Should You Buy, Sell, or Hold SNOW Stock Before Q3 Earnings Release?

Snowflake SNOW is set to release third-quarter fiscal 2026 results on Dec. 3.

The Zacks Consensus Estimate for earnings has remained steady at 31 cents per share over the past 30 days, indicating year-over-year growth of 55%. The consensus mark for revenues is pegged at $1.18 billion, indicating an increase of 25.39% from the year-ago quarter’s reported figure. 

SNOW’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 38.38%. 

Let’s see how things have shaped up for SNOW prior to this announcement:

Snowflake Inc. Price and EPS Surprise

Snowflake Inc. price-eps-surprise | Snowflake Inc. Quote

Factors to Note for SNOW’s Q3

Snowflake’s fiscal third-quarter performance is expected to have reflected an expanding clientele driven by strong AI capabilities and a rich partner base. 

Snowflake continues to benefit from strong adoption and increasing usage of its platform, as reflected in a net revenue retention rate of 125% at the end of the second quarter of fiscal 2026. The company reported 19% year-over-year growth in the number of customers, reaching 12,062 in the reported quarter.

At the end of the fiscal second quarter, SNOW had 654 customers with trailing 12-month product revenues greater than $1 million (up 27% year over year) and 751 Forbes Global 2000 customers. In the reported quarter, SNOW added 533 net new customers, representing a 21% increase year over year.

Expanding clientele is expected to have benefited the top-line growth. For the third quarter of fiscal 2026, Snowflake expects product revenues between $1.125 billion and $1.13 billion. The projection range indicates year-over-year growth of 25% to 26%.  The Zacks Consensus Estimate for fiscal third-quarter 2025 product revenues is pegged at $1.12 billion, indicating 25.4% growth from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for customers with trailing 12-month product revenues greater than $1 million is currently pegged at 686, suggesting a 26.5% increase from the figure reported in the year-ago quarter. The consensus mark for total customers is pegged at 12,483, indicating an increase of 421 net new customers in the to-be-reported quarter.

SNOW Shares Outperform Sector, Industry

Snowflake shares have appreciated 62.7% in the year-to-date period compared with the Zacks Computer & Technology sector’s return of 27.2% and the Zacks Internet Software industry’s 6.9% growth over the same time frame.

SNOW Stock’s Performance

SNOW Stock is Currently Overvalued

Snowflake stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of forward 12-month Price/Sales, SNOW is trading at 15.6X, higher than the Internet Software industry’s 4.87X.

Valuation: SNOW is Trading at a Premium

Snowflake Rides on Strong Portfolio

Snowflake is benefiting from portfolio strength. The company launched approximately 250 new capabilities in the first half of fiscal 2026, including Snowflake Intelligence, Cortex AI SQL, Gen2 warehouses, Snowflake Postgres and Snowflake OpenFlow. These innovations simplify data management, enhance performance and enable AI-driven insights.

Snowflake’s investments in artificial intelligence and machine learning, including the introduction of Cortex AI and its integration with models from OpenAI and Anthropic, drove customer engagement. In the second quarter of fiscal 2026, the company announced that more than 6,100 customers are using Snowflake’s AI and ML technology weekly.

Snowflake’s AI capabilities, such as Snowflake Intelligence and Cortex AI, are gaining traction.  Nearly 50% of new customer logos in the second quarter of fiscal 2026 were influenced by AI, and 25% of deployed use cases involved AI. The company’s AI adoption is likely to have driven growth in the to-be-reported quarter as well.

Rich Partner Base Expands SNOW’s Clientele

SNOW’s strong partner base, which includes major players like SAP SAP, Microsoft MSFT, Amazon’s cloud computing platform Amazon Web Services (AWS), NVIDIA NVDA, Meta Platform, ServiceNow, Fiserv, EY, LTMindtree, Next Pathway, and S&P Global, has been a significant growth driver of its success.

In November 2025, Snowflake announced a native integration with NVIDIA. This integration with NVIDIA brings GPU-accelerated CUDA-X DS libraries into Snowflake ML. It enables significant speed improvements for data science workflows without requiring any changes to the code.

Snowflake’s collaboration with OpenAI, Anthropic, and Microsoft Azure is expanding its reach and enhancing its AI capabilities. Microsoft Azure was the fastest-growing cloud for Snowflake, with 40% year-over-year growth in the second quarter of fiscal 2026.

In November 2025, Snowflake announced a new collaboration with SAP to integrate Snowflake’s AI Data Cloud with SAP Business Data Cloud, enabling seamless, zero-copy access to semantically rich enterprise data for advanced AI, analytics, and intelligent application development.

Conclusion

Snowflake’s long-term prospects ride on an innovative portfolio and rich partner base. However, stiff competition and elevated infrastructure spending, particularly on GPUs to support AI-driven initiatives, are adding to cost pressures. The stretched valuation also makes the stock risky right now.

Snowflake currently carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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