Snowflake SNOW is set to report its fourth-quarter fiscal 2025 results on Feb. 26. 

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The Zacks Consensus Estimate for revenues is pegged at $952.67 million, indicating an increase of 22.97% from the year-ago quarter’s reported figure.

The consensus mark for earnings has been stable in the past 30 days at 17 cents per share. The figure suggests a decrease of 51.43% from the year-ago quarter’s reported figure.

SNOW’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the average surprise being 35.39%.
 

Let’s see how things have shaped up for SNOW prior to this announcement.

Key Factors to Note for SNOW’s Q4

SNOW has been suffering from increased GPU-related costs as the company aggressively invests in AI initiatives. This is expected to have kept margins under pressure. Intensifying competition from the likes of Databricks is increasing pricing pressure, hurting profitability.

However, SNOW’s top-line growth is expected to have benefited from the growing adoption of Iceberg and Snowpark. The company’s artificial intelligence (AI) solution, Cortex, is expected to have gained more traction in the to-be-reported quarter. 

At the end of the third quarter of fiscal 2025, SNOW had more than 1,000 deployed use cases. Currently, more than 3,200 accounts use SNOW’s AI and machine learning (ML) features. Moreover, exiting third-quarter fiscal 2025, SNOW had 18 Global 2000 customers. This strong momentum is expected to have carried into the to-be-reported quarter.

SNOW Shares Outperform Sector

Snowflake shares have appreciated 15.2% year to date, outperforming the Zacks Computer & Technology sector’s decline of 0.6%.

Year-to-Date Performance

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SNOW stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

The stock is trading at a premium with a forward 12-month P/S of 13.2X compared with the broader sector’s 6.45X.

P/S Ratio (F12M)

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The stock is currently trading above the 50-day and 200-day moving averages, indicating a bullish trend.

SNOW Stock Trades Above the 50-Day & 200-Day SMA

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SNOW’s Strong Portfolio, Partner Base Aids Prospects

Snowflake has been benefiting from innovations like Apache Iceberg and Hybrid tables, Polaris, Cortex Large Language Model and ML functions, which are helping it win new clients.

SNOW benefits from a strong partner base that includes major players like Amazon AMZN, ServiceNow NOW, Microsoft MSFT, NVIDIA, Fiserv, EY, LTMindtree, Next Pathway and S&P Global. 

Features, including interoperability and data transformation, have been gaining traction among clients. In this regard, partnerships with Microsoft and ServiceNow have increased data interoperability as the transfer in and out of Snowflake has become much smoother.

In partnership with Microsoft, the company has established a Snowflake Power Platform connector for the Microsoft Power Platform, enabling bidirectional access between Dataverse and Snowflake’s AI Data Cloud. The connector simplifies data interoperability between Microsoft’s service suite, Dynamics 365 and the Snowflake AI Data Cloud.

SNOW’s partnership with Anthropic integrates advanced AI models into Cortex AI, supporting secure and flexible AI applications. These efforts are aimed at countering the fierce market competition and addressing pricing pressures in a rapidly evolving data platform market. 

Meanwhile, the planned acquisition of Datavolo strengthens Snowflake’s platform, offering enhanced support for structured and unstructured data while simplifying data engineering tasks. The buyout of Night Shift strengthens Snowflake’s federal footprint.

Snowflake has adopted NVIDIA AI Enterprise software to integrate NeMo Retriever microservices into Snowflake Cortex AI, its fully managed LLM and vector search service. The integration will help enterprises to smoothly connect custom models to diverse business data and deliver highly accurate responses.

SNOW Shares: Buy or Hold?

Snowflake benefits from a rich partner base, expanding clientele, strategically planned acquisitions and an innovative portfolio but is weighed down by competitive pressures and rising costs. 

Given the company’s modest growth prospects, as suggested by a Growth Score of C, we believe its valuation is significantly stretched, making the stock a risky bet for investors.

Snowflake currently has a Zacks Rank #3 (Hold), suggesting that investors should wait for a favorable time to accumulate the stock ahead of fourth-quarter fiscal 2025 results. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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