A sudden wave of negative news has impacted the AI application sector. Cloud data management giant Snowflake saw its shares plummet nearly 10% in after-hours trading on Wednesday following disappointing earnings guidance. Analysts noted that the company's operating margin outlook fell short of expectations, raising concerns about the profitability of its new AI tools. Separately, reports emerged that Microsoft had lowered sales targets for some AI software due to slower-than-expected enterprise adoption, causing its shares to drop over 3% intraday. Microsoft later clarified in an email statement that it had not reduced sales quotas for its teams.

Snowflake's stock tumbled sharply in after-hours trading on December 3, with losses nearing 10%. The company's latest earnings report projected a Q4 adjusted operating margin of about 7% for the fiscal year ending January 2026, below the analyst consensus of 8.5%. Product revenue guidance of $1.195–1.2 billion represented 27% year-over-year growth, barely exceeding the $1.19 billion average estimate. Despite closing Wednesday's regular session up 2% at $265 (market cap: $89.78 billion), the weak margin outlook triggered the selloff.

For Q3 (ended October 31), Snowflake reported revenue of $1.21 billion, beating the $1.18 billion estimate, though product revenue growth slowed to 29% ($1.16 billion). Remaining performance obligations—a measure of future contracted revenue—rose 37% to $7.88 billion, above the $7.23 billion forecast. Adjusted EPS of $0.35 also surpassed the $0.31 expectation. Analysts attributed the market reaction primarily to the disappointing margin guidance, as CEO Sridhar Ramaswamy's four acquisitions this year to bolster AI capabilities have pressured profitability. Concurrently, Snowflake announced a $200 million partnership with Anthropic to integrate Claude AI models into its platform.

Competitive concerns also weighed on sentiment. Reports indicate rival Databricks—a private company—is seeking funding at a valuation exceeding $130 billion, significantly higher than Snowflake's public market capitalization. Bernstein analyst Firoz Valliji noted, "While encouraged by innovation under the new CEO, we remain wary of intensifying core market competition." BNP Paribas' Stefan Slowinski observed that Snowflake's 70% year-to-date stock surge had set high expectations, making post-earnings declines unsurprising.

Meanwhile, Microsoft faced its own AI-related setback. Reports suggested the company reduced growth targets for certain AI products after sales teams missed fiscal-year goals. One Azure sales unit reportedly cut its "Foundry" product growth target from 50% to 25% after fewer than 20% of reps hit the original mark. Industry analysts view this as evidence of enterprises' cautious AI spending, particularly in high-stakes sectors like finance where ROI remains unproven. Microsoft denied adjusting sales quotas but acknowledged market challenges. Similar headwinds have affected others—OpenAI reportedly slashed its five-year "AI agent" revenue forecast by $26 billion, while Salesforce has turned to heavy discounts to attract customers. These developments highlight the gap between generative AI hype and scalable commercial adoption.