Snowflake Earnings: Secular Demand for Data Infrastructure Modernization Drives Solid Growth

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $177.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

Snowflake’s SNOW second-quarter year-over-year revenue growth of 31.5% accelerated 530 basis points sequentially, highlighting strong client interest in data infrastructure modernization. Non-GAAP operating margin also expanded 240 basis points sequentially to 11.2%, thanks to efficiency gains.

Why it matters: Snowflake’s core products continue to benefit from secular investments in artificial intelligence. Constant product innovation, supported by 250 new capability launches over the past six months, ensures that Snowflake remains competitive amid intense competition among analytical databases.

• Most notably, Snowpark Connect’s Apache Spark support should make Snowflake a more attractive choice for computational data workloads, an area in which its rival, Databricks, specializes.
• As more enterprise customers recognize the potential of agentic AI, data platform suppliers like Snowflake are poised to grow, as analytical databases are a key part of the infrastructure for AI agents.

The bottom line: We raise our fair value estimate for no-moat Snowflake to $177 per share from $150 as we incorporate better-than-expected growth momentum of its data and AI offerings. Shares look overvalued, and we think the market is underestimating the competitive pressure Snowflake faces.

• Despite acceleration in total customer count growth, Snowflake hired more salespeople in the past two quarters than the prior two years combined. We believe Snowflake’s execution of its go-to-market strategy is key to competing with Databricks and data platforms from hyperscalers.
• We like the continuous growth of data sharing on Snowflake Marketplace. 40% of customers are now exchanging their data, which brings Snowflake a step closer toward building an ecosystem that embodies network effects.

Coming up: Management increased its product revenue guidance for fiscal 2026 by $70 million to $4.395 billion. Non-GAAP operating margin guidance was also up 100 basis points to 9%, reflecting better operating leverage.