Stock Prices for Snowflake: An Unexpected Verdict
Snowflake, the cloud-based data warehousing company, has reported impressive financial results for its fiscal 2026 second quarter. The company generated $1.09 billion in product revenue, marking a 32% increase from the year-ago period and a faster growth rate compared to the first quarter.
The news sent Snowflake's stock soaring by 20%, reflecting investor optimism. The company's revenue growth acceleration came despite the company's losses piling up, reaching a net loss of $298 million during the quarter.
Snowflake's net revenue retention rate also increased sequentially to 125%, indicating that customers are spending 25% more money than they were at the same time last year. This is a positive sign for the company's long-term growth prospects.
The company's focus on artificial intelligence (AI) is also noteworthy. Snowflake launched Cortex AI in 2023, a platform that provides businesses with access to ready-made large language models and tools for easier data gathering. The platform includes tools like Cortex Agents, which can be trained to autonomously complete various tasks, such as analyzing sales transcripts to generate revenue opportunities.
Document AI, another tool within Cortex AI, can extract data from unstructured sources like contracts and invoices. Snowflake Intelligence, another AI platform in public preview, allows businesses to "talk" to their data using natural language.
Despite the high valuation, Snowflake might still offer potential for investment, but a holding period of five years or more may be necessary to maximize the chances of earning a positive return. However, investors should not ignore stock-based compensation, as it dilutes the holdings of existing shareholders, which can dent their potential returns.
As of the fiscal 2026 second quarter, Snowflake had 12,062 total customers, with more than 6,100 using at least one of the company's AI products weekly. The company's efforts to bring together fragmented data from multiple cloud computing platforms for more effective analysis through the Data Cloud are paying off.
Snowflake's valuation is currently high, with a price-to-sales (P/S) ratio of 20.8, making it more expensive than major cloud providers like Microsoft, Amazon, and Alphabet. However, it is important to note that Snowflake's valuation is significantly higher than these major cloud providers, even though they operate several other businesses beyond the cloud.
Snowflake's net loss for the first half of fiscal 2026 reached a record $728 million, indicating a potential to exceed its $1.3 billion loss from fiscal 2025. This is a concern for some investors, but the company's strong growth and AI advancements suggest that it is on the right track.
The company's remaining performance obligations (RPOs) increased 33% year over year to a record high of $6.9 billion, indicating strong demand. Snowflake's AI offerings are being adopted by major cloud and data-driven enterprises, though specific names are not detailed in the available search results. Snowflake itself is a key player in cloud data platforms with growing adoption for AI and data solutions as of 2025.
In conclusion, Snowflake's Q2 earnings show promising growth and advancements in AI, despite the company's high valuation and ongoing losses. Investors should consider these factors when deciding whether to invest in Snowflake.
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