Snowflake’s business is selling its own stock to employees

Snowflake's stock-based compensation has been more than 40% of its revenues since going public, and investors are losing their patience.

Jack Raines

8/22/24 2:56PM

A favorite accounting trick for publicly-traded companies is to exclude stock-based compensation from EBITDA and cash flow to paint an optimistic picture of company performance. For example, if a company’s net income is negative, but its stock-based compensation is larger than its net loss, adding back stock-based compensation in your financial statements can give you positive operating cash flow. The (incredibly-oversimplified) rationale is, “We’re not actually spending money, we’re just issuing new shares to employees. Why waste time focusing on stock-based comp?” Neat trick, right?

A different, but related, trick that companies love is to announce share buybacks to distract investors from high levels of stock-based compensation. Basically, company management will announce that it’s buying back, like, $500 million of stock, which sounds really good! Except, if the company’s stock-based compensation is more than $500 million over that period, it’s still a net-negative for investors. Think about it like this: while, yes, stock-based compensation is not a “cash expense” for the company, it is a very real expense for shareholders, because their stake in the company gets diluted.

On Wednesday, Snowflake, a data warehouse provider that went public in 2020, reported its Q2 2025 (its 2024 fiscal year ended on January 31, 2024) earnings, and the results were a masterclass in redistributing wealth from shareholders to employees. Snowflake’s stock-based compensation for the quarter was ~$373 million, or 43% of its $869 million in revenue. This matches a trend from the last three years, where Snowflake’s full-year stock-based compensation was 55%, 43%, and 44% of revenues in 2022, 2023, and 2024, respectively.

For context, Snap, which has long been cited as one of the more egregious examples of high stock-based compensation, had stock-based compensation worth 20% of revenue last quarter, compared to 30% last year.

Snowflake announced a $2.5 billion share buyback plan that expires in March 2027, which sounds nice, except the company’s total stock-based compensation over the last three years was approximately $2.8 billion. If this quarter’s equity compensation of $373 million is held constant through March 2027, more than $4 billion in new equity will be issued, and equity comp has only increased since the company went public. Buybacks sound nice, but they don’t mean much for investors if they fail to offset new issuances.

Snowflake lost ~$318 million on the quarter for a -36% profit margin, but if you removed stock-based compensation, the company would have posted a ~$56 million profit. It’s no surprise that investors are growing tired after three years of Snowflake awarding more than 40% of revenue as equity compensation as it remains an unprofitable company with slowing revenue growth. The stock fell as much as 13% today, and it’s down more than 50% from its IPO.

If Snowflake’s new CEO wants to fix his stock price, he should start by reconsidering insiders’ equity grants.

Max Knoblauch4h

The Trump administration is reportedly planning a 50% made-in-America requirement for USMCA tariff relief

Qualifying for USMCA-related lower tariffs may soon require more US-made vehicle components, according to reporting by The Wall Street Journal.

The Trump administration is reportedly planning to introduce a 50% US content requirement for vehicles covered by the trade pact to receive lower tariffs. The content would be measured by cost, according to the WSJ.

There currently isn’t any US-specific requirement for those lower tariff rates, but in order to receive preferential tariffs, vehicles are must contain at least 75% regional content (components made in North America). Per Reuters reporting, the Trump admin is seeking to raise the regional requirement to 82%.

These reported plans are subject to change as the US negotiates USMCA terms with Mexico over the next few months.

Overall, Tesla will likely have the easiest time qualifying for any stricter requirements. The automaker’s vehicles contained the highest amount of US/Canadian content in 2025, according to American University research. Ford, GM, and Stellantis all scored lower.

Notably: the underlying government data that many domestic content measurements rely on intentionally combines US and Canadian components, so it’s difficult to know exactly how much of any given vehicle is specifically US-made.

Exclusive | Trump Administration Wants Autos Under USMCA to Be at Least 50% Made in America

These reported plans are subject to change as the US negotiates USMCA terms with Mexico over the next few months.

Tom Jones10h

The $640,000 Luce makes the average Ferrari look like a bargain

Put aside the shape; put aside the smoothing out of Ferrari’s iconic sharp edges; put aside, even, the calls from former Chairman and President Luca Cordero di Montezemolo to “take the Prancing Horse off.” On the grounds of price alone, Luce detractors might have a point.

By now, many of us will have read the criticisms of Ferrari’s first fully electric vehicle, as the Luce — which was unveiled to the world earlier this week and promptly saw the company’s shares crash out in New York and Milan — gets subtly shaded by competitors online and not-so-subtly shaded by basically everyone else.

What makes all of this worse for Ferrari is that, even by the luxury car maker’s notoriously high standards, they’ve slapped a pretty hefty price tag on the Luce, and the company’s CEO, Benedetto Vigna, has already been forced to defend the €550,000 ($640,000) price point, saying yesterday that it’s “fair to pay for innovation,” per Reuters.

While Ferrari’s cars have been getting more expensive of late, as recently as 2022, Ferrari’s average revenue per car sold was around $340,000. At nearly twice that price, this new electric model is obviously proving a little much (visually, conceptually, and financially) for many loyal and long-standing fans of the Prancing Horse to stomach.