Is Snowflake Stock a Buy Now?

Date:

Shares of Snowflake (NYSE: SNOW) have been in the doghouse for the majority of 2024 as concerns regarding the data cloud platform provider’s slowing growth and expensive valuation have weighed on the stock, but its latest quarterly results have infused new life into this beaten-down technology company.

Snowflake stock shot up nearly 33% following the release of its fiscal 2025 third-quarter results (for the three months ended Oct. 31) on Nov. 20. Let’s see why that was the case and check if now is a good time to buy this technology stock in anticipation of more upside.

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Snowflake reported fiscal Q3 revenue of $942 million, an increase of 28% from the same quarter last year, driven by a 29% increase in its product revenue to $900 million. The company’s revenue was well ahead of analysts’ expectations of $897 million. Meanwhile, its non-GAAP earnings came in at $0.20 per share. Though that was lower than the year-ago period’s reading of $0.25 per share, its earnings were well ahead of the $0.15 per share consensus estimate.

The guidance was the icing on the cake. The midpoint of Snowflake’s fiscal Q4 product revenue forecast of $908.5 million was significantly higher than the $884.5 million analyst estimate. The company has also raised its full-year product revenue guidance to $3.43 billion, which would be a 29% increase over the prior year. It was earlier expecting product revenue to increase 26% in fiscal 2025 to $3.36 billion.

It has also increased its operating margin estimate to 5% from the prior expectation of 3%. Snowflake’s beat-and-raise quarter can be attributed to the growing adoption of the company’s data cloud platform, which is benefiting from the integration of artificial intelligence (AI) solutions. For instance, the company exited the third quarter with just over 10,600 customers, up 20% from the same quarter last year.

It also benefited from higher customer spending during the quarter, with the number of customers who have generated more than $1 million in product revenue for Snowflake in the trailing 12 months jumping 25% year over year to 542. More importantly, the company has been able to generate more business from its existing customer base, which explains why it has upgraded its margin guidance as well.

This can be gauged from Snowflake’s net revenue retention rate of 127% for the quarter. The metric compares the product revenue generated by the company’s customers at the end of a quarter to the revenue generated by the same customers in the year-ago period. A reading of more than 100% in this metric means that Snowflake’s existing customers have either adopted more of its solutions or increased their usage of its offerings.

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