After experiencing a prolonged decline in its Net Revenue Retention (NRR) rate for 13 consecutive quarters, Snowflake, a prominent cloud data platform company, has finally witnessed a reversal. The latest financial report reveals that Snowflake’s NRR has increased from 124% to 125%, while its product revenue growth has accelerated from 26% to 32%. This marks the initial success of Snowflake’s strategic shift towards becoming an AI data platform.
The improvement in performance is largely attributed to Snowflake’s robust performance in its core analytics market. This validates the company’s transition towards becoming a comprehensive AI data platform for large enterprises, setting the stage for further large-scale expansion. The strategic positioning of Snowflake aligns precisely with the current pain points of enterprises: without unified, high-quality data, effective AI development is not possible.
As enterprise customers increasingly view Snowflake as an infrastructure that encompasses data analysis, data science, collaboration, and AI, the company is poised to benefit from the rapidly growing addressable market. Its market competitive position and long-term growth potential are being reassessed. The rebound in NRR, driven by AI, is expanding the customer base. NRR, which exceeds 100%, not only reflects the increased purchases by existing customers and product stickiness but also serves as a strong proof of AI value realization.
Snowflake’s NRR, after a continuous decline for 13 quarters, has shown a quarterly increase, rising from 124% to 125%. Despite Snowflake’s aggressive promotion of its new workloads in AI and data science, its traditional core analytics business remains the solid engine of the company’s growth. The strengthening of NRR is primarily due to the stable customer expansion transactions in its core data analytics business. This growth is not only due to customers migrating to the cloud but also because enterprises recognize that without a modern data foundation, their AI ambitions cannot be realized. Therefore, enterprises are actively investing in data modernization and transformation plans.
The company’s product revenue growth has also shown significant acceleration, with a year-on-year growth rate increasing from 26% to 32%. The report indicates that the new customer growth rate has steadily maintained at 18%. These data collectively paint a picture of healthy growth: Snowflake is not only attracting new customers but also driving existing customers to increase their consumption, thereby reversing the downward trend of key indicators.
Snowflake’s strong performance this quarter is deeply rooted in the successful evolution of its market positioning. The market’s perception of Snowflake is changing, no longer viewing it as just a data warehouse but as a comprehensive “data platform” capable of handling various workloads such as analysis, data science, collaboration, and AI. This shift in positioning sets it apart in the competition. Customers may initially choose Snowflake for its core analytics capabilities but plan to add other workloads in the future, providing the company with greater customer expansion space and growth potential.
The strong free cash flow (FCF) is another highlight of Snowflake’s financial report. It is described as the fastest-growing free cash flow compounder among large-cap software companies, with a projected two-year compound annual growth rate (CAGR) of 31% by the 2026 fiscal year. Based on the expected free cash flow for the 2026 fiscal year, the target price for Snowflake has been raised to 280 dollars. This valuation premium is considered reasonable given the sustainability of its growth and its leading position in the AI software market.
