Snowflake Stock (SNOW) Set for Strong Q2 Earnings Amid AI-Driven Growth Prospects

Snowflake (SNOW) is expected to report Q2FY26 earnings after the market closes on August 27. Analysts remain optimistic about the company's potential Q2 beat and strong AI-driven growth prospects, despite rising competition from rivals. SNOW stock commands a Strong Buy consensus rating with an average price target of $235.18, implying 20.8% upside potential from current levels. Analysts expect Snowflake to report adjusted earnings of $0.27 per share on revenue of $1.09 billion, a 50% YoY jump in earnings and 25% surge in revenue compared to Q2FY25.

Snowflake Inc. (SNOW) is set to report its second-quarter fiscal year 2026 (Q2FY26) earnings after the market closes on August 27. Analysts remain optimistic about the company's potential Q2 beat and strong AI-driven growth prospects, despite rising competition from rivals. SNOW stock commands a Strong Buy consensus rating with an average price target of $235.18, implying 20.8% upside potential from current levels. Analysts expect Snowflake to report adjusted earnings of $0.27 per share on revenue of $1.09 billion, a 50% year-over-year (YoY) jump in earnings and 25% surge in revenue compared to Q2FY25 [1].

Snowflake's fiscal second-quarter performance is expected to reflect an expanding clientele driven by strong AI capabilities and a rich partner base. The company continues to benefit from strong adoption and increasing usage of its platform, as reflected in a net revenue retention rate of 124% at the end of the first quarter of fiscal 2026. Snowflake reported 18.8% YoY growth in the number of customers, reaching 11,578 in the reported quarter [1].

The Zacks Consensus Estimate for second-quarter 2025 product revenues is pegged at $1.04 billion, indicating 25.5% growth from the figure reported in the year-ago quarter. The Zacks Consensus Estimate for customers with trailing 12-month product revenues greater than $1 million is currently pegged at 634, suggesting 24.3% growth from the figure reported in the year-ago quarter [1].

However, higher expenses related to Snowflake Summit 2025 are expected to have hurt profitability in the to-be-reported quarter. Product gross margin contracted 100 basis points (bps) to 71% in the first quarter of fiscal 2026, and Snowflake expects second-quarter fiscal 2025 non-GAAP product gross margin of 75%, indicating a 100 bps decline sequentially. Snowflake expects non-GAAP operating margin to be 8%, suggesting a 100-bps sequential decline [1].

Snowflake's AI capabilities have been noteworthy, with more than 5,200 accounts now using machine learning features weekly. The Cortex AI platform has evolved from experimental to production-ready infrastructure, featuring tools like Cortex AISQL that embed generative AI into SQL queries while delivering up to 60% cost savings [1].

The company's strategic bets on AI are paying off. A multiyear partnership with Anthropic and the acquisition of AI startup Datavolo have bolstered its capabilities in machine learning and data observability. These moves align with the growing demand for AI infrastructure, as enterprises seek to monetize data and optimize workflows [2].

Snowflake is facing stiff competition from the likes of Amazon Web Services, Azure, and Google Cloud. SNOW faces stiff competition from the likes of Amazon Redshift, Google BigQuery and Microsoft Azure Synapse, which is expected to keep revenue growth under pressure. First-quarter fiscal 2026 revenue grew 26% year over year, slower than 27% growth in fourth-quarter fiscal 2025 and 28% in third-quarter fiscal 2025. Second-quarter fiscal 2026 revenues are now expected to grow 25% [1].

Elevated infrastructure spending, particularly on GPUs to support AI-driven initiatives, is adding to cost pressures. Despite these challenges, Snowflake's long-term prospects ride on an innovative portfolio and rich partner base. However, stiff competition and stretched valuation make the stock risky right now [1].

References:
[1] https://www.nasdaq.com/articles/buy-sell-or-hold-snowflake-stock-key-tips-ahead-q2-earnings
[2] https://www.ainvest.com/news/snowflake-resurgence-cloud-computing-volatility-assessing-sustainability-24-ytd-rally-2508/