Can Snowflake's Gen2 Launch Drive Strong Product Revenue Growth?
SNOW's compute engine, the Standard Warehouse, has been a critical driver for platform engagement and query performance across its data warehouse platform. Standard Warehouse supports high-throughput analytical workloads that power BI dashboards, batch jobs and AI applications across Snowflake's enterprise base.
Snowflake recently launched Standard Warehouse – Generation 2 (Gen2), which delivers up to 2.1X faster analytics performance and 1.9X faster execution compared to the existing platforms. The upgrade introduces a new execution engine and next-gen hardware, reducing query latency without requiring changes to customer workloads. Snowflake's Gen2 upgrade reflects its continued investment in core performance infrastructure.
SNOW's innovative portfolio is driving clientele. In the first quarter of fiscal 2026, Snowflake added 451 new customers, bringing the total to 11,578 (up 19% year over year). Snowflake maintained a net revenue retention rate of 124%, implying strong expansion within its existing base.
Expanding customer base is driving product revenues, which hit $997 million in the first quarter of fiscal 2026, reflecting 26% year-over-year growth. The figure beat the Zacks Consensus Estimate by 6.71%. As demand grows for faster, cost-effective data processing across enterprise and AI workloads, Snowflake expects Gen2 to contribute significantly to its consumption-based revenue growth.
Snowflake Faces Stiff Competition
Snowflake's data warehouse platform faces intense competition from Amazon AMZN and Microsoft MSFT, both of which are strengthening their cloud data infrastructure and analytics capabilities.
Amazon is advancing its position through Amazon Redshift and Redshift Serverless, which allow enterprises to scale analytics workloads without managing clusters. Redshift integrates with AWS's AI services like SageMaker and Bedrock, helping customers run ML models and generative AI applications directly within the data warehouse. Amazon's serverless innovation aligns with growing enterprise demand for elastic and AI-ready infrastructure.
Microsoft is reinforcing its presence in enterprise data with Microsoft Fabric, a unified analytics platform that combines Synapse, Power BI, and Data Factory with AI integrations. Fabric supports real-time analytics and large language model workloads, enabling seamless data collaboration across business teams. Microsoft's tightly integrated stack and expanding AI capabilities are positioning it as a formidable player in next-gen data infrastructure.
SNOW's Share Price Performance, Valuation and Estimates
Snowflake shares have appreciated 36.5% year to date, outperforming the broader Zacks Computer & Technology sector's return of 1.7% and the Zacks Internet Software industry's increase of 13.2%.
SNOW's YTD Price Performance
Image Source: Zacks Investment Research
Snowflake stock is trading at a premium, with a forward 12-month Price/Sales of 14.48X compared with the industry's 5.69X. SNOW has a Value Score of F.
SNOW's Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for second-quarter fiscal 2026 earnings is pegged at 26 cents per share, unchanged over the past 30 days, indicating 44.44% year-over-year growth.
Snowflake Inc. Price and Consensus
The consensus mark for SNOW's fiscal 2026 earnings is pegged at $1.06 per share, which has declined by 8.5% over the past 30 days. The figure indicates a 27.71% increase year over year.
Snowflake currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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