Snowflake Stock Forecast: Buy or Sell?

Snowflake Inc. (SNOW) is a data warehousing company that uses cloud computing allowing secure sharing and consumption of shared data. It provides a cloud-based data storage and analytics service enabling corporate users to store and analyze data. On the other hand, the Snowflake architecture with its ability to separate computer data storage from computing allows businesses that need a lot of storage but do not need a lot of CPU cycles, or vice versa, to pay for a combined package that includes both. Customers will only pay for the resources they utilize, which makes Snowflake’s business model unique. Snowflake maintains all aspects of data storage, including organization, file size, structure, compression, metadata, and analytics, automatically. Storage is charged in terabytes per month, and computation is charged on a per-second basis. Snowflake went public on September 16, 2020.  

The company reported its first-quarter earnings on May 27 beating revenue estimates handsomely. The shares, however, fell 8% in after-hours trading as the company reported a loss of $0.70 per share. However, the company is in a strong position in the growing data warehouse and cloud computing market, and its unique business model is likely to help the company gain market share from its closest rivals in the coming years.

First-quarter earnings recap

The company’s revenue for the quarter was $228.9 million, up 110% year-over-year. Product revenue was $214 million, and the remaining performance obligations were $1.4 billion. The net revenue retention rate was 168% in FQ1 2022, which ended on April 30. Snowflake generated $23 million of adjusted free cash flow and expanded its geographical scope in the Americas, EMEA, and APAC regions. EMEA revenue grew more than 200% and the Asia Pacific revenue grew more than 300% year-over-year. The company added 393 net new customers in Q1 and at the end of the quarter, had 104 customers with over $1 million in trailing 12-month product revenue, up from 77 in the previous quarter.

Exhibit 1: Quarterly revenue (in millions)

Source: Investor Presentation

The company also partnered with Datadog, Equifax, and Walgreens Boots Alliance during the quarter, and these partnerships are likely to be proven lucrative in the long run considering the massive demand for cloud computing services coming from large-scale companies.

Commenting on Snowflake’s success and its strategy, company CEO Frank Slootman said:

 “First, the modernization from on-premise to cloud computing is changing the landscape. Customers are moving workloads to public clouds to take advantage of unlimited capacity and scale and the utility model that lets them pay by the drink. Secondly, through Snowflake’s cloud-native software architecture, customers achieve remarkable gains in performance, economy, and data governance. Third, customers are now seeking to transform from a world where data influence people to one in which data drives operations directly. The data drives digital transformation. Data is the beating heart of the modern enterprise, and Snowflake is becoming core infrastructure to the digital economy.”

Exhibit 2: Revenue mix by geography

Source: Investor presentation

CFO Mike Scarpelli commented on geographical growth and said:

“Both EMEA and APAC exceeded their plan. It had very strong quarters. We saw a million-dollar-plus — it was actually a multimillion-dollar deal we did in EMEA with the big pharmaceutical company. And we landed a nice — very nice customer in Japan as well and saw very strong across the board I would say performance in EMEA and APAC.

Further, answering an analyst’s question on structural barriers or advantages that the company has, Frank said:

we’re not straddling the on-premise and public cloud environments. We’re only in the public cloud. And it is very important. I mean, you look at a lot of the public cloud companies, they have carried not only architecture but actual code forward from our product environment and they’ve tried to evolve that and adapt that…it’s hard to catch up when you’re not sitting on a good architecture. You’ll only going to get farther behind. Architecture matters. It matters a whole lot. And this is really the strength of Snowflake is rooted in its core architecture. Something we should never lose sight of.”

Industry outlook

According to Mordor Intelligence, the market for data warehouse-as-a-service was worth $1.44 billion in 2020 and is projected to grow at a CAGR of 20% between 2021 and 2026 to reach a market value of $4.3 billion by 2026. The Data Bridge Market Research highlights the major growth drivers of the data warehouse-as-a-service industry, including the growing demand for businesses to understand available data about business processes, goods, customers, and services, as well as real-world uses of technology in finance, business, healthcare, and other industries, and concerns related to data manageability and complexity.

Due to the huge growth in the volume of structured and unstructured data generated across numerous end-user industries, demand for data warehouse services, particularly in cloud-based systems, is likely to increase. The largest vertical is streaming media and advertisement followed by BFSI, which is a very profitable avenue for growth in the data warehouse-as-a-service sector because it deals with a large chunk of client data collected regularly. North America is the dominant region due to the early adoption of cloud computing services, but emerging regions such as Asia and Latin America are likely to grow at a faster clip in the next decade as a result of IT infrastructure development projects carried out by both government and private institutions.


Snowflake Inc. is one of the leading players in the data warehouse-as-a-service industry and cloud computing. Soon after the company debuted on the New York Stock Exchange, the stock popped close to $400, only to shed nearly half of its value in the months that followed. At the current market price of around $238, Snowflake offers a good opportunity for growth investors, but investors should expect substantial volatility in the future which is an inherent characteristic of many cloud computing stocks.

Disclosure: The author does not own any shares mentioned in this article.

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