Looking for the next decade-long winner from the AI (artificial intelligence) revolution? AI data cloud specialist Snowflake (SNOW 1.11%) is a good bet. As companies continue rebuilding their data stacks so they can train models and deploy AI features, Snowflake's cloud-based platform for data management and data sharing is a vital tool.
Take it from Snowflake's CEO: "As every company transforms to embrace the AI era, Snowflake remains at the center of today's AI revolution," Sridhar Ramaswamy said in the company's most recent earnings call.
To his end, the tech company's revenue has been soaring -- and growth will likely remain impressive for years to come, as Snowflake looks like it's still in the early innings of benefiting from the AI boom.
But just because a business looks well-positioned for explosive growth over the next 10 years doesn't mean the stock is.
Image source: Getty Images.
A decade-long tailwind
Snowflake's business model is simple: It gives companies one place to put data, organize it, interpret it, and securely share it across internal teams and even external partners. In an AI-heavy world, a seamless data cloud like this is key. More useful data for AI models means a better AI.
In its fiscal third-quarter 2026 earnings release, CEO Sridhar Ramaswamy described Snowflake as "the cornerstone for our customers' data and AI strategies."
As Snowflake leans into its efforts to be customers' cornerstone for their data, customers are responding.
Revenue is soaring. In its fiscal third quarter, revenue rose 29% year over year to $1.21 billion. In addition, management said in its fiscal third-quarter update that it crossed a $100 million revenue run rate tied directly to AI data.
"Because we operate as a consumption-based business, this number reflects real-world enterprise usage," Ramaswamy noted in the company's fiscal third-quarter earnings call. "It's a direct signal of how customers are using our AI capabilities in production to create value today."
With such a powerful tailwind from AI, Ramaswamy believes Snowflake has a long runway of "durable high growth and continued margin expansion."
NYSE: SNOW
Key Data Points
2 problems
All of this sounds great. In fact, I think that Ramaswamy is probably right; Snowflake's business will probably see explosive growth over the long haul.
But, for two reasons, that doesn't automatically make the stock a buy.
First, Snowflake is not even close to profitable. The company reported a net loss of about $292 million in its most recent quarter. And for the trailing-9-month period ended Oct. 31, 2025, the AI data cloud specialist's total net loss exceeded $1 billion -- more than its $958 million loss in the same period one year ago.
Sure, the company is generating positive cash flow. Its adjusted non-generally accepted accounting principles (GAAP) free cash flow in its most recent quarter was $136 million, or 11% of revenue. This was up from $88 million, or 9% of revenue, in the year-ago quarter. But to generate this free cash flow, the company pays stock-based compensation liberally, diluting shareholders. Total stock-based compensation in fiscal Q3 alone was an incredible $412 million.
The second issue with Snowflake as a stock is its valuation. Trading at nearly 17 times sales, the stock trades at a significant premium to more diversified software and internet giants Microsoft and Alphabet, which command price-to-sales ratios of 12 and 10, respectively.
All of this to say, Snowflake is a great business likely to see huge growth over the next decade. But its stock's outperformance potential isn't as certain. In fact, I'd prefer to stay on the sidelines at this valuation.
