Snowflake Stock: A Compelling AI Play with Upside Ahead

Is Snowflake (SNOW) stock a buy now? With AI adoption surging, margins improving, and a technical setup suggesting further upside, the answer is a resounding yes—provided investors focus on the long-term opportunity. While short-term volatility remains a risk, the company's strategic execution and Wall Street's bullish consensus position it as a rare growth stock with both fundamentals and sentiment aligned for a breakout.

The AI Catalyst: Snowflake's Revenue Growth Machine

Snowflake's Q1 2025 results underscore a critical inflection point: AI is no longer just a feature—it's the engine of its growth. Over 5,200 weekly active accounts now use AI/ML tools like Cortex, with enterprises like Samsung Ads (using real-time ML for ad targeting) and Kraft Heinz (building AI assistants for supply chain optimization) driving deeper platform engagement. While AI revenue isn't yet reported as a standalone line item, its indirect impact is undeniable.

• Product revenue rose 26% YoY to $996.8 million, fueled by AI-driven workflows that boost compute and storage consumption.
• Remaining Performance Obligations (RPO) hit $6.7 billion, a 34% YoY jump, with 50% expected to convert within the next year—a clear sign of sticky customer demand.
• Net Revenue Retention (NRR), though dipping to 124%, remains robust for a company at this scale, reflecting enterprises investing in Snowflake's “full-stack AI data platform” for everything from data engineering to analytics.

The AI monetization roadmap is equally compelling. Snowflake plans to delay direct pricing until adoption scales further, but its Cortex Agents (automating workflows) and Cortex Analyst (natural language querying) are already driving usage. The June 2025 Snowflake Summit will likely reveal more monetization strategies, including potential transactional layers for its Marketplace.

Analysts See a 12% Upside—Here's Why They're Right

With 40 analysts rating SNOW a Buy or Strong Buy, the consensus price target of $220.54 (vs. current ~$190) isn't arbitrary. Key catalysts include:

1. Margin Expansion:
   Non-GAAP operating margins improved to 8.8% (+442 bps YoY), with guidance for a 25% free cash flow margin by FY2026. While near-term investments (sales teams, R&D) pressure margins, AI-driven efficiency gains—like code-generation tools for engineers—will pay off.

2. Enterprise Adoption:
   Snowflake's 125+ new AI capabilities in Q1 (up 50% YoY) are resonating. Customers like Siemens and Dentsu are slashing costs via Snowflake's data unification tools, while the launch of Snowflake Public Sector Inc. opens a $20B federal market.

3. Technical Momentum:
   Shares rose 6.6% post-earnings and are nearing their 52-week high of $196. Technical indicators suggest a breakout:

4. RSI at 58 (neutral to bullish).
5. 50-day moving average is rising, with resistance at $200 likely to hold.
6. Volume spikes on earnings news signal institutional buying.

Historical backtests of a buy-and-hold strategy after earnings announcements, however, reveal challenges. A test buying SNOW on earnings dates and holding for 20 days from 2020–2025 showed underwhelming results: the strategy returned 12.77%, far below the benchmark's 99.02% gain, with a maximum drawdown of -38.02%. While this underscores short-term volatility risks, the current AI-driven tailwinds and upcoming catalysts (like the June Summit) suggest a different trajectory this time.

Risks? Yes—but Manageable for Long-Term Investors

Critics point to margin pressures (free cash flow dipped to 17.6% YoY) and NRR softness, but these are temporary. Snowflake's $1.5B buyback program and focus on operational discipline (e.g., CAC payback period improvements) mitigate risks. Meanwhile, competition from Microsoft Fabric is real, but Snowflake's partnerships (e.g., Azure integration) and open architecture (Apache Iceberg support) give it an edge.

Final Call: Buy Now, Focus on the Long Game

Snowflake's AI-driven flywheel—more customers adopting AI tools → higher platform usage → stronger margins → reinvestment in innovation—is firing on all cylinders. With Wall Street bullish, technicals supportive, and a $220 price target on the table, this is a buy at $190 with a 12-18 month horizon.

Yes, volatility will come—especially if macroeconomic headwinds persist. But Snowflake's $6.7B RPO backlog, 416% YoY growth in Data Applications, and 124% NRR are too strong to ignore. The June Summit and FY2026 guidance (targeting $4.325B revenue) will amplify momentum.

Action Item: Allocate to SNOW now, set a stop-loss at $170, and target $220+. This is a stock built for the AI era—and the era is here.

Data as of May 26, 2025. Past performance does not guarantee future results.