Snowflake's Earnings Report Shows Slowing Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4d ago
0mins
Should l Buy SNOW?
Source: Fool
- Revenue Growth Slowdown: Snowflake reported product revenue of $1.16 billion in fiscal Q3 2026, reflecting a 29% year-over-year increase, but this deceleration from 32% in Q2 raises concerns about sustained growth momentum among investors.
- Customer Base Expansion: The company ended Q3 with 688 customers generating over $1 million in trailing-12-month product revenue, marking a 29% increase year-over-year, indicating strong market demand for Snowflake's offerings despite growth concerns.
- Strong Demand Signals: Snowflake's remaining performance obligations (RPO) reached $7.88 billion at the end of Q3, up 37% year-over-year, suggesting rapidly growing customer demand for its data cloud platform, although revenue recognition is based on usage rather than contracts.
- Profitability Concerns: Despite reporting an adjusted operating income of $131.3 million and a gross margin of 76%, Snowflake's net loss exceeded $1 billion over the trailing nine months, highlighting ongoing profitability challenges that could deter investors.
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Analyst Views on SNOW
Wall Street analysts forecast SNOW stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for SNOW is 285.29 USD with a low forecast of 237.00 USD and a high forecast of 325.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 156.710
Low
237.00
Averages
285.29
High
325.00
Current: 156.710
Low
237.00
Averages
285.29
High
325.00
About SNOW
Snowflake Inc. is a data cloud and artificial intelligence company. Its platform is the technology that powers the AI Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful insights, apply artificial intelligence (AI) to solve business problems, build data applications, and share data and data products. It provides its platform through a customer-centric, and consumption-based business model. Its cloud-native architecture consists of three independently scalable but logically integrated layers across compute, storage, and cloud services. The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency. The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record. Its ClearQuery platform allows users to rapidly search, explore, and analyze their data using natural language queries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- AI Agent Deployment: On February 4, Snowflake announced that United Rentals rolled out a new AI agent based on Snowflake Intelligence across over 1,600 branches, enabling sales and operational teams to quickly obtain actionable insights through natural language queries, thereby enhancing work efficiency.
- Accelerating AI Innovation: United Rentals is leveraging Snowflake Cortex Code to expedite the testing and development of additional AI agents, indicating Snowflake's crucial role in driving customer AI innovation and further solidifying its market position.
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- Earnings Report Impact: On February 28, 2024, Snowflake announced its fourth-quarter and full fiscal year 2024 results, with management noting changes in customer behavior and product-related developments adversely affecting the company's outlook, potentially leading to future performance declines.
- Stock Price Plunge: Following the earnings announcement, Snowflake's stock price fell by $41.72, or 18.14%, closing at $188.28 on February 29, 2024, reflecting market concerns regarding the company's future prospects.
- Legal Consequences: Pomerantz LLP, recognized for its expertise in securities litigation, has secured multimillion-dollar settlements for victims; if the investigation yields negative findings, Snowflake may face significant financial and reputational damage.
See More
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- Market Panic: Wedbush analyst Dan Ives highlights that the market's reaction to a 'Software Armageddon' scenario is exaggerated, resulting in software stocks dropping between 9% and 19% this week, with projections of a 19% to 29% decline by 2026.
- Investment Recommendations: Ives recommends Microsoft, Palantir, CrowdStrike, Snowflake, and Salesforce as top stocks to invest in, asserting that these companies possess strong resilience in the current market environment.
- Customer Data Security: Ives emphasizes that many customers are reluctant to risk migrating their data to new systems when implementing AI strategies, suggesting that this cautious approach will limit short-term growth potential for software companies.
- Industry Integration Challenges: He notes that many companies have invested heavily in their software systems, making it difficult to abandon existing vendors, and that emerging AI providers like Anthropic and OpenAI are not yet equipped to handle enterprise data transitions effectively.
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- Market Turmoil in Software Stocks: This week, software stocks continued their decline, with the iShares Expanded Tech-Software Sector ETF (IGV) down over 9% week to date, reflecting growing market concerns about the software industry, particularly in the context of a potential unraveling AI bubble.
- Shift in Investor Sentiment: Software stocks have dropped nearly 30% from recent highs, as investors turned against trades perceived as crowded and expensive; despite the IGV surging over 58% in 2023, the current pullback is seen as a buying opportunity by some.
- Uncertain Market Outlook: While some analysts argue that the sell-off in software stocks is overdone and that established players are unlikely to be disrupted by emerging AI technologies, others caution that the current downturn may indicate deeper issues within the industry, especially among highly leveraged hyperscale companies.
- Changing Capital Flows: As funds shift from the Nasdaq to
See More
Snowflake Inc. Receives Buy Rating and Price Target
- Buy Rating Maintained: Bank of America Securities reaffirmed a Buy rating for Snowflake Inc. on February 6, setting a price target of $275, reflecting confidence in its future growth and likely attracting more investor interest.
- AI Agent Deployment: On February 4, Snowflake announced that United Rentals rolled out a new AI agent based on Snowflake Intelligence across over 1,600 branches, enabling sales and operational teams to quickly obtain actionable insights through natural language queries, thereby enhancing work efficiency.
- Accelerating AI Innovation: United Rentals is leveraging Snowflake Cortex Code to expedite the testing and development of additional AI agents, indicating Snowflake's crucial role in driving customer AI innovation and further solidifying its market position.
- Data Cloud Ecosystem: Snowflake's cloud data warehousing software supports various use cases, including data lakes, data engineering, and data sharing, helping customers break down data silos to maximize data value and strengthen its competitive edge in data management.
See More
Analysis of Potential Software Stock Rebound
- Market Panic and Rebound Opportunities: Since December 10, the iShares Expanded Tech-Software Sector ETF has fallen over 22%, officially entering bear market territory, yet Wall Street analysts believe the sell-off may be overdone, indicating some software stocks still present compelling opportunities.
- Optimistic Outlook for Datadog: The cloud monitoring and security software company Datadog has an average price target implying a 61% upside; despite its stock plummeting from nearly $200 in November to around $120, revenue is projected to grow by 20% by 2026.
- Snowflake's AI Strategy: Although Snowflake faces profitability challenges and high valuations, its average price target suggests a 63% upside, with the CEO stating that AI applications will be more nuanced, and a recent $200 million deal with OpenAI highlights its relevance in the AI space.
- Microsoft's AI Potential: Microsoft has an average price target indicating a 47% upside; despite a 23% decline in stock price over the past six months, its AI assistant Copilot boasts 15 million paid users, showcasing its significant potential in the AI landscape.
See More
Positive Outlook for Enterprise Software Stocks Recovery
- Snowflake Performance Outlook: Bank of America maintains a Buy rating on Snowflake with a $275 price target, anticipating its product revenue to grow at 28% year-over-year, significantly benefiting from surging data demand driven by AI data clouds.
- MongoDB Growth Potential: MongoDB's Atlas revenue grew 30% year-over-year in F3Q26, with analysts believing its application in AI workloads will further drive long-term market share growth, setting a price target of $500.
- Datadog Market Confidence: Despite competitive pressures, Bank of America analysts assert that Datadog's observability is critical, expecting a rebound in its stock price with a target of $215, emphasizing that non-AI native growth is a key metric to watch.
- JFrog AI Beneficiary: JFrog is seen as a beneficiary of AI developments, with analysts suggesting that the recent stock pullback creates a buying opportunity, targeting $74, as its cloud revenue grew 50% year-over-year in Q3 2025, indicating strong market demand.
See More
Pomerantz LLP Investigates Snowflake for Securities Fraud
- Securities Fraud Investigation: Pomerantz LLP is investigating whether Snowflake and its executives have engaged in securities fraud or other unlawful business practices, which could undermine investor confidence and lead to legal repercussions.
- Earnings Report Impact: On February 28, 2024, Snowflake announced its fourth-quarter and full fiscal year 2024 results, with management noting changes in customer behavior and product-related developments adversely affecting the company's outlook, potentially leading to future performance declines.
- Stock Price Plunge: Following the earnings announcement, Snowflake's stock price fell by $41.72, or 18.14%, closing at $188.28 on February 29, 2024, reflecting market concerns regarding the company's future prospects.
- Legal Consequences: Pomerantz LLP, recognized for its expertise in securities litigation, has secured multimillion-dollar settlements for victims; if the investigation yields negative findings, Snowflake may face significant financial and reputational damage.
See More
Analyst Recommends Investing in Software Sector Winners
- Market Panic: Wedbush analyst Dan Ives highlights that the market's reaction to a 'Software Armageddon' scenario is exaggerated, resulting in software stocks dropping between 9% and 19% this week, with projections of a 19% to 29% decline by 2026.
- Investment Recommendations: Ives recommends Microsoft, Palantir, CrowdStrike, Snowflake, and Salesforce as top stocks to invest in, asserting that these companies possess strong resilience in the current market environment.
- Customer Data Security: Ives emphasizes that many customers are reluctant to risk migrating their data to new systems when implementing AI strategies, suggesting that this cautious approach will limit short-term growth potential for software companies.
- Industry Integration Challenges: He notes that many companies have invested heavily in their software systems, making it difficult to abandon existing vendors, and that emerging AI providers like Anthropic and OpenAI are not yet equipped to handle enterprise data transitions effectively.
See More
Software Stock Sell-Off Raises Market Concerns
- Market Turmoil in Software Stocks: This week, software stocks continued their decline, with the iShares Expanded Tech-Software Sector ETF (IGV) down over 9% week to date, reflecting growing market concerns about the software industry, particularly in the context of a potential unraveling AI bubble.
- Shift in Investor Sentiment: Software stocks have dropped nearly 30% from recent highs, as investors turned against trades perceived as crowded and expensive; despite the IGV surging over 58% in 2023, the current pullback is seen as a buying opportunity by some.
- Uncertain Market Outlook: While some analysts argue that the sell-off in software stocks is overdone and that established players are unlikely to be disrupted by emerging AI technologies, others caution that the current downturn may indicate deeper issues within the industry, especially among highly leveraged hyperscale companies.
- Changing Capital Flows: As funds shift from the Nasdaq to
See More
