Snowflake (SNOW) looked unstoppable. Surging consumption. Confident forecasts. A bold ten billion dollar revenue target. But behind the scenes, efficiency changes, tiered storage discounts, and Iceberg Tables were expected to slow consumption and cut into revenue.
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A federal lawsuit filed in the Northern District of California alleges that Snowflake Inc. and two of its top executives misled investors about the company’s revenue trajectory and demand for its products throughout an eight-month period in 2023 and early 2024.
The complaint alleges that Snowflake concealed known headwinds tied to product efficiency improvements, discounted storage pricing, and a new open-source data format that would reduce customer spending on the platform. The class period runs from June 27, 2023, through February 28, 2024, and investors who purchased Snowflake Class A common stock during that window are at the center of the action.
On February 29, 2024, following a post-market disclosure, Snowflake shares fell $41.72 per share, or approximately 18%, closing at $188.28 after trading at $230.00 the prior day. The lawsuit connects that decline directly to disclosures made on February 28, 2024, regarding consumption trends and anticipated revenue headwinds, which plaintiffs allege management knew well before disclosure.
Investors who purchased Snowflake stock between June 27, 2023, and February 28, 2024, may wish to explore their eligibility to participate in this action.
What Snowflake Does and How It Makes Money
Snowflake is a cloud-based data platform that enables businesses to store, consolidate, and analyze large volumes of data. The company operates using a consumption-based revenue model, meaning it earns revenue as customers use, or consume, units called “credits” over a defined contract period. Unlike traditional enterprise software companies that charge upfront license fees, Snowflake’s revenue is directly tied to how much customers actually use its platform.
This model makes consumption trends a particularly sensitive metric for investors assessing Snowflake’s financial health and growth outlook. The complaint alleges that several product developments introduced during the class period were expected to reduce the amount of credits customers would consume, directly pressuring revenue.
The Revenue Headwinds Plaintiffs Say Were Hidden From Investors
At the heart of the lawsuit is the allegation that Snowflake’s leadership knew, or recklessly disregarded, that three specific factors were expected to materially reduce consumption and revenue: product efficiency gains, tiered storage pricing, and the adoption of Iceberg Tables. Iceberg Tables, as described in the complaint, are an open-source table format that allows customers to store data in their own cloud environment rather than in Snowflake’s, which plaintiffs say could reduce Snowflake’s storage-related and associated compute revenue.
The complaint alleges that despite awareness of these developments, Defendants continued to issue optimistic statements about consumption trends, growth prospects, and the company’s long-standing target of $10 billion in product revenue by fiscal year 2029. Plaintiffs allege that positive public statements made throughout the class period lacked a reasonable basis because the known headwinds were not disclosed alongside them.
Investors who believe they may have been affected by these alleged omissions are encouraged to follow the case as it develops.
What Executives Said During the Class Period
The lawsuit cites a series of statements made by then-CEO Frank Slootman and CFO Michael Scarpelli at investor events and on quarterly earnings calls. At a June 27, 2023, Investor Day, Scarpelli told investors that consumption had returned to expected levels following a brief period of softness in April and characterized Iceberg Tables as an opportunity that was “in full alignment” with Snowflake’s business model. On the same day, Scarpelli reaffirmed the company’s $10 billion revenue target for fiscal year 2029, stating they felt “very confident” in reaching that goal.
On an August 23, 2023, earnings call, Scarpelli described consumption as “good” and said the company was not seeing customers reduce their consumption at that time. In a November 29, 2023, earnings call, Scarpelli described Q3 as showing “strong consumption from a broad base of customers” and highlighted migration-driven growth from large accounts. The complaint alleges these statements were materially false or misleading at the time they were made.
Separately, the complaint cites a June 2023 statement by Slootman at the same Investor Day, in which he denied rumors of his impending resignation, stating that he was “still here.” The lawsuit alleges this was misleading because Slootman resigned eight months later, in February 2024.
How the Alleged Truth Came to Light
The complaint identifies February 28, 2024, as the date the alleged truth emerged. After the market closed that day, Snowflake released its Q4 fiscal year 2024 financial results and hosted a call with investors and analysts. On that call, Scarpelli disclosed that consumption trends had not returned to pre-fiscal 2024 patterns, and that the company was forecasting “increased revenue headwinds” tied to product efficiency gains, tiered storage pricing, and expected customer adoption of Iceberg Tables.
Also on that call, Scarpelli disclosed that Snowflake’s guidance for fiscal year 2025 product revenue was approximately $3.25 billion, representing 22% year-over-year growth, significantly below what the complaint characterizes as the market’s expectation of approximately 30% growth. Defendants also withdrew the publicly stated $10 billion product revenue target for fiscal year 2029. On February 29, 2024, Snowflake shares declined $41.72, or 18.14%, on the news. A separate March 5, 2024, presentation cited in the complaint says tiered storage pricing began rolling out as early as Q3 of fiscal 2024 and that Scarpelli saw limited downside because many large customers were expected to move toward Iceberg Tables.
Why Shareholders Are Paying Attention
The lawsuit alleges that investors who purchased Snowflake stock during the class period paid artificially inflated prices because the company’s executives were presenting an optimistic picture of the business while allegedly concealing known risks to consumption and revenue. When those risks were disclosed on February 28, 2024, the stock dropped sharply, erasing value for investors who had relied on the company’s public statements. The complaint further notes that Defendants Slootman and Scarpelli, along with other insiders, sold over $263 million and $28 million worth of Snowflake stock, respectively, during the class period, with those sales occurring in the weeks and months before the alleged corrective disclosures.
For investors who held Snowflake shares purchased during the June 27, 2023, to February 28, 2024, window, the central question raised by the suit is whether they would have paid the same prices had the alleged omissions been disclosed earlier.
The Legal Framework Behind the Suit
The complaint asserts two primary claims under federal securities law. The first, brought against all defendants, alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, which prohibit materially false or misleading statements and omissions made in connection with the purchase or sale of securities. The second claim, brought against Slootman and Scarpelli individually, alleges violations of Section 20(a) of the Exchange Act, which imposes liability on individuals who exercise control over a company that has committed a primary securities law violation.
The plaintiff seeks damages on behalf of a class of investors who purchased Snowflake common stock during the class period, alleging they paid artificially inflated prices as a result of the alleged misconduct.
Investors who purchased Snowflake common stock during the class period and wish to understand their legal rights are encouraged to seek additional information.
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