May Snowflake Inventory Assist You Change into a Millionaire?

Snowflake‘s (SNOW 2.38%) inventory soared 33% on Nov. 21 after the cloud-based knowledge warehouse supplier posted its newest earnings report. For the third quarter of fiscal 2025, which ended on Oct. 31, its income rose 28% 12 months over 12 months to $942.1 million and exceeded analysts’ expectations by $43.6 million. Its adjusted web revenue declined 19% to $73.2 million, or $0.20, however cleared the consensus forecast by a nickel.

For the complete 12 months, Snowflake expects its product income (which accounts for many of its high line) to rise 29%. That is larger than its earlier outlook for 26% progress, however it will nonetheless symbolize its slowest annual progress charge since its preliminary public providing (IPO) in 2020.

Picture supply: Getty Photos.

Snowflake’s beat-and-raise quarter introduced again some bulls, however its inventory stays almost 60% beneath its all-time excessive. So may its newest earnings report mark the start of a brand new millionaire-making rally?

Snowflake’s enterprise is maturing

Snowflake’s cloud-based knowledge warehouses assist giant corporations collect all of their knowledge right into a centralized location so it may be simply accessed by third-party functions. That strategy breaks down the silos between completely different computing platforms and makes it simpler for corporations to make data-driven choices.

Snowflake’s service runs on high of Amazon Internet Companies (AWS), Microsoft Azure, and different cloud infrastructure platforms. It additionally provides versatile consumption-based plans, which solely cost prospects for the storage and computing energy they want, as an alternative of locking them into subscriptions.

Amazon and Microsoft additionally supply their very own built-in cloud-based knowledge warehouses, however Snowflake’s cross-compatibility with a variety of cloud infrastructure platforms and versatile pricing mannequin makes it an interesting possibility for corporations that do not wish to be locked right into a single massive tech firm’s ecosystem. That is why its annual product income greater than doubled in each fiscal 2021 and monetary 2022 (which resulted in January 2022).

Its product income rose 70% in fiscal 2023, however cooled to only 38% progress in fiscal 2024. Its web income retention charge, which gauges its year-over-year progress per current buyer, dropped from 168% in fiscal 2021 to 131% in fiscal 2024. These two core progress metrics continued to chill off in fiscal 2025.

Knowledge supply: Snowflake. YOY = Yr over 12 months.

Snowflake, like many different cloud software program corporations, primarily blamed its slowdown on the macro headwinds. Nevertheless, it additionally faces stiff competitors from faster-growing knowledge warehousing start-ups like Databricks, in addition to cloud giants like Amazon and Microsoft.

On the brilliant aspect, Snowflake’s web income retention charge stabilized sequentially within the third quarter as a few of its older prospects began to make use of its newer merchandise. The fast enlargement of the AI market can also be producing tailwinds for its Cortex AI platform, which helps corporations rapidly crunch knowledge and construct their very own generative AI functions. These recent product initiatives prompted it to spice up its full-year product income steerage.

However its margins are stabilizing

Snowflake’s adjusted product, working, and free-cash-flow (FCF) margins additionally slipped as its top-line progress cooled off. However within the third quarter, all three of these metrics both remained secure or expanded sequentially.

Knowledge supply: Snowflake.

Through the convention name, CEO Sridhar Ramaswamy attributed that stabilization to its “extra rigorous strategy to price administration,” the removing of “redundant administration layers,” and the usage of “AI to drive larger velocity whereas decreasing total prices.”

For the complete 12 months, it is guiding for an adjusted product gross margin of 76%, an adjusted working margin of 5%, and an adjusted FCF margin of 26%. All three margins would symbolize declines from fiscal 2024, however they may stabilize at its present ranges.

May Snowflake be a millionaire-maker inventory?

Snowflake is rising, however its enterprise is maturing and it is nonetheless deeply unprofitable on a typically accepted accounting rules (GAAP) foundation. Its inventory is not a screaming discount at 12 occasions this 12 months’s gross sales, however it’s nonetheless plowing loads of money into buybacks to offset the dilution from its stock-based compensation.

That is perhaps why Warren Buffett’s Berkshire Hathaway liquidated its total stake in Snowflake this 12 months, and why its insiders bought almost 4 occasions as many shares as they purchased over the previous 12 months.

Analysts count on Snowflake’s income to develop at a compound annual progress charge (CAGR) of 24% from fiscal 2024 to fiscal 2027. Assuming it meets these expectations, retains rising at a CAGR of 20% over the next 13 years, and trades at about 10 occasions gross sales, its market cap may doubtlessly develop 1,240% to $580 billion by fiscal 2040.

That rally would flip $75,000 into over $1 million — however it’s too early to inform if it will probably preserve its momentum within the more and more crowded knowledge warehousing market. So whereas Snowflake’s inventory may finally make you a millionaire, hitting that objective may require loads of persistence.