Citi Bullish on Snowflake Ahead of Q2 Earnings

Why Citi Is Still Bullish on Snowflake Before Q2 Earnings—and What It Means for Investors

Key Points

Citi has raised its price target for Snowflake to £250 from £245, maintaining a buy rating, signaling confidence in AI-driven growth reacceleration in the latter half of 2025.
Snowflake's shares have risen approximately 26% year-to-date, reflecting market enthusiasm, though analysts caution on potential volatility from high valuations and competition.
Expectations for Q2 fiscal 2026 earnings on 27 August include product revenue growth of around 26-28%, bolstered by strong remaining performance obligations, but profitability may remain flat due to investments.
While bullish on AI innovations like agentic features from the Snowflake Summit, investors should note risks such as macroeconomic headwinds and intense rivalry from players like Databricks and Amazon Redshift.
Overall, Wall Street consensus leans towards a strong buy, with an average price target of about £235, suggesting 19-20% upside, though debates persist on long-term margins amid stock-based compensation concerns.

Introduction

As artificial intelligence becomes central to the evolving cloud computing landscape, Snowflake’s upcoming Q2 earnings are drawing heightened attention. Citi's recent reaffirmation of its bullish stance has sparked fresh interest – but what does this mean for investors? With shares already up significantly this year, is now the time to buy in, or are there hidden risks? Now, let’s break it down so you can decide whether Snowflake deserves a spot in your portfolio

Why Citi is Bullish on Snowflake

Citi analyst Tyler Radke has reiterated a buy rating on Snowflake, emphasizing the company's potential for growth reacceleration driven by AI demand and robust remaining performance obligations (RPO).

This optimism comes just days before the earnings release, highlighting Snowflake's strategic positioning in the AI data cloud market.

Snowflake's Recent Performance

Snowflake started fiscal 2026 strong—Q1 product revenue hit £996.8 million, up 26% from last year, and RPO jumped 34% to £6.7 billion.

The net revenue retention rate stood at 124%, indicating strong customer loyalty and expansion.

These numbers give investors reason to be upbeat heading into Q2

What to Watch in Q2 Earnings

Analysts anticipate continued revenue growth, with consensus estimates pointing to steady earnings per share around 0.27.

However, expenses from events like the Snowflake Summit 2025 could pressure margins.

Investors should monitor guidance for the back half of the year, where AI momentum is expected to shine.

AI as a Growth Driver

With fresh AI tools like agentic capabilities and new partnerships announced at the 2025 Summit, Snowflake looks well-prepared for future growth.

These features enable easier data analysis and ML workflows, appealing to enterprises seeking AI-ready data solutions.

As we approach Snowflake's second-quarter fiscal 2026 earnings on 27 August 2025, Citi's continued optimism provides a compelling narrative for investors navigating the dynamic cloud and AI sectors. This comprehensive analysis explores the underpinnings of Citi's stance, Snowflake's business fundamentals, market context, innovations, risks, and broader analyst perspectives. Drawing from recent financial data, industry trends, and expert insights, we'll unpack why Snowflake remains a focal point in tech investing – and what potential pitfalls lie ahead.

Snowflake's Business Model: A Primer for Investors

Snowflake operates as a leading AI Data Cloud company, offering a platform that allows organizations to store, manage, and analyse vast amounts of data across multiple clouds without the constraints of traditional data warehouses.

Founded in 2012 and going public in 2020, Snowflake pioneered the concept of a consumption-based pricing model, where customers pay only for the resources they use – a shift from fixed subscriptions that has fuel led its rapid adoption.

At its core, Snowflake's architecture separates storage and compute, enabling scalable performance and cost efficiency. This has attracted a diverse customer base, from Fortune 500 enterprises to startups, spanning industries like retail, healthcare, and finance. By the end of fiscal 2025, Snowflake boasted over 580 customers generating more than £1 million in trailing 12-month product revenue, underscoring its enterprise appeal.

In the context of 2025's AI boom, Snowflake has evolved beyond mere data storage. Its platform now integrates AI and machine learning tools, allowing users to build data agents, process unstructured data, and deploy models directly within the ecosystem.

This positions Snowflake not just as a data repository, but as an enabler of AI-driven insights, aligning with the growing demand for "agentic AI" – systems that autonomously perform tasks based on data.

For investors, understanding this model is crucial. Unlike legacy players tied to single-cloud environments, Snowflake's multi-cloud compatibility (supporting AWS, Azure, and Google Cloud) reduces vendor lock-in risks. However, this flexibility also invites competition, as we'll discuss later.

Citi's Detailed Analysis: Breaking Down the Bullish Case

Citi's Tyler Radke, a prominent analyst in the software space, has been vocal about Snowflake's prospects. In his latest note dated 22 August 2025, Radke raised the price target to £250 from £245 while reaffirming a buy rating.

This adjustment implies a potential 28% upside from current levels around £196, based on enthusiasm from Snowflake's recent Summit and anticipated AI tailwinds.

Key reasons cited include:

AI-Driven Growth Reacceleration: Radke expects Snowflake's back-half performance in fiscal 2026 to benefit from surging AI demand. Features like Cortex AI, which simplifies ML workflows, and integrations with partners such as NVIDIA and Anthropic, are seen as catalysts.

He notes that AI products could contribute meaningfully to revenue, with fiscal 2026 estimates revised upward due to this momentum. Strong Remaining Performance Obligations (RPO): RPO, a forward-looking metric, stood at £6.7 billion in Q1, up 34% year-over-year.

Citi views this as a harbinger of sustained growth, indicating committed future revenue from existing contracts.

Summit Buzz and Product Momentum: At its 2025 Summit, Snowflake rolled out big updates—like a marketplace for data and AI assets, new governed sharing tools, and upgraded agent deployment.

Radke highlighted the "strong momentum" in these areas, suggesting they could drive customer expansion and net retention rates. Comparatively, Citi draws parallels to other tech stocks navigating AI transitions. For instance, while not directly analogous, John Deere's (DE) integration of AI in precision agriculture has boosted its stock by over 15% in 2025 amid similar analyst upgrades – illustrating how AI adoption can revitalize established players.

Snowflake, however, operates in a faster-growing cloud segment, potentially amplifying such gains.

Radke's track record adds credibility; his ratings on Snowflake have been consistently bullish since early 2025, with prior targets like £245 in May proving prescient as shares rebounded.

Q2 Earnings Preview: Expectations and Key Metrics

Snowflake's Q2 fiscal 2026 earnings, set for release after market close on 27 August, are pivotal. Consensus estimates project earnings per share of 0.27, with revenue around £1.04 billion – implying 26% growth.

This builds on Q1's solid showing, where adjusted net income hit £87.3 million (24 pence per share), beating expectations.

Investors should focus on:

Product Revenue and Guidance: Analysts expect 26-28% YoY growth, driven by AI uptake. Any upward revision in full-year guidance could propel shares higher.

Margins and Expenses: Non-GAAP operating income was positive in Q1, but costs from the Summit (estimated at £50-£70 million in marketing) may keep profitability flat. Free cash flow, which grew 24% to £884.1 million in fiscal 2025, is another watchpoint. Customer Metrics: Net revenue retention (124% in Q1) and large customer count will signal health.

Key Financial Metric	Q1 FY26 Actual	Q2 FY26 Consensus Estimate	YoY Growth
Product Revenue	£996.8M	~£1.04B	26%
RPO	£6.7B	N/A	34% (Q1)
EPS (Non-GAAP)	0.24	0.27	N/A
Net Retention Rate	124%	Expected Stable	N/A

This table summaries core metrics, highlighting Snowflake's trajectory.

Practical tip: If you're considering investing pre-earnings, use options strategies like covered calls to hedge volatility, given Snowflake's history of post-earnings swings (e.g., 10% moves in prior quarters).

AI Innovations: The Engine of Future Growth

The 2025 Snowflake Summit was a showcase of AI prowess, with announcements that could redefine the platform.

Key features include:

Agentic AI Capabilities: Tools for building autonomous data agents that Analyse unstructured data and create ML workflows seamlessly.

Enhanced Integrations: Partnerships with firms like ServiceNow and UiPath for AI app development, and an open-source push to foster ecosystem growth. Governed Data Marketplace: A secure interface for internal data sharing, reducing silos and accelerating AI deployment.

These innovations address a market projected to grow at 30% CAGR through 2030, per industry reports. For example, a retail client using Snowflake's AI for predictive analytics reported 15% efficiency gains – a practical tip for businesses: Start with pilot projects on unstructured data to test ROI.

Internal link suggestion: For more on AI in cloud computing, check our guide on Emerging AI Stocks to Watch in 2025. Another: Explore our comparison of Snowflake vs. Databricks.

Market Position, Competitors, and Differentiation

Snowflake holds an 18.33% market share in cloud data warehousing as of Q1 2025, ahead of Databricks at 8.67%.

Its strengths lie in ease of use and multi-cloud support, but competition is fierce.

Top competitors:

Google Big Query: Serverless and cost-effective for analytics, but lacks Snowflake's separation of storage/compute.

Amazon Redshift: AWS-integrated, strong for large-scale queries, yet more complex to manage.

Databricks: Excels in unified analytics with Lakehouse architecture, posing a threat in AI/ML spaces.

Microsoft Azure Synapse: Perfect for Azure users who want BI tools already integrated.

Competitor	Key Strength	Weakness vs. Snowflake	Market Share (2025 Est.)
Google Big Query	Scalable analytics	Less flexible multi-cloud	~15%
Amazon Redshift	High performance	Vendor lock-in	~20%
Databricks	AI/ML focus	Higher complexity	8.67%
Azure Synapse	Integration with Microsoft ecosystem	Cost for small users	~12%

This table illustrates Snowflake's edge in flexibility, but highlights the need for continued innovation.

Practical tip: If evaluating alternatives, assess total cost of ownership – Snowflake's consumption model often saves 20-30% for variable workloads.

Risks and the Bear Case: A Balanced View

Despite the bullishness, Snowflake faces headwinds. High valuation (trading at 37x forward sales) raises concerns, especially with stock-based compensation at 37% of revenue in Q1.

Macro uncertainties, affecting 40% of customers per surveys, could slow growth.

Bear arguments include:

Competition Erosion: Databricks' Lakehouse could lure AI-focused clients.
Profitability Pressures: Ongoing GAAP losses, despite non-GAAP positives.

Geopolitical and Economic Risks: Supply chain issues or recessions impacting cloud spend. A bearish option like a call spread might appeal for hedgers, as suggested in recent analyses.

Tip: Diversify portfolios with non-correlated assets to mitigate tech volatility.

Broader Analyst Sentiment and Stock Forecast

Wall Street is largely optimistic, with 31 buy ratings and three holds, yielding a strong buy consensus.

Average price target: £235.18, implying 19.5% upside. Firms like JMP Securities (£260 target) and DA Davidson (£250) echo Citi's view. Projections: Shares could reach £267 by year-end if AI momentum holds.

Internal link: See our Wall Street Analyst Roundup for Tech Stocks.

External sources: For deeper dives, visit Snowflake Investor Relations or TipRanks for Analyst Ratings.

Conclusion

Citi's bullish reaffirmation underscores Snowflake's AI-fueled potential amid a competitive landscape, with Q2 earnings likely to validate or challenge this narrative. While growth metrics impress, balanced investors should weigh risks like valuations and macro factors. If you're eyeing entry, consider post-earnings dips for better positioning.

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