notably, the company also announced that it had entered into a new $200 million contract with Anthropic. The multi-year deal expands on the previous partnership between the companies and will see Snowflake increase the integration of Anthropic's Claude AI with its own Cortex AI platform.

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Despite news of the partnership and substantial sales and earnings beats in fiscal Q3, Snowflake got hit with big sell-offs following the company's earnings release. The stock ended the day's trading down 11.4%.

AI helped power strong growth for Snowflake in fiscal Q3

Anthropic has emerged as a hot player in the artificial intelligence (AI) space, and the announcement of an expanded contract with the company represents a meaningful win for Snowflake. News of the deal arrived with an announcement from Snowflake that it had reached its $100 million AI revenue run rate target one quarter earlier than expected, and growth looked strong overall at the business.

Product revenue for fiscal Q3 increased 29% year over year to reach $1.16 billion. Revenue was up approximately 28% year over year in the quarter, and remaining performance obligations (RPO) jumped 37% annually to reach $7.88 billion. Snowflake closed out the period with a net-revenue-retention rate of 125% and managed to add 615 new customers in the period, but that still wasn't enough to support gains for the stock.

Investors sold out of Snowflake in response to a handful of factors

Despite posting an adjusted earnings beat, performance looked less stellar on a GAAP basis. Snowflake posted a total operating loss of $329.5 million in the quarter, and heavy expenditures on sales and marketing put otherwise impressive revenue growth in a less favorable light for some investors. Snowflake has also continued to rely heavily on stock-based compensation in order to fund its operations.

Investors also weren't thrilled with the company's forward guidance. Snowflake is targeting product revenue between $1.195 billion and $1.2 billion for the current quarter. While the guidance range came in above the $1.9 billion in product revenue called for by the average analyst estimate, some shareholders were looking for more aggressive guidance.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.