Snowflake (SNOW) remains a compelling buy as it expands in the $342 billion cloud data market, with strong management execution, growing Artificial Intelligence/Machine Learning adoption, and improving margins, RBC Capital Markets said in a note emailed Monday.

Despite about 20% share price decline since mid-February, the firm sees Snowflake's 30% growth at a $3.5 billion revenue scale, stable net revenue retention, and ongoing margin improvements as key strengths.

The firm highlighted Snowflake's expanding multi-cloud strategy, with increasing adoption on Microsoft Azure and Google Cloud in addition to AWS, giving it a competitive edge. AI/ML products, including Cortex and Snowpark, are gaining traction, with over 4,000 customers using Snowflake's AI/ML technology weekly.

Core computing remains the primary revenue driver, while new data engineering features such as Dynamic Tables and data-sharing capabilities help drive additional usage. RBC noted that while data sharing itself does not directly increase compute consumption, it expands data availability, supporting future growth.

Despite uncertain macro headlines, Snowflake has not seen a slowdown in deal cycles or customer spending. While new business growth could slow in a downturn, expansion within existing accounts remains strong, RBC said. The firm expects operating margin improvement to come from cost efficiencies rather than gross margin expansion.

RBC maintained an outperform rating on Snowflake's stock with a $221 price target.

Shares of Snowflake were up 5% in recent Monday trading.

Price: 165.57, Change: +7.18, Percent Change: +4.53