Snowflake(NYSE: SNOW) inventory was down within the dumps till Could 27 this 12 months, however a stable set of outcomes for the primary quarter of fiscal 2027 (which ended on April 30) despatched it skyrocketing the next day.
Snowflake inventory surged a whopping 36% on Could 28, because it beat Wall Avenue’s expectations and raised its full-year income and earnings steering. The inventory — which had misplaced 19% of its worth in 2026 earlier than the discharge of its fiscal Q1 outcomes on Could 27 — appears to have turn into the brand new darling of the synthetic intelligence (AI) software program area.
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That is not stunning, as Snowflake’s AI enterprise is taking off. The corporate operates a cloud-based knowledge platform, which helps prospects retailer and analyze each structured and unstructured knowledge. Snowflake’s platform additionally allows prospects to share knowledge, derive analytics and insights from their proprietary knowledge, and construct purposes, amongst different use instances.
As Snowflake has been providing AI software program instruments to its prospects to get extra out of their knowledge, it’s simple to see why it’s anticipating sooner progress. Nonetheless, is it a good suggestion to purchase this AI inventory following its newest outcomes? Or will it meet the identical destiny as Palantir Applied sciences(NASDAQ: PLTR), a inventory that has slipped considerably this 12 months regardless of delivering phenomenal progress?
Let’s discover out.
Picture supply: The Motley Idiot.
AI goes to supercharge Snowflake’s progress
Snowflake’s fiscal Q1 income elevated 33% 12 months over 12 months to $1.39 billion. Its non-GAAP earnings per share elevated by a formidable 62.5% 12 months over 12 months to $0.39. Snowflake administration famous on the newest earnings name that its general buyer rely elevated by 38% 12 months over 12 months to virtually 14,000.
Snowflake notes that the adoption of its AI instruments is rising quickly. It’s value noting that 13,600 buyer accounts had been utilizing its AI options final quarter, up from 5,200 within the year-ago interval. Even higher, Snowflake’s sturdy buyer progress is accompanied by elevated spending by present prospects.
That is evident from the corporate’s web income retention charge of 126%. This metric, which is calculated by dividing the product income generated by Snowflake’s prospects in a interval by the spending by those self same prospects within the year-ago interval, expanded by a few proportion factors 12 months over 12 months. A web income retention charge of greater than 100% implies that Snowflake’s present prospects are spending more cash on its choices.
Provided that Snowflake continues so as to add new prospects at a pleasant clip, it will not be stunning to see its income pipeline getting higher sooner or later. Actually, Snowflake’s remaining efficiency obligations (RPO), which is the worth of contracts but to be fulfilled on the finish of 1 / 4, elevated by 38% 12 months over 12 months in fiscal Q1 to $9.2 billion.
That was greater than the corporate’s income progress, suggesting its future progress is prone to speed up. That is exactly why Snowflake administration now expects 31% progress in its product income in fiscal 2027, greater than the 27% progress it had anticipated earlier.
Analysts expect its earnings per share to extend by 54% within the present fiscal 12 months to $1.93, and so they have hiked their progress expectations for the following couple of years as properly.
Information by YCharts
Ideally, the potential acceleration in Snowflake’s bottom-line progress ought to be rewarded with extra upside. Nonetheless, there may be one issue that will restrict its upside potential, and that is exactly why I feel that Snowflake might get the Palantir remedy on the inventory market.
An costly valuation might weigh on the inventory, similar to what Palantir buyers have been experiencing
Palantir inventory is down by 15% to date in 2026. That is regardless of the corporate’s spectacular progress. Palantir’s Q1 income elevated by 85% 12 months over 12 months to $1.63 billion. Its adjusted earnings per share elevated by 2.5x to $0.33 per share. What’s extra, Palantir raised its full-year steering, however that hasn’t boosted investor confidence within the inventory.
Identical to Snowflake, even Palantir is constructing a stable income pipeline. Its remaining deal worth, which is the entire worth of contracts but to be fulfilled on the finish of 1 / 4, almost doubled year-over-year in Q1 to $11.8 billion. This explains why consensus estimates are projecting a 95% spike in Palantir’s earnings this 12 months, adopted by spectacular progress over the following couple of years.
Information by YCharts
Nonetheless, the inventory trades at an costly 161 instances earnings. Its ahead earnings a number of of 97 is not low cost both. Nonetheless,, Palantir’s ahead earnings a number of is decrease than Snowflake’s.
Information by YCharts
Moreover, Palantir is rising at a a lot stronger tempo, and its future progress is prone to be higher than Snowflake’s, as per the charts above. So, the post-earnings pop in Snowflake inventory would not essentially assure that it’ll go on a sustained bull run from right here. Palantir buyers are already experiencing this ache in 2026.
That is why buyers would do properly to evaluate their danger profile earlier than shopping for Snowflake inventory, as its costly valuation might weigh on its efficiency sooner or later.
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Harsh Chauhan has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Palantir Applied sciences and Snowflake. The Motley Idiot has a disclosure coverage.
Is Snowflake the New Market Darling of AI Software program — or Will It Observe Palantir’s Path? was initially revealed by The Motley Idiot
