snowflake(NYSE: SNOW) is the creator of Data Cloud, a platform where large organizations can aggregate their valuable information, even if it is stored on multiple cloud providers such as Amazon web services and Microsoft Sky blue. This is critical to perform comprehensive analysis and extract actionable insights.
Unified data sets are also critical for developing artificial intelligence (AI) models, as real-time access to the latest information improves the ability to generate accurate outputs. Snowflake has built a platform called Cortex AI where enterprises can develop and deploy AI, including a growing set of software products that help collect data, plug it into third-party models and put finished applications into production.
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Snowflake shares are down 20% so far in 2026 as investors generally reduce their exposure to the software space. But the vast majority of analysts track wall street journal The stock has a Buy rating, but no one recommends Sell. Their consensus price target suggests significant upside from here, so should investors buy the dip?
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The Cortex AI platform includes many artificial intelligence-driven software capabilities. For example, Document AI allows businesses to quickly extract data from unstructured sources such as contracts and invoices, which used to be a time-consuming manual process. Then there’s Cortex Search, which enables employees to instantly find critical data from across the organization using natural language.
Cortex also hosts content from leading third parties such as OpenAI, Anthropic and meta platform. Businesses can plug data into these models to create custom AI software applications, a faster and cheaper alternative to building entire models from scratch.
As of January 31 (end of the fourth quarter of fiscal 2026), Snowflake had 13,328 customers, 9,100 of which use at least one of its artificial intelligence capabilities. That’s up from just 4,000 customers using its AI products a year ago, so adoption is rapid.
Snowflake generated $4.5 billion in product revenue in fiscal 2026, up 29.1% from the previous year. This growth rate is slightly lower than in fiscal 2025, when product revenue increased 29.8%. While on the surface this doesn’t sound like a major negative, the slowdown in growth amid the company’s ballooning costs is concerning.
Snowflake’s operating expenses rose 18% in fiscal 2026 to a record $4.6 billion, led by increased marketing spending and R&D spending. This resulted in a record net loss of $1.3 billion.
Excluding one-time and non-cash charges, net income looked better: Snowflake’s full-year adjusted net income was $465.9 million. However, these non-cash expenses include up to $1.7 billion worth of stock-based compensation allocated to employees. Investors shouldn’t ignore this fee because every time a company issues new shares, it dilutes existing shareholders.
When a company spends record amounts of money, investors want to see a return on their spending. If Snowflake’s revenue growth accelerates, some of its profitability issues will be easier to overlook. But I worry about the lack of organic growth, which means its revenue growth could lose significant momentum as the company cuts costs like marketing to narrow losses.
wall street journal Snowflake stock is tracked by 52 analysts, with 40 of them giving it a buy rating. Another five fall into the Overweight (Bullish) camp, while the remaining seven recommend Hold. No one is proposing to sell.
Their average price target for the stock is $248.07, which suggests the stock could rise 43% over the next 12 months or so. However, the Wall Street-high target of $500 implies potential upside of 189%.
I’m not sure these price targets are realistic. As I write this, Snowflake’s price-to-sales (P/S) ratio is 13.2, and while it’s near three-year lows, I think the stock remains expensive. The company doesn’t have many comparables on the public market, but it’s significantly more expensive than the major cloud providers currently offering a similar mix of AI products and services.
SNOW PS ratio data provided by YCharts.
Amazon, Microsoft and letter Operating multiple businesses outside of cloud computing and software, they’re not a perfect company to compare to Snowflake. It’s worth noting, however, that Microsoft’s cloud unit’s revenue grew 39% in its most recent quarter, and Alphabet’s Google Cloud revenue soared 48% during the same period.
In my opinion, Snowflake’s premium valuation is hard to justify since it’s growing at a much slower pace. Regardless of Wall Street’s current bullish consensus, investors may want to wait for a further correction before buying this stock.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions and recommendations in Alphabet, Amazon, Meta Platforms, Microsoft and Snowflake. The Motley Fool has a disclosure policy.
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