Snowflake Rallies Post Q1 Earnings: Buy, Sell or Hold the Stock?

Core Insights - Snowflake (SNOW) shares have increased by 11.7% since the release of its first-quarter fiscal 2026 results, driven by strong platform adoption and a net revenue retention rate of 124% as of April 30, 2025 [1] - The company has seen a year-to-date share price increase of 29.5%, outperforming the Zacks Computer and Technology sector, which decreased by 3.8%, and the Zacks Internet Software industry, which increased by 4.3% [2] - Snowflake's customer base has grown significantly, with 11,578 customers as of April 30, 2025, up from 9,741 customers a year earlier, and a net addition of 451 customers in the first quarter of fiscal 2026, representing a 19% year-over-year increase [2] Financial Performance - For the second quarter of fiscal 2026, Snowflake expects product revenues to be between $1.03 billion and $1.04 billion, indicating a year-over-year growth of 25% [15] - The Zacks Consensus Estimate for second-quarter fiscal 2026 revenues is currently at $1.08 billion, reflecting a 24.60% year-over-year growth [16] - For fiscal 2026, Snowflake anticipates product revenues to reach $4.32 billion, a 25% increase from fiscal 2025 [15] Competitive Landscape - Snowflake's strong partner ecosystem, including major companies like Microsoft, Amazon, and NVIDIA, has been a key growth driver [7] - The company faces intense competition from major cloud providers such as AWS, Azure, and Google Cloud, as well as rivals like Databricks [18][19] - Rising expenses and GPU-related costs due to aggressive investments in AI initiatives are impacting profitability [18][19] Product and Innovation - Snowflake's expanding portfolio includes products like Apache Iceberg, Hybrid tables, and Cortex AI, which are attracting new clients [12] - The integration of OpenAI's models into Snowflake Cortex AI through a partnership with Microsoft enhances enterprise AI capabilities [8] - More than 5,200 customers are utilizing Snowflake's AI and machine learning technology weekly, indicating strong engagement [14]