On Thursday, Evercore ISI updated its financial outlook on Snowflake Inc . (NYSE:SNOW), raising the price target to $190 from the previous $170 while maintaining an Outperform rating on the stock.
The adjustment follows Snowflake's recent quarterly performance, which exceeded expectations with product revenue reaching $900 million, marking a 29% increase. This figure surpassed both Evercore ISI's and the broader market's projections of 21.5% and 22.5% growth, respectively.
The company's operating margins also outperformed forecasts, coming in at 6% compared to the anticipated 3.4% by Evercore ISI and 3.2% by the market.
Additionally, Snowflake's net revenue retention (NRR) remained stable at 127% quarter over quarter, and the remaining performance obligations (RPO) saw a significant 55% acceleration. Notably, Snowflake secured three large deals worth over $50 million each during the quarter.
Management's positive outlook on demand trends, bookings, and consumption for the fourth fiscal quarter and the fiscal year 2026 also contributed to Evercore ISI's optimistic stance. The firm highlighted that despite the lesser impact from Iceberg-related challenges, the broader narrative is one of a stabilizing macro environment.
The introduction and growing contribution of new products such as Snowpark, Dynamic Tables, Connectors, and Snowpark Streaming are seen as key drivers for the company's future consumption revenue.
Looking ahead to the fiscal year 2026, Evercore ISI suggests that the current estimates for product revenue growth, around 21%, may be conservative. They anticipate potential upward revisions and expect operating margins to improve. The firm also predicts that Snowflake will benefit from an increased focus on AI-related products like Cortex.
In light of these factors, Evercore ISI reiterated its Outperform rating and expressed confidence in the stock's favorable risk/reward balance moving forward.
In other recent news, Snowflake has reported a robust fiscal third-quarter performance, with a 29% growth in product revenue, reaching $900 million. This growth is accompanied by a significant 55% year-over-year increase in remaining performance obligations, totaling $5.7 billion. The company's non-GAAP operating margin also improved, rising to 6%, while its net revenue retention rate remained stable at 127%.
Snowflake has raised its full-year product revenue guidance to approximately $3.43 billion. The company is aiming to become the preferred data platform for enterprises and anticipates a strong fourth quarter in terms of bookings.
Snowflake has also launched as many Tier 1 features in Q3 as in the entire previous fiscal year, with the Snowflake Cortex AI seeing significant adoption with over 1,000 deployed use cases.
The company's strategic focus on cost efficiency and innovation in data engineering and AI technologies is evident. With the acquisition of DataVolo set to enhance data connectivity and engineering capabilities, and the partnership with Anthropic integrating powerful AI models into the Snowflake Cortex, these recent developments indicate a strong growth trajectory for Snowflake.
InvestingPro Insights
To complement Evercore ISI's optimistic outlook on Snowflake Inc. (NYSE:SNOW), recent data from InvestingPro offers additional context for investors. Despite the company's strong revenue growth of 31.21% over the last twelve months, Snowflake is currently trading at a high revenue valuation multiple, according to InvestingPro Tips. This suggests that the market has high expectations for the company's future performance, aligning with Evercore's bullish stance.
InvestingPro data shows that Snowflake's revenue for the last twelve months reached $3.21 billion, with a robust gross profit margin of 67.83%. These figures support the company's strong performance mentioned in the article, particularly the 29% increase in product revenue.
An InvestingPro Tip highlights that Snowflake holds more cash than debt on its balance sheet, which could provide financial flexibility as the company continues to invest in new products like Snowpark and AI-related offerings such as Cortex. However, it's worth noting that Snowflake is not currently profitable, with a P/E ratio of -42.12, although analysts predict profitability this year.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Snowflake, providing a deeper understanding of the company's financial position and market performance.
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