Snowflake is a cloud-based data platform that lets businesses store, manage, and analyze massive amounts of data without owning or maintaining their own servers. Understanding what Snowflake does matters for investors because the company operates in a fast-growing corner of enterprise technology, earning revenue through a consumption-based pricing model that ties its income directly to how much customers actually use the platform.
Key takeaways
- Snowflake sells cloud data storage, processing, and analytics as a service, charging customers based on how much they consume rather than flat subscription fees.
- Its architecture separates storage from compute, which means customers can scale each independently and only pay for what they use.
- Snowflake competes with cloud giants like Amazon Web Services, Google BigQuery, and Microsoft Azure Synapse, but differentiates by working across all three major cloud providers.
- The company's net revenue retention rate is a critical metric to watch because it signals whether existing customers are spending more over time.
What does Snowflake do, exactly?
At its core, Snowflake is a data warehouse built for the cloud. Businesses generate enormous amounts of data from sales transactions, customer interactions, supply chains, and dozens of other sources. That data needs to live somewhere, and more importantly, someone needs to be able to query it, analyze it, and pull useful insights out of it. That's what Snowflake provides.
Traditional databases require companies to buy hardware, install software, and hire teams to maintain everything. Snowflake removes that burden. A company signs up, loads its data into Snowflake's platform, and starts running queries. The infrastructure runs on top of public cloud providers like AWS, Azure, or Google Cloud, but Snowflake handles the complexity so users don't have to think about server management.
Data warehouse: A centralized system where businesses store structured data from multiple sources for reporting and analysis. For investors, the size and growth of a company's data warehouse business often reflects how deeply embedded it is in its customers' daily operations.
What makes Snowflake different from older database tools is its architecture. It separates storage and compute into independent layers. You can store a petabyte of data but only spin up a small amount of computing power to run a simple query. Or you can keep a modest dataset but throw massive compute resources at a complex machine learning workload. You're not locked into paying for both at the same scale.
How does Snowflake make money?
Snowflake's revenue model is consumption-based. Customers pay for the amount of data they store and the computing resources they use when running queries or workloads. This is different from a typical software-as-a-service company that charges a flat monthly or annual subscription fee regardless of usage.
The consumption model has a few implications worth understanding. On the positive side, as customers load more data and run more analyses, their spending with Snowflake grows organically. Snowflake tracks this through its net revenue retention rate, which measures how much more (or less) existing customers spend compared to the prior year. A rate above 100% means customers are spending more over time without Snowflake needing to acquire new accounts.
The flip side is that consumption-based revenue can be less predictable than subscriptions. If a customer hits a slow quarter or optimizes how they run queries, their Snowflake bill drops. This creates some lumpiness in quarterly results that investors should keep in mind when evaluating the business.
Net revenue retention rate: A metric showing how much revenue a company earns from its existing customers compared to the same group in the prior period. A rate consistently above 120% generally signals strong product stickiness and expanding use cases within the customer base.
Who are Snowflake's customers?
Snowflake's customer base spans industries: financial services, healthcare, retail, media, technology, and government. The common thread is that these organizations deal with large volumes of data and need to make sense of it quickly.
One metric Snowflake highlights is the number of customers generating more than $1 million in trailing twelve-month product revenue. This count has grown steadily and matters because it shows the platform isn't just winning small accounts. Large enterprises are adopting Snowflake and, more importantly, increasing their spending over time. When a Fortune 500 company goes from spending $500,000 to $2 million with Snowflake, that's a strong signal the product is becoming embedded in critical business processes.
This pattern of land-and-expand is central to Snowflake's growth strategy. A team within a company might start using Snowflake for one project. If it works well, other teams adopt it. Over time, the company's overall Snowflake consumption grows without the sales team needing to close a brand new deal.
How is Snowflake different from traditional databases?
If you're new to this space, here's the simplest way to think about it. Traditional databases, like Oracle or on-premise SQL Server installations, are like buying a car. You own it, you maintain it, you pay for insurance, and when you need more capacity, you buy another car. Snowflake is more like a ride-sharing service. You use it when you need it, you scale up or down based on demand, and someone else handles the maintenance.
The technical distinction that matters most is the separation of storage and compute. In legacy systems, these are tightly coupled. If you need more processing power, you often have to upgrade your entire system, which means paying for more storage you might not need. Snowflake decouples them. This flexibility is a genuine competitive advantage, especially for organizations with unpredictable or seasonal workloads.
There's also the multi-cloud angle. Snowflake runs on AWS, Azure, and Google Cloud. This means a customer using AWS for some workloads and Azure for others can use Snowflake as a single data platform across both. Competing products from cloud providers tend to work best (or only) within their own ecosystem. Snowflake's cloud-agnostic approach appeals to enterprises that don't want vendor lock-in.
Who does Snowflake compete with?
Snowflake's competitive landscape is worth understanding because it directly affects the company's pricing power and growth potential. The main competitors fall into two camps.
The first camp is the cloud providers themselves. Amazon offers Redshift, Google has BigQuery, and Microsoft has Azure Synapse Analytics. These are all cloud data warehouse products, and they come with a built-in advantage: customers already using that cloud platform can add the data warehouse with minimal friction. The cloud providers can also bundle pricing in ways that make their offering look cheaper on paper.
The second camp is legacy database companies like Oracle and Teradata that are migrating their products to the cloud. These companies have deep relationships with large enterprises and decades of trust, but their cloud offerings are generally viewed as less modern than Snowflake's architecture.
Snowflake's edge is its focus. While AWS, Google, and Microsoft each sell hundreds of cloud services, Snowflake's entire business revolves around data. That focus has allowed it to build features like seamless data sharing between organizations, support for semi-structured data, and a marketplace where companies can buy and sell datasets. Whether that focus is enough to hold off competitors with far greater resources is one of the big open questions for investors evaluating this stock. You can explore Snowflake's company page on Rallies.ai for a closer look at how the business stacks up.
What should beginners know about Snowflake's financials?
For anyone approaching SNOW for the first time, a few financial characteristics stand out.
First, Snowflake has historically prioritized revenue growth over profitability. This is common in high-growth enterprise software companies. The logic is that capturing market share now, while the cloud data market is still expanding, will pay off later through economies of scale and deeply embedded customer relationships. Whether you find that logic compelling depends on your investment philosophy.
Second, pay attention to remaining performance obligations (RPO). This represents the total value of contracts customers have committed to but haven't yet consumed. High RPO suggests future revenue is already locked in, even if it hasn't hit the income statement yet.
Remaining performance obligations (RPO): The total dollar value of contracted but unrecognized revenue. Think of it as a backlog. For consumption-based businesses, RPO gives investors a forward-looking view of committed customer spending.
Third, gross margins matter. Snowflake pays cloud providers (AWS, Azure, Google Cloud) to host its platform, and those infrastructure costs eat into margins. Tracking whether Snowflake's product gross margin is expanding or contracting over time tells you a lot about the company's pricing power and operational efficiency.
If you want to dig into these metrics yourself, tools like the Rallies.ai stock screener let you filter companies by financial characteristics and compare them side by side.
Why does Snowflake matter for investors?
The broader question behind "what does Snowflake do" is really about the size of the opportunity. Enterprise data volumes are growing faster than most companies can manage. Every business is collecting more data from more sources, and the ability to centralize, govern, and analyze that data has become a competitive necessity.
Snowflake sits at the center of this trend. Its platform is becoming the system of record for enterprise data in many organizations, similar to how Salesforce became the system of record for customer relationships. Once a company's data infrastructure is built on Snowflake, switching costs are high. Migrating petabytes of data and rewriting all the queries and pipelines that depend on it is expensive and risky. That stickiness is a meaningful moat.
The risk side is real too. Competition from well-funded cloud providers isn't going away. The consumption model means revenue can slow if customers optimize usage or if economic conditions cause companies to cut spending. And Snowflake's valuation has historically reflected very high growth expectations, which leaves less room for error.
For those tracking broader stock analysis trends, Snowflake is a useful case study in how to evaluate a high-growth technology company where traditional valuation metrics like price-to-earnings ratios may not apply in the near term.
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:
- Explain Snowflake's business model like I'm new to cloud data companies — how do they make money, who are their main competitors, and what makes their approach different from traditional databases?
- Explain what Snowflake does like I'm new to investing — how does the business work and why does it matter?
- What are the biggest risks to Snowflake's business model, and how would I evaluate whether the company can maintain its growth rate over time?
Frequently asked questions
What is SNOW in the stock market?
SNOW is the ticker symbol for Snowflake Inc., a cloud-based data platform company that trades on the New York Stock Exchange. The company provides data storage, processing, and analytics services to businesses across a wide range of industries. When investors reference SNOW, they're referring to shares of this company.
Is Snowflake a SaaS company?
Snowflake shares characteristics with SaaS companies but doesn't follow the traditional subscription model. Instead of charging a flat fee, Snowflake uses consumption-based pricing where customers pay based on how much storage and computing power they use. This distinction matters because it affects revenue predictability and how investors should model the company's financials.
How is SNOW explained to beginners?
The simplest explanation: Snowflake is a cloud service that helps businesses store all their data in one place and analyze it without managing their own servers. Think of it like renting a highly organized warehouse for your data, where you only pay for the space and forklift time you actually use. The company handles all the maintenance and infrastructure behind the scenes.
What makes Snowflake different from AWS or Azure?
AWS and Azure are cloud infrastructure providers that offer hundreds of services, including their own data warehouse tools. Snowflake is focused specifically on data. Its main differentiator is that it runs across all three major cloud platforms (AWS, Azure, and Google Cloud), so customers aren't locked into a single provider. It also separates storage and computing, letting users scale each independently.
Is Snowflake profitable?
Snowflake has historically invested heavily in growth rather than optimizing for near-term profitability. When evaluating the company, investors often look at product gross margins and free cash flow trends alongside revenue growth. Because profitability metrics evolve over time, it's worth checking the most recent financial filings to see where the company stands. You can review market news on Rallies.ai to stay updated.
What does Snowflake do that matters for investors?
Snowflake provides the data infrastructure that enterprises increasingly depend on for decision-making, reporting, and machine learning. For investors, the company represents a bet on the continued growth of enterprise data and the shift from on-premise systems to cloud-based platforms. The strength of its customer retention, the expansion of spending within existing accounts, and its ability to compete with much larger cloud providers are the factors that drive its investment case.
Bottom line
Understanding what Snowflake does comes down to three things: it stores enterprise data in the cloud, it lets companies analyze that data on demand, and it charges based on actual usage. The business model is built on the bet that enterprise data volumes will keep growing and that companies will pay a premium for a platform that works across cloud providers and scales flexibly.
If you're researching SNOW or similar cloud data companies, start by examining the business model, customer retention metrics, and competitive dynamics before looking at the stock price. For more frameworks on evaluating companies like this, explore the stock analysis resources on Rallies.ai.
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.
