Cloud Migration And AI Adoption Will Expand Global Markets

Key Takeaways

• Expanding AI-driven use cases and unique platform collaborations position Snowflake for outsized, sustained revenue growth and considerable margin expansion as enterprises consolidate data platforms.
  
• Major investments in sales infrastructure and automated migration tools are set to accelerate international expansion and recurring revenue retention through viral, consumption-based adoption.
  
• Heavy reliance on aggressive growth investments, evolving data trends, regulatory hurdles, and hyperscaler exposure could constrain profitability, differentiation, and sustainable revenue expansion.

Catalysts

Provides a cloud-based data platform for various organizations in the United States and internationally.

• While analyst consensus acknowledges accelerating AI adoption and Snowflake's broadening product suite as tailwinds for revenue, it likely understates how AI-driven use cases are becoming foundational to nearly all new workloads, with almost half of new customer wins and a quarter of use cases now AI-centric-suggesting a much greater and more durable step-function in product revenue and long-term expansion rates as generative AI and agentic workflows become the default for global enterprises.
  
• Analyst consensus highlights strong partnerships and rapid innovation, yet it may not fully reflect how Snowflake's unique platform-agnostic collaborations, deep integration with hyperscalers like Microsoft, and first-to-market launches of enterprise-ready AI features are positioning Snowflake as the orchestrator of the modern data stack, likely supporting both higher-than-expected customer stickiness and significant gross margin expansion as vendors consolidate around best-in-class platforms.
  
• The surge in large-scale sales and marketing hiring-more in the last six months than the prior two years combined-indicates Snowflake is consciously building the sales infrastructure to double or even triple its quota-carrying capacity, which could drive outsized net new customer additions in underpenetrated international markets and ultimately accelerate product revenue growth far beyond current forecasts.
  
• Enterprises are still in the early stages of migrating off legacy and first-generation cloud data solutions, and Snowflake's growing suite of migration automation (like SnowConvert AI and OpenFlow) and native support for open formats and critical workloads (Postgres, Spark, Iceberg) positions it to capture disproportionate share of a massive, expanding data platform market, sustaining elevated net revenue retention and recurring revenue growth over multiple years.
  
• Snowflake's adoption-led, consumption business model is driving viral, bottom-up expansion as AI use cases propagate across business functions, enabling rapid upsell and broader per-customer monetization without heavy sales investment-this model, combined with multi-product cross-sell, sets the stage for sustained outperformance in both free cash flow generation and operating margins as scale efficiencies intensify.

Snowflake Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Snowflake compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Snowflake's revenue will grow by 28.1% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Snowflake will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Snowflake's profit margin will increase from -33.5% to the average US IT industry of 6.4% in 3 years.
• If Snowflake's profit margin were to converge on the industry average, you could expect earnings to reach $551.7 million (and earnings per share of $1.66) by about September 2028, up from $-1.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 260.7x on those 2028 earnings, up from -53.7x today. This future PE is greater than the current PE for the US IT industry at 32.4x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.81%, as per the Simply Wall St company report.

Snowflake Future Earnings Per Share Growth

Risks

• Snowflake's heavy investment in aggressive sales and marketing hiring may create pressure on net margins if it does not yield proportionate increases in high-value customers or scalable operating leverage in the long term.
  
• Strong momentum with cloud-provider partnerships, particularly with Azure and AWS, underscores Snowflake's ongoing reliance on major hyperscalers, which exposes the company to risks from changes in pricing, terms, or potential competition from these providers and can compress gross margins and limit long-term profitability.
  
• Growing adoption of open data formats like Apache Iceberg and workloads such as Spark within Snowflake's customer base highlights the broader industry shift toward open-source and more modular data architectures, which could reduce Snowflake's differentiation and pricing power, impacting revenue growth and average contract value.
  
• Increasing data privacy regulations and data sovereignty requirements, especially with Snowflake's expansion efforts in regions like Europe and APJ, could complicate enterprise adoption and require costly adaptations, potentially slowing future revenue growth and requiring increased compliance expenditures.
  
• The rapid pace of innovation in AI and cloud data platforms, combined with persistent skills shortages for advanced data engineering talent, may elongate sales cycles, increase customer implementation friction, and lead to higher costs for customer success and professional services, putting downward pressure on earnings and free cash flow.

Valuation

• The assumed bullish price target for Snowflake is $335.26, which represents two standard deviations above the consensus price target of $262.03. This valuation is based on what can be assumed as the expectations of Snowflake's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $440.0, and the most bearish reporting a price target of just $170.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $8.7 billion, earnings will come to $551.7 million, and it would be trading on a PE ratio of 260.7x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $221.9, the bullish analyst price target of $335.26 is 33.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.