SNOW: Enterprise AI Demand Will Drive Long-Term Earnings Power And Upside Potential

Analysts have nudged our Snowflake fair value estimate higher to approximately $282 from about $273 per share, citing a wave of Street price target hikes toward the $295 to $325 range and increased confidence that robust, AI driven demand can support stronger long term earnings power, despite only modest tweaks to growth and margin assumptions.

Analyst Commentary

Bullish analysts are broadly lifting targets into the $295 to $325 range, characterizing Snowflake as a key beneficiary of accelerating enterprise AI adoption and improving demand visibility into 2025 and beyond.

Bullish Takeaways

• Partner and channel checks point to robust, AI centric demand for Snowflake, reinforcing confidence that the platform can sustain elevated product growth and support a premium valuation multiple.
• Commentary around exiting the year at just over $4.5 billion in revenue and a path to $10 billion in a couple of years underpins the view that Snowflake remains a long duration growth compounder with meaningful operating leverage ahead.
• Analysts highlight positive off quarter demand checks, stronger Q3 deal flow, and healthy Q4 pipeline generation, which collectively reduce near term execution risk and support upside to current guidance.
• Snowflake continues to be cited as a top pick within software and data infrastructure. Easing year over year comparisons and conservative guidance are seen as catalysts for estimate revisions and further target hikes.

Bearish Takeaways

• Street commentary acknowledges ongoing volatility in AI exposed software names, with crowding in perceived AI winners introducing multiple risk even if fundamentals track expectations.
• Some analysts flag that the recent wave of price target increases reflects a more optimistic scenario on AI monetization and execution, leaving less room for error if demand normalization or competitive intensity emerges.
• While checks are broadly positive, the outlook still depends on continued strength in large deal activity and steady pipeline conversion, creating sensitivity to any macro slowdown or tighter IT budgets.
• Investors are cautioned that expectations for revenue upside and guidance raises are becoming more widespread, increasing the bar for quarterly results to positively surprise and sustain the current valuation rerating.

What's in the News

• Snowflake expanded its multi year partnership with Anthropic through a $200 million agreement, bringing Claude models to more than 12,600 customers and making Claude a core engine behind Snowflake Intelligence for enterprise AI agents (Client Announcements).
• The company unveiled major AI and developer focused product innovations, including Snowflake Intelligence general availability, Cortex Agents, Workspaces with Git and VS Code integration, dbt Projects on Snowflake, and Snowpark Connect for Apache Spark to speed AI app and agent development on a single governed platform (Product Related Announcements).
• Snowflake introduced new data platform capabilities such as Horizon Catalog, Openflow, Interactive Tables and Warehouses, near real time streaming analytics, and Snowflake Postgres, aiming to unify transactional and analytical data and redefine the enterprise lakehouse for the AI era (Product Related Announcements).
• Snowflake and Accenture formed the Accenture Snowflake Business Group, backed by more than 5,000 certified professionals and a new global Center of Excellence, to scale generative AI and data driven business model reinvention for large enterprises (Client Announcements).
• Snowflake launched Cortex AI for Financial Services and a managed Model Context Protocol Server to let financial institutions securely combine proprietary and third party market data with AI agents for use cases such as market analysis, fraud detection, and customer support (Product Related Announcements).

Valuation Changes

• The fair value estimate has risen slightly, moving from approximately $272.69 to about $281.73 per share.
• The discount rate has increased marginally, from roughly 9.01 percent to about 9.07 percent, reflecting a modest uptick in required return assumptions.
• Revenue growth has edged down slightly, from around 23.98 percent to about 23.74 percent, implying a minor tempering of long term top line expectations.
• The net profit margin has decreased very slightly, from about 6.99 percent to roughly 6.98 percent, indicating essentially unchanged long term profitability assumptions.
• The future P/E has risen modestly, from approximately 236.0x to about 240.2x, suggesting a small increase in the implied valuation multiple on forward earnings.