Snowflake Earnings: Long-Term Upside Is Far From Melting

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $231.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

Snowflake’s SNOW third quarter was mixed, in our view. Revenue came in above our expectations while the bottom line came in under. Encouragingly, full-year fiscal 2024 guidance was raised for revenue and profitability. Shares have popped 7% upon results, inching the stock somewhat closer to our $231 fair value estimate while leaving room for ample upside.

Overall, Snowflake is extremely well-positioned to benefit from a world that is rapidly collecting more data in need of a place to live, and which also requires a playground like Snowflake’s to work with this data and extract more value. While these are passive tailwinds, we think the company’s technical expertise and execution will make it an active beneficiary in data management software. We still believe it’s a top pick within our technology coverage.

Snowflake reported third-quarter revenue of $734 million and product sales of $699 million, growing year over year by 32% and 34%, respectively. Solid results came thanks to execution and a stabilizing macroeconomic environment. Management noted that they hardly hear “AI” and “budget” in the same sentence, and we think this leaves the firm in a sweet spot, with customers eager to be at the forefront of cutting-edge technology. We think this safeguards the uncertainty that can come with a consumption-based revenue model.

Snowflake reported quarterly GAAP losses per share of $0.65 and non-GAAP earnings per share of $0.25. While we had rosier expectations for earnings than the market, we are unfazed as we keep our sights on the long term.