Snowflake Earnings: Promise of AI Is Real for Integrated Data Platforms

Key Morningstar Metrics for Snowflake

• Fair Value Estimate: $223.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snowflake’s Earnings

Snowflake’s SNOW fourth-quarter results easily topped guidance, with revenue growth accelerating to 30% and bookings growth accelerating to 42%. We believe artificial-intelligence-related demand is the primary driver of the company’s recent outperformance.

Why it matters: When enterprise customers want to leverage AI’s power to unlock proprietary data insight, Snowflake’s fully managed development suite can come in handy. Tools like Cortex AI benefit from their proximity to data, which allows rapid iteration of enterprise AI prototypes.

• Snowflake customers’ interest in data-driven AI applications is much stronger than we expected. Nearly 70% of Snowflake customers are using the platform’s AI features, with almost 20% leveraging Snowflake Intelligence, which became generally available only four months ago.
• We surmise the broad-based AI tailwind is also benefiting competitive offerings like Databricks’ Agent Bricks or Google Vertex AI. In other words, healthy growth momentum does not necessarily earn Snowflake a more favorable position in the enterprise data platform market.

The bottom line: We raise our fair value estimate for no-moat Snowflake to $223 per share from $193, based on a more optimistic growth outlook from AI-induced demand. We think fear around AI’s disruption to database infrastructure is unjustified, leaving Snowflake shares undervalued.

• With Snowflake landing its largest deal in history of over $400 million, we see a clear sign that the company is enjoying higher switching costs. Continued expansion of account size is a prerequisite for Snowflake to develop an economic moat.
• Net revenue retention remained stable at 125% for the third consecutive quarter, boosting our confidence that the company can deliver five-year annualized revenue growth of 24%.

Coming up: For fiscal 2027, management guided a product revenue growth of 27.0% and a non-GAAP operating margin of 12.5%, both of which came slightly ahead of our expectations.