Goldman Sachs remains optimistic about Snowflake: slowing growth is not a concern, core metrics are healthy, and AI momentum is still strong.

Although Snowflake’s latest financial report showed a slowdown in revenue growth compared to previous periods and triggered volatility in its share price in after-hours trading, Goldman Sachs maintained its "Buy" rating and raised its target price to $275. Goldman Sachs believes that concerns over short-term growth fluctuations have overshadowed the company's strong core business performance and accelerating monetization capability in the field of artificial intelligence.

Snowflake’s third-quarter earnings report showed product revenue grew 29% year-on-year, slightly above market expectations, although the margin of outperformance narrowed compared to the first half of the year. Meanwhile, the company’s AI business achieved a milestone, with annualized AI revenue hitting $100 million one quarter ahead of schedule. However, due to previously high investor expectations and being accustomed to significant outperformance in past quarters, the share price dropped 8% after hours.

In response, Goldman Sachs stated in a research report on the 3rd that Snowflake’s AI strategy is becoming a "multiplier" for business growth and that its core customer retention rate (NER) remains at a healthy 125%. Analysts believe that although consumption models inherently feature quarter-to-quarter volatility, based on record-breaking new contractual obligations (RPO) and rapid AI product adoption, spending conditions among enterprise clients remain healthy and future growth potential is undamaged.

However, there are still some dissenting voices in the market. Nomura maintains a more cautious stance, arguing that Snowflake’s current valuation has already adequately reflected the AI growth expectations emphasized by Goldman Sachs. If there are future fluctuations in consumption or a slowdown in AI adoption, its valuation multiples may come under pressure. Opinions are divided mainly over whether AI can bring sustained increases in consumption and whether the current share price has already discounted future growth potential.

AI Becomes a “Multiplier” for Business Growth

According to Goldman Sachs’ report, Snowflake is rapidly proving its commercial value in the era of generative AI. The company not only achieved its $100 million annualized AI revenue target one quarter ahead of time, but also saw a sharp increase in adoption of its AI-related products.

Data shows that Snowflake Intelligence has become the fastest-adopted new product in the company’s history, with more than 1,200 customers currently using it. In addition, in this quarter’s bookings, 50% were influenced by AI factors; currently, 58% of customers use Snowflake’s AI features every week. Goldman Sachs sees AI as a “force multiplier” for Snowflake’s business.

Beyond direct revenue contributions, Snowflake continues to expand its monetizable product offerings, including Cortex, Openflow, Snowpark, and Iceberg product lines. Goldman Sachs believes that as these products converge with ongoing cloud migration trends, they will strongly support the company in maintaining a medium-term revenue growth rate of over 20%.

Core Metrics Remain Robust, No Need to Overly Worry About Growth Fluctuations

Though the market was somewhat disappointed that third-quarter product revenue only beat expectations by 2.3% (lower than the previous quarter’s outperformance), Goldman Sachs believes this is more a reflection of overly high investor expectations rather than a deterioration of fundamentals.

Looking at core operational metrics, Snowflake’s performance is still strong. Third-quarter net new RPO reached a record $949 million, with 615 new customers, far surpassing the prior quarter’s 343. Meanwhile, the previously watched net revenue retention rate (NER) remained stable at 125%.

Goldman Sachs points out that the consumption-based business model itself leads to higher volatility, as seen in Q3, but combined with higher-than-expected Q4 guidance (up 27% year-on-year) and strong new order data, this suggests that customer spending willingness not only hasn’t weakened – it’s accelerating.

If Snowflake can maintain similar outperformance in the fourth quarter, its exit growth rate could reach 30%, which would mean growth has even accelerated from Q3.

Valuation Dispute: Goldman Bullish, Institutions Cautious

While Goldman Sachs is optimistic about Snowflake’s prospects and emphasizes its outstanding performance regarding the “Rule of 50” (growth rate plus profit margin), there is still disagreement on Wall Street.

Nomura’s research on the 4th kept a “Hold” rating and set a target price of $238. The analysis notes that although Snowflake’s execution remains strong and its AI revenue has reached a solid $100 million scale, the current valuation already reflects optimistic expectations for AI-driven growth and can be described as “priced for perfection.”

Nomura’s view is that although there is momentum in the POC (proof of concept) stage for AI, there is not yet clear evidence that AI workloads can significantly and sustainably increase overall platform consumption. Additionally, Nomura raises a long-term structural concern: as AI’s capabilities in processing unstructured data improve, the paradigm of data analytics may shift in the future, thereby partially eroding Snowflake’s traditional data warehousing total addressable market (TAM).

By contrast, Goldman Sachs places more value on Snowflake’s long-term moat as a data cloud platform. Goldman believes that as Snowflake continues to expand the monetizable surface area of its platform and deeply engages in the cloud migration wave, its competitive position remains solid, and the current share price pullback offers attractive risk-return for long-term investors.

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