Snowflake (NYSE:SNOW) Surprises With Q1 Sales, Stock Soars

Anthony Lee

Wed, May 21, 2025, 2:17 PM 4 min read

Revenue: $1.04 billion vs analyst estimates of $1.01 billion (25.7% year-on-year growth, 3.4% beat)
Adjusted EPS: $0.24 vs analyst estimates of $0.21 (13.1% beat)
Adjusted Operating Income: $91.66 million vs analyst estimates of $52.66 million (8.8% margin, 74.1% beat)
Product Revenue Guidance for Q2 CY2025 is $1.04 billion at the midpoint, higher than expectations of $1.02 billion
Operating Margin: -42.9%, in line with the same quarter last year
Free Cash Flow Margin: 0%, down from 42.1% in the previous quarter
Customers: 606 customers paying more than $1 million annually
Net Revenue Retention Rate: 124%, down from 126% in the previous quarter
Billings: $770.7 million at quarter end, up 36.2% year on year (2% miss vs expectations of $786 million)
Market Capitalization: $61.02 billion

Company Overview

Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake (NYSE:SNOW) provides a data warehouse-as-a-service in the cloud that allows companies to store large amounts of data and analyze it in real time.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Snowflake grew its sales at an exceptional 39.6% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

This quarter, Snowflake reported robust year-on-year revenue growth of 25.7%, and its $1.04 billion of revenue topped Wall Street estimates by 3.4%.

Looking ahead, sell-side analysts expect revenue to grow 22.8% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is admirable and implies the market sees success for its products and services.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Snowflake’s billings punched in at $770.7 million in Q1, and over the last four quarters, its growth was fantastic as it averaged 26.6% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Snowflake’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 126% in Q1. This means Snowflake would’ve grown its revenue by 26% even if it didn’t win any new customers over the last 12 months.

Despite falling over the last year, Snowflake still has an excellent net retention rate. This data point proves that the company sells useful products, and we can see that its customers are satisfied and increasing usage over time.

Key Takeaways from Snowflake’s Q1 Results

It was encouraging to see Snowflake beat analysts’ revenue expectations this quarter. Additionally, profitability was much stronger than expected, leading adjusted operating profit and adjusted EPS to beat handily. Looking ahead, Q2 product revenue was slightly higher than Wall Street Consensus. On the other hand, its billings missed and its net revenue retention decreased. This wasn't a perfect quarter, but it was still very solid. The stock traded up 5.7% to $189.30 immediately after reporting.

Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.

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