Snowflake Stock Before Q4 Earnings: To Buy or Not to Buy?

Core Viewpoint - Snowflake (SNOW) is expected to report its fourth-quarter fiscal 2025 results on February 26, with revenue estimates indicating a year-over-year increase of 22.97% to $952.67 million, while earnings per share are projected to decrease by 51.43$952.67 million, indicating an increase of 22.97% from the year-ago quarter's reported figure [2]. - The consensus mark for earnings has been stable in the past 30 days at 17 cents per share, suggesting a decrease of 51.43% from the year-ago quarter's reported figure [2]. - SNOW's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average surprise of 35.39% [3]. Group 2: Key Factors Impacting Performance - SNOW has been facing increased GPU-related costs due to aggressive investments in AI initiatives, which are expected to keep margins under pressure [5]. - Competition from companies like Databricks is intensifying, leading to pricing pressure that may hurt profitability [5]. - However, top-line growth is anticipated to benefit from the growing adoption of Iceberg and Snowpark, along with increased traction for the AI solution, Cortex [6]. Group 3: Client and Market Position - As of the end of the third quarter of fiscal 2025, SNOW had over 1,000 deployed use cases and more than 3,200 accounts utilizing its AI and machine learning features [7]. - The company had 18 Global 2000 customers at the end of the third quarter, indicating strong momentum that is expected to continue [7]. - Snowflake shares have appreciated 15.2% year to date, outperforming the Zacks Computer & Technology sector's decline of 0.6% [8]. Group 4: Valuation and Market Sentiment - SNOW stock is currently trading at a premium, with a forward 12-month price-to-sales (P/S) ratio of 13.2X compared to the broader sector's 6.45X, suggesting a stretched valuation [11]. - The stock is trading above the 50-day and 200-day moving averages, indicating a bullish trend [14]. Group 5: Strategic Initiatives and Partnerships - Snowflake is benefiting from innovations such as Apache Iceberg, Hybrid tables, and Cortex Large Language Model, which are helping to win new clients [16]. - Partnerships with major players like Amazon, Microsoft, and NVIDIA enhance data interoperability and support the company's growth [16][17]. - The planned acquisition of Datavolo is expected to strengthen Snowflake's platform by enhancing support for structured and unstructured data [20].