If you want to know how to research Snowflake stock, start with the business model. Understand how the company makes money, who its customers are, and what keeps them on the platform. From there, move into financials, paying close attention to revenue growth and margins. Then evaluate the valuation relative to peers, assess competitive positioning in the cloud data market, and map out the risks. That sequence gives you a structured framework for SNOW due diligence that actually holds up.
Key takeaways
- Begin your Snowflake research guide by understanding the consumption-based business model before touching any financial statement.
- Revenue growth rate and net revenue retention rate are the two financial metrics that matter most for a company at this stage.
- Valuation comparisons should be made against other high-growth cloud data companies, not the broad market.
- Competitive positioning against Databricks, AWS, Google BigQuery, and Azure Synapse determines long-term market share.
- Work through risks last, but don't skip them. Concentration risk, profitability timeline, and insider selling patterns all deserve attention.
How to research Snowflake stock: Start with the business model
Most people jump straight to financials or valuation when researching a stock. That's backwards. You can't evaluate whether a P/S ratio of 15 is reasonable or absurd if you don't understand what the company actually does and how it generates revenue.
Snowflake operates a cloud-based data platform. It lets organizations store, process, and analyze data across major cloud providers like AWS, Azure, and Google Cloud. Here's the thing that makes Snowflake different from a lot of software companies: it uses a consumption-based pricing model. Customers pay based on how much compute and storage they use, not a fixed subscription fee.
Consumption-based pricing: A revenue model where customers pay based on actual usage rather than a flat subscription. This means revenue can fluctuate based on customer activity, making forecasting harder but also creating natural expansion when customers increase their data workloads.
That distinction matters enormously for your analysis. It means Snowflake's revenue depends on customers continuously using (and expanding) their data workloads. If a customer's data needs shrink or they optimize their queries to use less compute, Snowflake earns less from that account. This is fundamentally different from a company like Salesforce, where a signed contract locks in predictable recurring revenue.
When doing your own SNOW due diligence, dig into these business model questions:
- What percentage of revenue comes from the largest customers? High concentration is a risk.
- What's the breakdown between storage revenue and compute revenue?
- How does the company's architecture differ from competitors that bundle compute and storage together?
- What role does the Snowflake Marketplace play in creating ecosystem lock-in?
You can pull much of this from the company's 10-K filing, investor presentations, and earnings call transcripts. The Rallies AI Research Assistant can help you synthesize these documents quickly instead of reading through hundreds of pages manually.
What financials should you focus on when analyzing SNOW?
Once you understand the business model, you're ready for financials. But here's where a lot of people get tripped up: Snowflake isn't profitable by traditional measures, so you can't run the same playbook you'd use for an established company like Microsoft or Apple.
For high-growth cloud companies, focus on these metrics in order of importance:
- Product revenue growth rate. This is the headline number. For a company priced like Snowflake, you need to see strong, sustained growth in product revenue (not total revenue, which can include professional services that are lower quality).
- Net revenue retention rate (NRR). This tells you whether existing customers are spending more over time. An NRR above 120% means the average customer is spending at least 20% more than the previous year, even before new customer additions.
- Remaining performance obligations (RPO). These are contracted but unrecognized revenues. RPO growth gives you a forward-looking indicator of revenue in the pipeline.
- Gross margin. For a cloud platform, gross margins in the 60-75% range are typical. Watch the trend. Improving gross margins suggest the company is scaling efficiently.
- Free cash flow margin. Even if GAAP net income is negative, check whether the company generates positive free cash flow. Stock-based compensation can make GAAP losses look worse than the actual cash economics.
Net revenue retention rate (NRR): Measures how much revenue a company retains and expands from its existing customer base over a given period, excluding new customers. An NRR above 100% means existing customers are spending more; below 100% means they're churning or spending less.
A common mistake in this Snowflake research guide: looking at GAAP net income and concluding the company is "losing money." That's technically true, but stock-based compensation (a non-cash expense) often makes up the bulk of those losses. You need to look at both GAAP and non-GAAP metrics, understand the difference, and form your own view on how much weight to give stock-based comp.
Where to find these numbers
Pull financials from the SEC's EDGAR database (search for Snowflake's 10-K and 10-Q filings), the company's investor relations page, or use the SNOW research page on Rallies.ai to get a consolidated view. Earnings call transcripts are also worth reading because management often provides context that the raw numbers don't capture.
How to evaluate Snowflake's valuation compared to peers
Valuation is where things get subjective, and where most disagreements about SNOW live. The stock has historically traded at a premium to almost every other public software company. The question is whether that premium is justified.
Here's how to analyze SNOW's valuation step by step:
Step 1: Choose the right multiples. For unprofitable, high-growth companies, price-to-sales (P/S) and enterprise value-to-revenue (EV/Revenue) are the standard starting points. P/E ratios are meaningless when earnings are negative.
Step 2: Build a peer group. Don't compare Snowflake to the S&P 500 average. Compare it to companies with similar growth profiles and business models. Relevant peers include Databricks (private, but useful for context), MongoDB, Datadog, and Confluent. Each plays in the data infrastructure space, though with different focus areas.
Step 3: Normalize for growth. A company growing revenue at 40% per year should trade at a higher multiple than one growing at 15%. The PEG ratio concept applies here, though you'll adapt it for revenue growth rather than earnings growth. Divide the EV/Revenue multiple by the revenue growth rate to get a rough "growth-adjusted" valuation.
Step 4: Consider the total addressable market (TAM). Snowflake competes in the cloud data platform market, which is large and expanding. But TAM estimates vary wildly depending on the source. Be skeptical of management's own TAM claims; they're always optimistic. Look for independent research from Gartner, IDC, or similar firms.
One approach some investors use: build a simple discounted cash flow (DCF) model with a range of assumptions. Even a rough model forces you to make explicit assumptions about growth deceleration, margin expansion, and terminal value. That's more useful than just staring at a P/S ratio and guessing whether it's "too high."
Where does Snowflake stand competitively?
Competitive positioning might be the most important and most overlooked part of how to research Snowflake stock. A company can have great financials today and still be a poor investment if its competitive moat is eroding.
Snowflake's main competitors fall into three categories:
- Cloud provider native tools: Amazon Redshift, Google BigQuery, Azure Synapse. These are built into the platforms where most enterprises already run their infrastructure. The advantage is convenience and integration. The disadvantage (for customers) is vendor lock-in to a single cloud provider.
- Direct competitors: Databricks is the most frequently cited rival. Databricks started from the data engineering side (Apache Spark) and has moved toward data warehousing, while Snowflake started from warehousing and is moving toward engineering and data science. They're converging.
- Legacy players: Teradata, Oracle, and IBM still hold on-premise data warehouse market share, particularly in large enterprises with regulatory constraints. The migration from on-premise to cloud represents both an opportunity and a timeline uncertainty for Snowflake.
When assessing competitive position, think about these factors:
- Switching costs. How hard is it for a Snowflake customer to move to Databricks or BigQuery? The answer is "not trivial but not impossible." Data migration is painful, but it's doable.
- Multi-cloud advantage. Snowflake runs on AWS, Azure, and Google Cloud. This is a genuine differentiator for enterprises that use multiple cloud providers and don't want to be locked into one vendor's analytics tool.
- Data sharing and marketplace. Snowflake's data marketplace creates network effects. The more data providers list on the platform, the more valuable it becomes for consumers of that data, and vice versa.
You can use the Rallies Vibe Screener to compare SNOW against peers in cloud infrastructure and data platforms on metrics that matter.
What are the biggest risks to research?
Every Snowflake research guide should end the analysis with risks, not because they're less important, but because you need all the preceding context to evaluate them properly.
Customer concentration. Check what percentage of revenue comes from the top 10 or top 20 customers. If a handful of large accounts drive a disproportionate share of consumption, losing even one could materially impact results.
Consumption model vulnerability. In an economic downturn, companies optimize spending. With a consumption model, customers can reduce their Snowflake usage without breaking a contract. That makes revenue more cyclically sensitive than a pure subscription model.
Stock-based compensation dilution. Snowflake has historically issued significant stock-based compensation. This dilutes existing shareholders over time. Track the share count trend and calculate what percentage of revenue goes toward stock-based comp.
Competition from cloud hyperscalers. AWS, Google, and Microsoft have effectively unlimited R&D budgets. If they aggressively improve and price their native data tools, Snowflake's growth could decelerate faster than expected.
Path to profitability. At what revenue scale does Snowflake reach sustained GAAP profitability? If the answer keeps getting pushed further out, that's a yellow flag. Model out when you think breakeven happens and track whether the company is moving toward or away from that target.
Stock-based compensation (SBC): Non-cash expense where companies pay employees with equity (stock options or restricted stock units). While it doesn't reduce cash on hand, it increases the number of shares outstanding, which dilutes existing shareholders' ownership percentage over time.
Putting it all together: A SNOW due diligence checklist
Here's a practical sequence you can follow. Treat it as a checklist rather than a rigid formula, and adjust based on what you find at each stage:
- Business model deep dive (1-2 hours): Read the 10-K business description, understand consumption pricing, map out the product portfolio.
- Financial analysis (1-2 hours): Pull the last several quarters of product revenue, NRR, RPO, gross margins, and free cash flow. Look for trends, not single data points.
- Valuation comparison (1 hour): Build a peer comparison table with EV/Revenue multiples, growth rates, and margins. Run a simple scenario analysis or DCF.
- Competitive landscape (1-2 hours): Read analyst reports, industry publications, and customer reviews on platforms like G2 or Gartner Peer Insights. Listen to what actual users say about switching between platforms.
- Risk assessment (30 minutes): Review insider selling, customer concentration, and the profitability timeline. Check for any pending litigation or regulatory issues in the 10-K risk factors section.
- Synthesis (30 minutes): Write a one-page summary for yourself. What's the bull case? What's the bear case? What would change your mind in either direction?
That last step is easy to skip, but it's the most valuable. Forcing yourself to articulate both sides of the argument in writing reveals gaps in your research.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Walk me through how to research Snowflake from scratch — what should I focus on to understand their business model, competitive position, and whether their financials justify the valuation compared to other cloud data companies?
- If I'm researching Snowflake for the first time, what's the step-by-step process? What should I look at first?
- Compare Snowflake's net revenue retention rate and gross margins to Databricks, MongoDB, and Datadog. What does this tell me about competitive positioning?
Frequently asked questions
What's the best way to start a Snowflake research guide?
Start with the business model. Understand that Snowflake uses consumption-based pricing, which makes its revenue dynamics different from typical SaaS companies. Once you understand how the company earns money and what drives customers to spend more, the financial analysis becomes much more intuitive.
How do you analyze SNOW compared to other cloud data stocks?
Use EV/Revenue multiples normalized for growth rate. Build a peer group of similar companies like MongoDB, Datadog, and Confluent. Compare not just valuation multiples but also net revenue retention rates, gross margins, and free cash flow generation. A higher multiple is justified only if growth and retention metrics are proportionally stronger.
What financial metrics matter most for SNOW due diligence?
Product revenue growth, net revenue retention rate, remaining performance obligations, gross margin, and free cash flow margin. Because Snowflake isn't consistently GAAP profitable, traditional earnings-based metrics like P/E ratios won't be useful. Focus on revenue quality and the path to profitability instead.
Is Snowflake's consumption-based model a strength or weakness?
Both. It's a strength because it allows natural revenue expansion as customers increase data workloads, and it reduces friction for initial adoption. It's a weakness because revenue can contract without customers formally churning. In an economic slowdown, customers can simply use less compute. This dual nature is something to weigh carefully.
How do I research Snowflake stock without relying on analyst reports?
Read the 10-K and 10-Q filings directly on SEC EDGAR. Listen to earnings call transcripts for management commentary. Check customer reviews on G2 and Gartner Peer Insights for ground-level product feedback. Use tools like the Rallies AI Research Assistant to ask targeted questions about the company's financials and competitive position. Primary sources are almost always more reliable than secondhand analysis.
What are the biggest risks when investing in cloud data companies like Snowflake?
Competition from hyperscalers (AWS, Google, Microsoft) who can bundle data tools cheaply, customer concentration risk, high stock-based compensation diluting shareholders, and an uncertain timeline to sustained profitability. For Snowflake specifically, the consumption model adds cyclical sensitivity that pure subscription businesses don't face.
Bottom line
Knowing how to research Snowflake stock means following a structured sequence: business model first, then financials, valuation against real peers, competitive positioning, and risks. Skip any of those steps and you're making a decision with incomplete information. The frameworks in this guide work for SNOW and for most high-growth cloud companies you'll encounter.
For more step-by-step research frameworks like this one, explore the Rallies guides library and build your own analysis from the ground up.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.