To The Moon

$Snowflake(SNOW)$

Snowflake Inc. (NYSE: SNOW) has once again captured Wall Street’s attention with its latest quarterly results, which sent shares soaring. The data cloud leader reported robust revenue growth, impressive customer retention metrics, and steady progress toward profitability. Yet, the rally also raises a critical question for investors: with shares trading at a premium, does Snowflake still represent an attractive buying opportunity, or is caution warranted at these higher valuations?

In this article, I’ll walk through Snowflake’s performance in detail, evaluate its customer economics, examine its cash flow and profitability trajectory, and provide an updated valuation using my proprietary discounted cash flow (DCF) model. Finally, I’ll share my investment verdict and the price range I believe offers long-term investors an attractive entry point.

Market Reaction and Investor Sentiment

Snowflake’s earnings were met with enthusiasm by the market, with the stock price climbing sharply following the announcement. Investors appeared to reward the company for continued strong growth, evidence of operating leverage, and reassurance about long-term demand tied to artificial intelligence (AI) and data analytics.

But while Wall Street has consistently treated Snowflake as a premium asset in the software space, valuation questions linger. Even after incorporating the company’s stronger-than-expected results, the stock trades well above most fundamental fair value estimates, leaving investors to balance enthusiasm for growth against the risk of paying too high a price.

Key Metrics Driving Confidence

Two financial indicators stand out in Snowflake’s quarterly report: net revenue retention rate (NRR) and remaining performance obligations (RPO). These are the lifeblood metrics for evaluating subscription and consumption-based software businesses.

Net Revenue Retention Rate: A Strong 125%

Snowflake reported a 125% NRR, meaning customers that have been with the company for more than a year are increasing their spending by 25% on average. This is a clear sign of a sticky product and a strong value proposition.

Why does this matter? High NRR demonstrates that Snowflake not only retains its customers but also expands wallet share over time. It suggests that enterprises see growing utility in Snowflake’s platform as their data needs expand, particularly in AI-driven environments where proprietary data is critical for competitive advantage.

Among software companies, anything above 120% is considered elite. Snowflake’s performance in this area places it firmly in the top tier, reinforcing the durability of its business model.

Remaining Performance Obligations: $6.9 Billion and Rising

RPO came in at $6.9 billion, up 33% year-over-year. This figure measures contracted revenue not yet recognized—essentially future sales waiting to be booked. When RPO grows faster than revenue, it signals accelerating demand and a pipeline that supports sustained growth.

In this case, RPO rose slightly faster than revenue, suggesting a modest but meaningful acceleration. This is an encouraging signal for long-term growth and indicates that Snowflake’s sales momentum is translating into durable, multi-year contracts.

Revenue Growth and Profitability Trends

For the quarter ended July 31, 2025, Snowflake’s revenue grew to $1.144 billion, up 32% from $868 million in the prior year. This level of growth, while slightly slower than in past years, remains robust for a company of Snowflake’s scale.

The company is still operating at a loss, but progress toward profitability is evident. Operating losses narrowed from $355 million to $340 million, despite higher revenue. More importantly, the operating loss as a percentage of revenue improved, showing better scalability and operating leverage.

This is exactly what investors want to see from a high-growth software company: evidence that fixed costs are being spread across a larger revenue base, narrowing losses even as the company continues to invest heavily in its platform.

Cash Flow Performance

One of the most encouraging developments was Snowflake’s cash generation. The company delivered $75 million in operating cash flow this quarter, up from $69.8 million a year ago.

While six-month cash flow figures show a decline compared to 2024 ($303 million versus $425 million), much of this shortfall is attributable to shifts in accounts receivable timing rather than a deterioration in underlying economics. Investors should take comfort in the fact that quarterly cash flow showed improvement—a sign that Snowflake is building resilience and edging closer to consistent free cash flow generation.

The Role of AI and Data

Management was clear in its commentary: Snowflake sees itself at the center of the AI revolution. Data is the essential fuel for artificial intelligence, and Snowflake’s ability to aggregate, organize, and make data actionable positions it as a critical enabler for enterprises deploying AI solutions.

The company is not simply riding a secular wave—it is building proprietary advantages through customer adoption and long-term contracts. The more data Snowflake manages, the stronger its network effects and the harder it becomes for competitors to displace its platform.

Updated Valuation

After integrating the latest financials into my proprietary DCF model, I now estimate Snowflake’s intrinsic value at $153 per share, up nearly 20% from my prior estimate of $130. This increase reflects higher projected cash flows and stronger-than-expected operating leverage.

However, with the stock currently trading around $239 per share, it remains significantly above fair value. On a relative basis, Snowflake’s forward price-to-free-cash-flow multiple is approximately 60x, which is in line with its historical trading range. While this multiple may be justified given Snowflake’s best-in-class metrics, it leaves little room for error.

Investment Verdict

Snowflake has consistently been one of the highest-quality companies in the software universe. Its customer satisfaction, net promoter scores, retention rates, and growth trajectory all point to a durable business with significant long-term potential.

Yet, valuation cannot be ignored. Even with my updated fair value, the stock appears overvalued by around 10%–15%. For investors with a long-term horizon, this is not a company to bet against—but it is also not one to chase at any price.

✅ Rating: Hold 🎯 Attractive Entry Zone: $215 or below 📈 Long-Term Outlook: Strong growth potential, but premium valuation demands discipline

Key Takeaways for Investors

1. Outstanding customer metrics: A 125% NRR places Snowflake among the best software companies in terms of customer expansion.

2. Solid forward visibility: $6.9 billion in RPO provides confidence in sustained growth.

3. Progress toward profitability: Operating leverage is improving as revenue scales.

4. AI tailwinds: Data remains central to AI adoption, and Snowflake is strategically positioned.

5. Valuation remains stretched: Despite raising my intrinsic value to $153, shares at $239 leave little margin of safety.

For investors, the message is clear: Snowflake remains an elite growth company, but patience is required. The best opportunities in stocks like this often come during market pullbacks, not when enthusiasm is running high.