Should You Buy, Hold, or Sell Snowflake Stock Before Q1 Earnings?

Snowflake SNOW is set to report its first-quarter fiscal 2026 results on May 21.

The Zacks Consensus Estimate for the top line is pegged at $1 billion, suggesting year-over-year growth of 21.13%. 

The consensus mark for earnings is pegged at 22 cents per share, unchanged over the past 30 days, indicating 57.14% year-over-year growth.

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the average earnings surprise being 28.04%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Snowflake Inc. Price and EPS Surprise

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

Let’s see how things have shaped up before this announcement.

Key Factors to Note for SNOW’s Q1 Earnings

Snowflake’s fiscal first-quarter performance is expected to have benefited from an expanding clientele and a strong partner base. 

Snowflake continues to gain from strong adoption and increasing usage of its platform, as reflected in a net revenue retention rate of 126% as of Jan. 31, 2025. In fourth-quarter fiscal 2025, the number of customers that contributed more than $1 million in the trailing 12-month product revenue increased from 455 as of Jan. 31, 2024, to 580 as of Jan. 31, 2025.

As of Jan. 31, 2025, SNOW had 11,159 customers, increasing from 9,384 customers as of Jan. 31, 2024. The clientele included 745 of the Forbes Global 2000 and accounted for 45% of SNOW’s fiscal 2025 revenues of $3.6 billion, up 29% from fiscal 2024. This strong momentum is expected to have carried into the to-be-reported quarter as well.

For the first quarter of fiscal 2026, Snowflake expects product revenues in the range of 955-$960 million. The projection range indicates year-over-year growth of 21-22%.

Snowflake’s investments in artificial intelligence (AI) and machine learning, including the introduction of Cortex AI and its integration with models from OpenAI and Anthropic, continue to drive customer engagement. More than 4,000 customers are utilizing Snowflake’s AI and ML technology on a weekly basis, which is expected to have positively impacted the company’s performance in the to-be-reported quarter.

SNOW Outperforms Sector and Industry

Snowflake shares have surged 18.5% in the year-to-date period, outperforming the Zacks Computer and Technology sector’s decrease of 1.4% and the Zacks Internet Software industry’s increase of 7.2%. The outperformance in SNOW stock is driven by its strong portfolio and an expanding partner base. 

YTD Performance

SNOW Stock is Currently Overvalued

SNOW stock is not so cheap, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, SNOW is trading at 12.81X, higher than the Computer & Technology sector’s 6.18X.

Price/Sales (F12M)

SNOW Benefits From Expanding Portfolio

Snowflake’s expanding portfolio has been noteworthy. Products like Apache Iceberg and Hybrid tables, Polaris, Cortex Large Language Model and ML functions are helping Snowflake win new clients. 

Building on this momentum, in April 2025, Snowflake enhanced its AI Data Cloud by integrating core capabilities with Apache Iceberg tables. This enabled seamless open lakehouse strategies, improved query performance, comprehensive security, and data sharing while advancing open-source contributions.

Further strengthening its offerings in May 2025, SNOW announced the expansion of its AI Data Cloud with automotive-specific solutions, driving digital transformation and AI innovation across the automotive industry.

SNOW’s Expanding AI Partnerships Drive Growth

SNOW’s strong partner base, which includes major players like Microsoft MSFT, Amazon AMZN, NVIDIA NVDA, ServiceNow, Fiserv, EY, LTMindtree, Next Pathway and S&P Global, is expected to have been a major growth driver of its success.

In April 2025, SNOW announced an expanded partnership with Microsoft to integrate OpenAI’s models into Snowflake Cortex AI through Azure OpenAI Service, empowering enterprises to build AI-powered apps. This collaboration also brings Snowflake Cortex Agents to Microsoft 365 Copilot and Microsoft Teams, enhancing productivity with AI-driven insights.

Snowflake’s partnership with NVIDIA enables businesses to build customized AI data applications using Snowflake Cortex AI and NVIDIA AI Enterprise software, driving enhanced AI performance and integration.

SNOW’s partnership with Amazon’s cloud computing platform, Amazon Web Services (AWS), has expanded to drive customer-focused innovation, enhance industry-specific solutions, deepen product integrations, and increase collaborative sales and marketing efforts to serve more than 6,000 joint customers, including major Fortune 500 companies.

SNOW Shares – Buy, Sell or Hold?

Snowflake benefits from a rich partner base, expanding clientele and an innovative portfolio, but is weighed down by competitive pressures and rising costs. 

Snowflake also expects a tougher year-over-year revenue comparison in the to-be-reported quarter due to lapping the leap year, which will impact the company’s top-line growth.

Snowflake also expects the first quarter of fiscal 2026 non-GAAP operating margin to be impacted by approximately $15 million in expenses related to its annual sales kickoff event. Stretched valuation also remains a concern.

Currently, SNOW carries a Zacks Rank #3 (Hold), implying that investors should wait for a better 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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