Snowflake(NYSE: SNOW) The stock went public in late 2020, and shares peaked during the pandemic-era tech sector’s surge in late 2021. The stock has since fallen about 68% from that all-time high, but Wall Street is seeing a turnaround on the horizon. Among the 45 analysts covering the company, the average price target is $169 per share – 33% higher than the current share price of $127.
Snowflake’s cloud-based platform allows customers to integrate, store, transform and understand their data. It also has a marketplace for data sharing and monetization, creating a network effect that makes the platform increasingly useful as more customers join. Importantly, the architecture is cloud-agnostic: the platform runs on all systems of the major cloud infrastructure providers. That distinguishes Snowflake from the analytics solutions of Amazon And Microsoft.
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Snowflake was one of several high-growth tech stocks that soared during 2021’s market mania, then crashed back to earth during 2022’s bear market. More recently, the stock continued to struggle as investors reacted to news of a hacking. incident that affected more than 160 of its customers, the retirement of CEO Frank Slootman and concerns about the company’s investments in artificial intelligence (AI).
However, with the share price down so far, it’s worth taking a closer look today, especially as the recent headwinds are transitory. The cybersecurity incident was limited to customers who had not properly secured their data. Importantly, it was not caused by “any vulnerability, misconfiguration or breach of Snowflake’s product,” the company said in a joint statement with third-party experts Mandiant and CrowdStrike.
Moreover, Slootman praised his successor, Sridhar Ramaswamy. “As a leading cloud data platform, Snowflake is at the epicenter of the AI revolution,” he said. “There is no better person than Sridhar to lead Snowflake into this next phase of growth and seize the opportunities ahead in AI and machine learning.”
Finally, the company has invested in the development of AI products. Cortex is a fully managed service that allows companies to process data with large language and machine learning models trained for answer extraction, text summarization, prediction, and anomaly detection. It also includes a conversational interface that allows users to ask questions about their data in natural language and get meaningful answers.
While the heavy investments in AI product development have (and will continue to) squeeze operating margins, early data suggests that these investments will pay off in the coming years. From a survey of managers recently conducted by Morgan Stanley Snowflake ranked third (behind Microsoft and Amazon) in terms of which companies Chief Information Officers say are likely to gain market share in generative AI spending over the next three years.
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Snowflake reported mediocre results in the second quarter of 2025, which ended July 31. Total revenue rose 29% to $869 million. That exceeded expectations, but was also a slowdown from the 33% growth posted in the first quarter. Meanwhile, non-GAAP earnings fell 18% year-over-year to $0.18 per diluted share as product development and marketing costs caused operating margin to decline 3 percentage points.
Looking ahead, Snowflake is well-positioned to capitalize on the increasing demand for AI thanks to the cloud-agnostic architecture and data sharing capabilities the platform offers. While continued investment in product development will likely continue to negatively impact profitability in the coming quarters, revenue growth should accelerate again and profitability should improve as AI products gain popularity.
While Wall Street analysts expect adjusted earnings to decline 25% over the next twelve months, they also expect adjusted earnings to rise 34% annually through fiscal 2028, which ends in January 2028. That consensus outlook indicates that a strong turnaround is just a few quarters away. But even in that context, the company’s current valuation of 135 times adjusted earnings seems expensive.
Personally, I think patient investors with a high risk tolerance could open small positions in Snowflake today. But it would be wiser to keep Snowflake on your watchlist until the stock trades at a more reasonable valuation.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions in Amazon and CrowdStrike. The Motley Fool holds positions in and recommends Amazon, CrowdStrike, Microsoft, and Snowflake. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
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