Snowflake Earnings: Solid Start to Fiscal 2026 Positions the Company Favorably for Competition

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $150.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

No-moat Snowflake SNOW delivered a solid start to fiscal 2026, with revenue growing 26% and remaining performance obligations up 34% compared with a year earlier. The company continues to benefit from the adoption of open table formats and increased queries for artificial intelligence-related data analytics.

We lift our fair value estimate to $150 per share from $137, based on a more optimistic revenue outlook supported by healthy demand for Snowflake’s user-friendly data processing capabilities. However, we still think Snowflake faces pressure to maintain its high growth and justify its valuation in a competitive environment. Shares currently look overvalued to us.

First-quarter revenue of $997 million beat the higher end of Snowflake’s previous guidance. Macroeconomic factors had little impact on performance, with the firm adding 451 new customers over the past quarter. The net revenue retention rate remained high at 124%, demonstrating Snowflake’s existing customers’ strong incremental consumption as the platform embraces the open-source Iceberg table format.

Management also pointed out favorable adoption trends of new products, such as Snowpark and dynamic tables, that are contributing to the quarter’s outperformance. We view the strength in new product attachment as a crucial element for Snowflake to stay competitive in the data lake and data warehouse market.

Despite Snowflake’s progress with top-line growth, its magnitude of margin expansion was smaller than we expected. Its cost of product revenue and sales and marketing expenses as a percentage of revenue remained roughly flat over the past year. In addition, total headcount increased 5% quarter to quarter, a significant increase in hiring compared with the previous few quarters. We recognize the vast market opportunities in front of Snowflake, but we also believe improved operational efficiency could better prepare the company to weather any uncertainties in the current economic environment.