Snowflake Stock: The Dip That Smart Investors Are Buying Right Now

Key Points

• Snowflake is part of the trend in which accelerating AI adoption drives growth.
• Management's Q4 guidance is cautious and analysts are calling the December price pullback is an opportunity.
• Analysts are narrowing their target range to around the consensus, calling for a 30% upside.

Snowflake NYSE: SNOW looks increasingly attractive following its December pullback, as its third-quarter results point toward robust momentum heading into 2026. The company’s performance aligns with a broader trend of accelerating adoption of cloud-based and AI-enabled services by businesses and enterprises, as evidenced by results from Salesforce NYSE: CRM and Guidewire Software NYSE: GWRE.

Snowflake, as a data-centric service, is well-positioned for this trend, and its positioning was reflected in its earnings results. Revenue grew at an above-consensus 28.4%, and internal metrics, such as retention rates, remaining performance obligations, and client growth, all point to accelerating business for Snowflake in the upcoming quarters. 

Snowflake’s Strengths Overshadowed by In-Line Guidance

Snowflake had a robust quarter, with revenue growing by nearly 28% to $1.21 billion. The revenue outpaced analyst expectations by a slim margin, with retention rates and other internal metrics pointing to accelerating growth in subsequent quarters.

Net retention rate, the measure of new revenue from existing customers, held steady at a strong 125% while the remaining performance obligation (RPO), a measure of contracted revenue yet to be earned, accelerated to 37%. 

Both metrics are underpinned by client growth, with the company’s largest clients increasing by 29%. The company also showed meaningful margin improvement. While still reporting GAAP losses, Snowflake expanded adjusted operating margins, driving an accelerated 80% year-over-year increase in adjusted net profits.

Revenue and earnings were both ahead of the consensus estimate, with earnings outpacing the forecast by 1100 basis points and likely to remain strong in upcoming quarters. 

Despite beating expectations, Snowflake’s stock fell following the earnings release. The culprit? Management issued in-line revenue guidance, targeting 28% growth—on par with consensus but underwhelming for a high-growth stock.

However, internal performance metrics tell a different story. The strong RPO and client growth suggest sequential revenue increases are likely, contradicting the flat forecast and setting up a potential beat-and-raise scenario in early 2026.

Analysts Applaud Snowflake’s Q3 Results

Although some growth concerns remain, the analyst response to Snowflake's Q3 results was more positive than not. The four revisions MarketBeat tracked within the first twelve hours of the release are technically “mixed”, including some reaffirmed targets.

No analysts lowered their target or made a downgrade, but one did upgrade its price target to $275. This resulted in analyst updates netting bullish, with forecasted price targets narrowing around the consensus, which represents an approximately 30% upside from critical support targets.

Institutional investors, who control about 65% of outstanding shares, have been net buyers throughout 2025. According to MarketBeat data, buy activity outweighed selling by a ratio of roughly 3.5-to-1, suggesting that institutional owners will step in during temporary price drops. Assuming they continue this trend, Snowflake's stock price is unlikely to fall significantly below the $235 level before a rebound gains traction.

The technical action is sketchy. However, despite five weeks of pressure, the market is holding up at the $235 level. The likely outcome is that SNOW will continue to consolidate at the current levels before regaining traction in early 2026.

Near-term risks include profit-taking and tax-loss selling. The stock is up significantly from the 2025 lows, providing an attractive exit for short-term traders, and down 15% from its highs, offering an opportunity to secure a loss before year-end.