Snowflake Is Up Nearly 50% in 2026—What Are Short Sellers Betting Against?

Key Points

• Despite a 50% year-to-date gain and mostly bullish analyst ratings, Snowflake remains one of the market's most heavily shorted stocks, with short interest valued at $6.18 billion.
• Snowflake continues to post GAAP net losses, including $1.33 billion in fiscal 2026, while heavy stock-based compensation and insider selling raise concerns about shareholder dilution.
• Bulls point to Snowflake's strong Q1 FY2027 earnings beat, record 126% net revenue retention, growing AI adoption, and rising institutional investment as reasons for long-term optimism.

Establishing fair market value in 2026 has become a tricky proposition. That is particularly true of pre-profit, high-flying tech stocks.

Such is the case for Snowflake NYSE: SNOW. Despite a 50% year-to-date (YTD) gain, the cloud-native data platform provider remains one of the market’s most heavily shorted stocks.

While Wall Street analysts remain firmly bullish on Snowflake—34 of the 40 analysts covering the stock assigning it a Buy—short sellers are telling a different story.

Current short interest stands at 5.7% of the float. And while that may not seem too high, it equates to more than 18.8 million shares valued at $6.18 billion, which remains near the highest levels in company history.

That contrast between Snowflake’s strong YTD performance and its Moderate Buy analyst consensus rating with its elevated short interest underscores the difficulty in identifying true value in today’s market. But looking at some fundamental truths about Snowflake supports the long-term bull thesis.

Snowflake’s Valuation and GAAP Losses Keep the Bear Case Alive

The most simple explanation for Snowflake’s high short interest is its performance vis-à-vis its underlying financials. On top of a 50% YTD gain, the stock is up nearly 65% over the past year and around 200% from its five-year low in September 2024.

However, since its initial public offering on Sept. 16, 2020, the company has yet to achieve Generally Accepted Accounting Principals, or GAAP, profitability.

For its fiscal 2026, Snowflake finished with a net loss of $1.33 billion following net losses of $1.28 billion in 2025 and $836 million in 2024.

That trend has continued. In the company's fiscal Q1 2027, net income registered a negative $296 million. Annualized diluted earnings per share (EPS) losses have also increased each year, averaging negative 88 cents over the past four quarters.

Another potential concern is whether Snowflake can sustain its current growth rate. In Q1 FY2027, total revenue increased 33% year over year (YOY) to $1.39 billion, while product revenue grew 34% to $1.33 billion. That represented an acceleration from 30% product revenue growth in Q4 FY2026. However, with Snowflake trading at a premium valuation, any future slowdown in growth could increase valuation-compression risk and strengthen the bear case.

The Elephant in the Room: Stock-Based Compensation Keeps Dilution in Focus

But more problematic is Snowflake’s reliance on stock-based compensation (SBC) and the resultant shareholder dilution it contributes to.

Companies that heavily issue shares as compensation rather than cash are often targeted by short sellers because their free cash flow (FCF) is driven by SBC, not by earnings. Unlike cash compensation, SBC is considered an operating expense. That allows accountants to add SBC back into the books as cash flow from operations based on a dollar amount that was never issued as cash.

As a result, insider selling has been elevated as management liquidates equity to either lock in gains or cover tax obligations. Over the past 12 months, Snowflake has seen eight insider sales totalling $1.04 billion against zero buys.

In fiscal 2026, Snowflake’s SBC reached nearly $1.6 billion and now accounts for approximately 35% of its total revenue. The company does generate positive non-GAAP FCF; however, its SBC plan has translated to persistent GAAP operating losses.

That issue isn’t going away any time soon, either. On July 15, Snowflake’s CEO Sridhar Ramawamy was received a massive performance-based equity retention package worth up to an estimated $448 million. The award covers 1 million shares across five tranches, with vesting tied to continued service and increasingly higher stock-price milestones, according to the company's Form 8-K filing.

AI Adoption and Margin Expansion Support the Bull Case

As strong as those headwinds may be in the short and medium terms, buy-and-hold investors should remain focused on the long-term bull case.

In its Q1 2027 earnings report on May 27, Snowflake announced EPS of 39 cents, surpassing the analyst consensus expectation of 32 cents—the company’s 10th earnings beat in the last 11 quarters.

Meanwhile, net revenue retention of 126% was the strongest in company history, while its new AI offerings are seeing rapid adoption. Snowflake Intelligence accounts more than doubled quarter over quarter, and Cortex Code is now in use at more than 7,100 accounts.

Operating leverage also improved, with non-GAAP operating margin expanding over 300 basis points YOY to 12%. Additionally, management raised full-year operating margin guidance to 13.5%.

And while short interest may be the near-term headline-grabber, institutional owners have been loading up on SNOW. Over the trailing 12 months, 883 institutional buyers have injected nearly $41 billion into the stock, with institutional sellers’ outflows totaling less than $6 billion.

With Snowflake set to report Q2 FY2027 results on Sept. 2, investors may want to watch whether AI-driven growth and margin expansion continue to offset concerns around valuation, dilution, and GAAP losses.

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