Snowflake (SNOW -1.50%) shares continued their recent upward momentum following a strong fiscal first-quarter earnings report and increased guidance from the company. The stock is now trading up about 32% on the year, as of this writing, and up nearly 57% since early April.
Let's take a closer look at the company's most recent earnings results to see if its momentum can continue.
Strong revenue growth
For those unfamiliar with Snowflake, it is a cloud-based data warehousing and analytics company. Customers use its solutions to store and analyze large amounts of data. Its system separates storage from computing and works across cloud providers, allowing users to securely share data in real time.
Image source: Getty Images.
There has been some worry that artificial intelligence (AI) could disrupt its business. Snowflake thrives at handling and analyzing structured data, while AI excels at analyzing unstructured data. As such, there has been some concern that AI would reduce the need for structured data, since it can extract meaning and context from unstructured data. However, thus far there hasn't been less need for structured data, while Snowflake has embraced AI to expand its services to unstructured data.
The company's Cortex AI platform, which incorporates AI tools directly into its data platform, has been a hit with customers. It said that over 5,200 accounts use its AI and machine learning capabilities weekly. Meanwhile, it has been able to improve its connectivity capabilities and integration with platforms like Google Drive following its acquisition of Datavolo.
This helped power 26% year-over-year revenue growth as the company topped $1 billion in quarterly revenue for the first time. Its $1.04 billion in total revenue also topped the $1.01 billion analyst consensus, as compiled by LSEG. Product revenue jumped 26% to $996.8 million. Adjusted earnings per share (EPS) climbed to $0.24 from $0.14 a year ago, which was well ahead of the $0.21 consensus.
Its net revenue retention rate stood at 124% over the past 12 months. This metric measures the growth of existing customers after churn and shows both strong retention and the company's ability to continue to expand within its customer base. Any number over 100% indicates expansion. Importantly, two large customers that ran out of capacity last quarter and elected to delay their renewals signed $100 million-plus contracts in the quarter. Snowflake is also doing a good job of adding new customers. It added 451 net new customers in fiscal Q1, which was a 19% year-over-year increase.
Looking ahead, Snowflake increased its guidance for full-year product revenue to approximately $4.325 billion, up from a prior outlook of $4.28 billion. The new forecast represents 25% year-over-year growth. It is looking for an 8% operating income margin. For fiscal Q2, it forecast product revenue of between $1.035 billion to $1.045 billion, representing growth of about 25%. It projected an 8% operating income margin.
Is the stock a buy?
Snowflake is starting to change the narrative around how AI will impact its long-term growth. It's doing more than just holding onto customers; it's consistently adding new ones and expanding relationships with existing clients. A big part of that growth is coming from upselling solutions like Cortex AI and other new products, which are helping drive revenue growth.
While the stock has had a strong 2025 so far, it's still down about 50% from the fall of 2021. However, it is probably fair to say that the stock was overvalued at that time, with a trailing price-to-sales (P/S) multiple of over 100 times back then.
Data by YCharts.
With a forward P/S multiple of over 12x this fiscal year's analyst estimates, the stock is not in the bargain bin, but it's not a crazy valuation for a software-as-a-service (SaaS) company with high gross margins growing its revenue between 25% to 30%.
Given its valuation and the opportunity in front of it, I think the stock looks fairly valued at this time. As such, I wouldn't chase the rally in the stock, but I also wouldn't be a seller if I owned it either.
The key will be for the company to continually prove that AI is helping its business and not hurting it. That will take time, but it's been doing a great job so far.
