ii view: Snowflake shares rally to highest since 2021

Photo: Samuel Boivin/NurPhoto via Getty Images.

Third-quarter results to 31 July  

• Product revenue up 37% $1.49 billion (£1.1 billion)
• A net loss of $191.7 million versus $297.9 million a year ago

Chief executive Sridhar Ramaswamy said:

“Our rapid pace of innovation, tight go-to-market execution, and operational discipline position us well to capture the opportunity ahead. The Agentic Enterprise runs on Snowflake, and we're just getting started."

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ii round-up:

Snowflake Inc Ordinary Shares (NYSE:SNOW) detailed accelerating sales growth, with the analyser and moderniser of data for corporations again raising its annual sales estimate.

Tools to help build AI agents, or productivity enhancers helped push second-quarter product revenues up 37% from a year ago to $1.49 billion (£1.1 billion). That’s an acceleration from 34% growth in the first quarter, with analysts predicting a further acceleration to 40% during the second half.

Shares in New York listed Snowflake soared by a fifth in post results US trading having come into these latest numbers up around 40% so far in 2026. That’s comfortably ahead of a 14% gain for the tech-heavy Nasdaq Composite index. AI darling and high-performance chip maker NVIDIA Corp (NASDAQ:NVDA) is up around 22% year to date.

Snowflake unites and analyses data from servers across the global on behalf of customers such as Booking.com, Nissan and United Rentals.

The Montana headquartered company added more than 2,000 accounts for its key AI assistance tool during the period to bring users to over 9,100. Total customers soared by just under a third from a year ago to more than 14,500.

Snowflake now predicts annual product revenues of $6.07 billion, up from a previous $5.84 billion, pushing year-over-year growth to 36% from a previous 31% estimate.

A net loss of $191.7 million, or 55 cents per share for this latest quarter was smaller than the $297.9 million, or 89 cents per share loss reported a year ago.

Group customers with trailing 12-month product revenues of more than $1 million rose to 828 from the prior quarter's 779.

Broker Morgan Stanley reiterated its ‘overweight’ stance on Snowflake shares post the results, raising its fair value estimate to $470 from $300, and said Snowflake offers an AI-powered growth flywheel that is still in the early innings.

ii view:

Founded in 2012 and coming to the stock market in 2020, Snowflake today employs around 9,300 people. Geographically, the US accounted for most sales during its last financial year at 75%, followed by Europe, the Middle East, and Africa at 16%, Asia-Pacific and Japan 6%, and the other Americas 3%.  

For investors, further losses can't be ignored. The exact impact of AI on software companies broadly remains hard to predict. Increased costs suffered by its corporate customers given the war in the Middle East and elevated energy prices could yet slow IT spending, while a share price-to-net asset value around four times the three-year average may suggest the shares are not obviously cheap.

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To the upside, customer numbers and revenues are growing, helped by services to aid customers with their own AI provision. Geographical and product diversity exist. Sridhar Ramaswamy, CEO since early 2024, has looked to reinvigorate group strategy including a new focus on product innovation, while AI itself is increasing Snowflake’s own efficiency, reducing staff hiring and costs. 

In all, a share price trading close to the consensus analyst fair value estimate at $331 offers some caution. That said, some on Wall Street believe the shares are worth much more, and with corporate AI ambitions difficult without data modernisation and transformation initiatives, grounds for longer-term optimism appear to remain.

Positives:

• Growing customer numbers
• Increasing use of data

Negatives:

• Uncertain economic outlook
• No dividend payment

The average rating of stock market analysts:

Buy