After a 17% Surge, Is Snowflake Stock Still a Buy as Revenue Growth Accelerates?

It wasn't too long ago that Snowflake (NYSE: SNOW) was viewed as a potential AI loser. Today, the company looks to be one of the biggest AI winners outside the infrastructure space. The stock recently surged 16.6% the session following its fiscal second-quarter earnings report and is now up nearly 70% on the year.

The cloud-based data warehousing and analytics company's architecture, which separates storage from compute to allow customers to store data and then process it across multiple cloud computing providers, is proving integral in the age of AI. Its solution has become an important system of record for agentic AI and also, importantly, allows for model choice.

Let's take a closer look at Snowflake's fiscal Q2 results to see whether the growth stock can keep its momentum or if it's too late to buy the rally.

Image source: The Motley Fool.

Snowflake's strong momentum continues

AI continues to be a big growth driver for Snowflake, with the company saying that it is at the center of the push toward enterprise agentic AI, as its platform "provides that trusted foundation." It's seeing rapid adoption of its AI coding agent CoCo and ready-to-use agentic app CoWork, while noting that its flexible model approach, which lets customers switch models and optimize costs, is a competitive advantage.

During the quarter, which ended July 31, the company's revenue climbed 35% year over year to $1.55 billion, topping the $1.48 billion analyst consensus. Product revenue, meanwhile, jumped 37% to $1.49 billion, its third-straight quarter of acceleration. Adjusted earnings per share (EPS) surged to $0.62 from $0.35 a year ago, easily surpassing the $0.45 consensus.

Snowflake continues to see strong expansion within its existing customer base, with net revenue retention rate coming in at 126% over the past 12 months, the same as in Q1. A number more than 100% indicates that existing customer usage is increasing after accounting for customer churn.

Snowflake also added 692 new customers in the quarter, including 14 Global 2000 companies. That was a 32% increase in net additions year over year. Meanwhile, it now has 828 customers who spend more than $1 million annually.

Snowflake raised its forecast for full-year product revenue to approximately $6.07 billion, up from previous guidance of $5.84 billion. The new outlook represents year-over-year growth of 36%. The company also raised guidance for its adjusted operating margin to 14.5% from 13.5%.

For fiscal Q3, it forecast product revenue between $1.588 billion and $1.593 billion, representing growth of 37% to 38%. It's looking for adjusted operating margin of 15.5%.

Is the stock still a buy?

Snowflake continues to fire on all cylinders. It continues to see great growth with existing customers, despite its large size, while it is also doing a great job of bringing on new customers.

It's truly positioned itself as an important model-agnostic platform that is paramount for the deployment of enterprise AI. With agentic AI still in the very early innings and the company continuing to build its own strong pipeline of AI products, Snowflake should have many years of strong growth in front of it.

The stock's valuation, though, is another story. With its strong performance this year, the stock now trades at a forward price-to-sales (P/S) multiple of 20 times this fiscal year's analyst estimates and 16 times fiscal 2028 (ending January 2028). That's toward the high end of its range since 2024, with similar to slightly higher revenue growth.

While I think Snowflake is positioned to be a long-term winner, its valuation could cap its near- to medium-term upside. As such, I wouldn't chase the stock here, but investors should be on the lookout to add shares on any meaningful pullback.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.