Snowflake Q3 FY1/25 Earnings Review

Last updated on Nov 21, 2024

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Flywheel Spinning Up

OK let’s just cut to the chase. The good part about Snowflake ($SNOW) earnings is the the order book - the growth rate of the “remaining performance obligation” in 10-Qspeak - is trending up, and that probably means that recognized revenue growth will trend up in the coming quarters. You take that, and a general level of misery on the stock (charismatic former CEO gone fishing, a nagging doubt that maybe the reason Swiss Toni went fishing in the first place is because maybe Snowflake technology is a little bit not cutting edge, not legacy exactly but a little bit more like yesterday than tomorrow, etc), and you get a ginormo +20% move in the thinly-traded post- and premarket sessions.

We have $SNOW rated at Accumulate between around $120–160/share. Right now the stock is sat at the top of our Accumulation Zone and is threatening to break out. Woot. But the thing is still trading at twice the cashflow multiple that NVDA demands. So it’s hard to get too excited about this name if you ask me. It definitely looks to me like it will become Officially Legacy in a couple years. So, charts don’t lie and the RPO is moving up and growth may follow suit. The company also executed a too-cute convertible note raise and used some of the money to buy shares back in a private deal from selected shareholders at $112 before earnings. I imagine the CEO will be getting calls from a couple of those shareholders today. Probably not happy calls.

Let's look at the numbers first. Then we'll do charts and suchlike.

TL:DR - Headlines

Nothing good here except that RPO growth. So anyone getting all excited about the numbers is assuming that RPO growth feeds into better revenue growth. Which might happen, but it won’t definitely happen.

Financial Fundamentals

If you have any questions about the numbers by the way, post them in Slack Chat (Inner Circle members) or in comments to this article (everyone else).

OK let’s be fair. Deferred revenue saw accelerating growth too. Which is a little more concrete than a swelling forward order book.

Valuation Analysis

NVDA, 50x TTM cashflow. SNOW, 109x TTM cashflow. Yes I can see that SNOW cashflows might grow at a faster rate than do Nvidia’s, but that hasn’t happened yet. Yes I also know valuations look to the future. But I also know valuations don’t much matter. Here’s the numbers anyway.