Snowflake: A Spot of Bother, Perhaps?

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Snowflake, you see, has been posting results that, on the face of it, are dashedly impressive. A thirty percent climb in product revenue to $1.23 billion, and a remaining performance obligation that’s swelled by forty-two percent to $9.77 billion! One might think a chap would be scrambling for his chequebook, but alas, I remain on the sidelines, a bit like a spectator at a particularly energetic game of croquet.

It’s not that I begrudge Snowflake its successes, you understand. The top line is, without a doubt, exhibiting a cheerful robustness. However, there are a couple of small clouds on the otherwise bright horizon, and they concern the matter of profitability and, naturally, the valuation. The market, it seems, is banking on a future inflection point, a moment when the profits will suddenly blossom forth like a particularly enthusiastic rose bush. But, as I observe the situation, that moment appears to be lingering in the distant future, a bit like a train perpetually stuck in the station.

A Most Promising Performance, Nonetheless

Snowflake’s latest quarter certainly offered a few plums for the bulls. The net revenue retention stood at a rather handsome 125%, and they’ve amassed a respectable 733 customers generating over a million dollars in product revenue – a twenty-seven percent increase, no less! They’ve also added 740 new customers, which, as a percentage increase, is even more agreeable. One can’t help but admire the energy, really.

And the acceleration in product revenue growth is, shall we say, encouraging. A thirty percent increase in fiscal Q4, up from twenty-nine percent in Q3. The RPO growth, accelerating to forty-two percent, is even more pronounced. It appears Snowflake is positioning itself rather cleverly as a beneficiary of the current AI excitement, according to their CEO, Mr. Ramaswamy. A most astute fellow, I gather.

He explained, with a commendable degree of enthusiasm, that Snowflake has spent the last decade building a foundation for AI – a single source of truth, cross-cloud interoperability, and enterprise-grade governance. Now, they’re adding agentic capabilities on top. A rather clever bit of engineering, what!

Management anticipates continued strong growth, guiding fiscal 2027 product revenue to $5.66 billion, implying a twenty-seven percent increase. And for the first quarter, they’re projecting $1.262 to $1.267 billion, also with a twenty-seven percent bump. A most optimistic outlook, wouldn’t you agree?

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The Matter of the Missing Profits

Here’s the rub, you see. Snowflake, despite all this admirable hustle, remains stubbornly unprofitable on a GAAP basis. And the losses are not exactly pocket change. A $318 million operating loss in Q4, and a full-year net loss of $1.33 billion, against revenue of just $4.7 billion! It’s a bit like spending a fortune on a perfectly splendid hat, only to discover one has no head to put it on.

This discrepancy between a strong top line and a stubbornly negative bottom line is the primary reason I’m exercising a degree of caution. I might reconsider if the stock were trading at a more reasonable valuation, but currently, it commands a market capitalization of around $57 billion, giving it a price-to-sales ratio of about 12. That implies not only profitability but substantial profits, which, frankly, seem a bit distant at the moment. The net loss for fiscal 2026, at $1.33 billion, was actually worse than the $1.29 billion loss in 2025. A most unfortunate turn of events.

Ultimately, Snowflake is a fundamentally sound business. And they arguably need to invest aggressively to succeed in the fiercely competitive data cloud arena. One can hardly fault them for that. The latest quarter suggests the platform is becoming increasingly central as companies modernize their data stacks and deploy AI tools. The demand signals – accelerating revenue growth and RPO – are, undeniably, impressive.

Still, I remain on the sidelines. Given the persistent losses, the intense competition, and the rather lofty valuation, I believe there are more attractive opportunities elsewhere. Snowflake, you see, is a perfectly good horse, but I’m waiting for a slightly clearer track before placing my bets. A prudent course of action, wouldn’t you agree?

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2026-02-27 21:04