Key insights
- An analyst is initiating a position in Snowflake (SNOW), citing a compelling entry point due to a recent market selloff and strong underlying growth drivers. Key bullish signals include accelerating AI consumption, robust RPO growth indicating revenue durability, and increasing platform stickiness. The analyst believes the current valuation doesn't fully reflect Snowflake's growth potential, especially with AI becoming a second growth engine.
The broader market selloff has compressed SNOW from $277 in Nov 2025 to ~$153 in four months. That's a lot of fear priced in. I’ve been building conviction on Snowflake for the past few months. I think it is finally getting interesting for a staged entry. You're buying a high quality compounder at a valuation that, while not cheap, is the most reasonable it's been since 2022.
I'm planning to start with a small position and plan to scale in through 2026 as execution confirms.
Here’s my thesis.
Snowflake just closed FY2026 with $4.72B in product revenue, up 30% YoY. Q4 product revenue hit $1.23B (+30%), and the company guided FY2027 at ~$5.66B (~27% growth). That's deceleration from the triple-digit days, but 27-30% growth at this scale puts SNOW in rare company among enterprise software names. What also caught my attention are the leading indicators underneath it.
1. AI consumption is inflecting.
Over 9100 accounts are now using Snowflake AI features — the largest sequential increase the company has ever reported. Snowflake Intelligence scaled to 2500+ accounts in just 3 months. Cortex Code is already active across 4400+ customer accounts. Customers are driving incremental platform consumption on top of existing analytics and data engineering workloads. AI workloads are becoming a second growth engine.
2. RPO acceleration signaling revenue durabiliTty.
Remaining performance obligations hit $9.77B, up 42% YoY and that growth rate accelerated for the second consecutive quarter. RPO is the closest thing to a forward-looking revenue guarantee in a consumption model. When RPO is growing faster than revenue, it means the backlog is building, not depleting. For a company the market is pricing like growth is dying, that is a disconnect.
3. The platform is becoming stickier.
The product surface now spans analytics, data engineering, AI/ML, and now observability (Observe acquisition). Each new workload a customer adopts raises switching costs. Net revenue retention at 125% confirms existing customers keep spending more. 733 customers now spend $1M+ annually (+27% YoY), and Snowflake serves 790 of the Forbes Global 2000. This is becoming enterprise infrastructure.
However, there are two keys risks pulling me from starting a position.
1. Valuation.
Even after a 45% drawdown (~$153), SNOW trades at ~12x forward revenue and a forward P/E near 200. The stock is priced for sustained high growth and margin expansion. If revenue growth decelerates below 25%, the multiple has room to compress further. GAAP losses widened to -$1.33B in FY2026, and stock-based compensation remains elevated at ~37% of revenue. I think the valuation carries real risk.
2. Databricks and hyperscalers Competition.
Databricks is growing faster in ML-heavy workloads and has stronger momentum with data engineering teams. AWS (SageMaker Lakehouse), Google (BigQuery + Gemini), and Azure (Azure OpenAI) are all converging toward integrated data + AI stacks that work natively with existing cloud workloads. Snowflake multi-cloud neutrality is a differentiator, but hyperscalers control the underlying infrastructure and increasingly offer competitive alternatives. If enterprises consolidate onto single-cloud stacks, Snowflake's advantage weakens.
Curious what others think, anyone else building a position here? or waiting for further weakness lower than $50B valuation?