Snowflake Earnings: Quarter Sees Strong AI Sales and Successful Product Launches

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $165.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

Snowflake SNOW reported strong fiscal 2025 fourth-quarter earnings that beat our top line and profitability expectations. Management unveiled good fiscal 2026 guidance, expecting product revenue growth of 24% and non-GAAP operating margin of 8% on the back of optimism around artificial intelligence sales.

The results and outlook were better than we expected, and Snowflake delivered a revenue growth outlook of 20% or more for 2026, which we thought the company needed to justify the premium valuation. Therefore, we have raised our intermediate revenue growth and profitability estimates to reflect our increased confidence in the firm’s ability to capitalize on the unyielding AI demand and ongoing cloud migrations. As a result, we are raising our fair value estimate to $165 per share from $129. The firm’s strong performance sent shares up 9% after hours. We see the stock as slightly overvalued compared with our raised valuation.

Fourth-quarter revenue came in at $987 million, up 27% year over year and 5% sequentially. Product sales grew 28% year over year due to the strong adoption of the firm’s data engineering and AI solutions. Snowflake’s ability to identify new workload opportunities continues to impress us, as new products like Snowpark support both strong product attach and large customer acquisition. Remaining performance obligation grew a solid 33% year over year, indicating strong demand for Snowflake’s products. While revenue retention declined from 127% to 126% sequentially, this is normal as a software company scales, and the sequential customer and RPO growth of 5% and 20%, respectively, were exceptional. We expect successful new product launches and AI sales to drive above-guidance growth in the near term but anticipate increasing competitive pressures to weather growth over time.