Should You Buy, Sell, or Hold SNOW Stock Before Q2 Earnings Release?

Snowflake SNOW is set to release second-quarter fiscal 2027 results on Sept. 2.

The Zacks Consensus Estimate for second-quarter fiscal 2027 earnings has remained steady at 45 cents per share over the past 30 days, indicating a 28.57% year-over-year increase. The consensus mark for second-quarter revenues is pegged at $1.47 billion, indicating a 28.77% increase from the year-ago quarter’s reported figure.

SNOW’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, with the average earnings surprise being 21.98%. 

Let’s see how things have shaped up for SNOW prior to this announcement:

Snowflake Inc. Price and EPS Surprise

Snowflake Inc. price-eps-surprise | Snowflake Inc. Quote

Factors to Note for SNOW’s Q2

Snowflake’s fiscal second-quarter performance is expected to have reflected an expanding clientele, driven by strong AI capabilities, particularly Snowflake Intelligence and Cortex Code (CoCo) and a rich partner base. 

SNOW continues to benefit from strong adoption and increasing usage of its platform, as reflected by the net revenue retention rate of 126% in the first quarter of fiscal 2027.  In the same quarter, Snowflake reported 13,912 total customers and added 616 net new customers, up 38% year over year, including 13 new Forbes Global 2000 customers. The company now has 779 customers spending more than $1 million annually, up 29% year over year, and the number of customers spending more than $10 million annually increased to 64. This trend is expected to have continued in the to-be-reported quarter as well.

Expanding clientele is expected to have benefited the top-line growth. For the fiscal second quarter, Snowflake expects product revenues between $1.415 billion and $1.42 billion, representing approximately 30% year-over-year growth. The Zacks Consensus Estimate for fiscal second-quarter 2027 product revenues is pegged at $1.41 billion, indicating 29.97% growth from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for customers with trailing 12-month product revenues greater than $1 million is currently pegged at 818, indicating a 25.07% increase from the year-ago quarter. The consensus mark for total customers is pegged at 14,399, indicating an increase of 437 net new customers in the to-be-reported quarter.

However, Snowflake suffers from the variability of consumption as customers optimize spend and AI products that carry lower gross margins than the core platform. Integration and hiring tied to acquisitions also weigh on free cash flow margins, keeping risk and reward balanced until AI monetization and margin offsets prove durable. Stiff competition also remains a concern.

SNOW Shares Underperform Sector

Snowflake shares have surged 49.5% in the year-to-date period compared with the Zacks Computer & Technology sector’s increase of 17.1%. The company’s shares have outperformed the Zacks Internet Software industry’s decline of 0.4% over the same time frame.

The company’s shares have also outperformed its peers like Oracle ORCL, Alphabet GOOGL and Amazon AMZN, which are also expanding their footprint in the AI space. While Oracle shares have plunged 22.6%, Alphabet and Amazon shares have rallied 15.4% and 10.7%, respectively, in the year-to-date period.

SNOW Stock’s Performance

Image Source: Zacks Investment Research

SNOW Stock Is Currently Overvalued

Snowflake stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of forward 12-month Price/Sales, SNOW is trading at 16.32X, higher than the Internet Software industry’s 4.08X, Oracle’s 4.36X, Alphabet’s 8.39X, and Amazon’s 3.16X.

Valuation: SNOW Is Trading at a Premium

Image Source: Zacks Investment Research

SNOW Benefits From Strong Enterprise AI Push

SNOW is benefiting from the accelerating adoption of enterprise AI, which is fundamentally reshaping how organizations operate and innovate. The company’s strong focus on AI security and governance, which is rapidly becoming a key differentiator in the enterprise AI landscape, has been noteworthy.

Snowflake’s AI products, which include Snowflake Intelligence and CoCo, are seeing rapid adoption, with CoCo already in use by more than 7,100 accounts. These products allow both business users and developers to interact with enterprise data and build AI-powered applications directly within Snowflake, all while maintaining strict governance. With the intended acquisition of Natoma, Snowflake is extending its agentic control plane to everyday business applications, enabling users to perform tasks like sending emails or summarizing Slack conversations within a governed environment.

Further strengthening this AI strategy, in August 2026, Snowflake announced dynamic model routing across Cortex AI Gateway and its flagship AI products, enabling enterprises to balance AI quality and costs by automatically selecting the most suitable model for each task. The company also expanded access to leading open models, strengthening its AI capabilities and helping customers improve the efficiency of their intelligence.

Conclusion

Snowflake’s strong enterprise AI momentum, expanding customer base and solid product revenue growth prospects position it well for continued growth. Despite its stretched valuation, margin pressures and intense competition, SNOW’s strengthening AI portfolio and rising platform adoption make the stock an attractive buy ahead of its second quarter 2026 earnings release.

SNOW stock currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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