Shares of data warehouse specialist Snowflake (NYSE: SNOW) have had a disappointing start to 2026. As of this writing, the growth stock is down about 23% year to date.
This steep decline, however, comes as the underlying business is showing impressive momentum — at least on its top line. Additionally, the company’s revenue growth rate is accelerating, benefiting from an artificial intelligence (AI) tailwind.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
For investors who have been watching from the sidelines, a pullback like this in a fast-growing business can look like a tempting opportunity. Is the stock’s recent weakness an opportunity?
Snowflake, which records revenue based on platform usage, saw its fiscal fourth-quarter product revenue rise 30% year over year to $1.23 billion — an acceleration from 29% growth in the prior quarter.
One driver for the recent acceleration is AI. Customers are increasingly relying on Snowflake’s data cloud to organize and process the massive amounts of data required to train and run AI models. In fact, management noted during the company’s earnings call that more than 9,100 accounts are already using the company’s AI offerings.
“A year ago, we were talking about the promise of AI,” explained Snowflake CEO Sridhar Ramaswamy during the company’s fiscal fourth-quarter earnings call. “Today, the promise is real, and Snowflake sits at the center of the enterprise AI revolution.”
This surging demand is clearly evident in the company’s backlog. Snowflake’s remaining performance obligations (RPO), or the contracted revenue that has not yet been recognized, totaled $9.77 billion in fiscal Q4. This represents 42% year-over-year growth — marking the second consecutive quarter of accelerating RPO growth. And the company’s net revenue retention rate remained at a very healthy 125%, indicating that existing customers are steadily increasing their spending on the platform.
With accelerating revenue and a booming backlog, the bull case for Snowflake is easy to understand. But, unfortunately, the bear case is just as easy to understand.
The first issue for investors to consider is profitability. Despite its impressive top-line momentum, Snowflake remains unprofitable on a generally accepted accounting principles (GAAP) basis. The company reported a GAAP operating loss of $318.2 million in fiscal Q4. While its non-GAAP (adjusted) operating margin reached a much healthier 11%, the heavy stock-based compensation, which weighs on its unadjusted bottom line, remains a high cost for shareholders.
