Solved! Go to Solution.
Something to try:
Make sure your environment extent and snap raster are set to the flow direction grid for your run of the watershed tool.
Just to clarify what happened a bit for anyone else who visits this thread. You made use of the Snap Pour Point tool. The raster that is derived from this tool will have the extent of the input points if you leave the extent settings default when you run the tool. Usually the point layer's extent is smaller than the DEM extent. When you move forward in the hydro workflow (watershed tool) and you use the smaller extent raster as input, the tool's default behavior is to use the smallest extent of any of the inputs. In other words, just the area of overlap between the inputs. You can avoid this by setting the extent to the DEM when you run the Snap Pour Point tool, or like Curtis suggested, when you run Watershed.
If you create an envelope of the points using the Minimum Bounding Geometry tool and overlay it with your original watershed result it should be quite clear why your catchments got 'cut' off.