Late last year, Fool’s freelance investment writers were asked to pick their top US stock (for investors to consider buying) for 2025. I went with Snowflake (NYSE: SNOW), which specialises in data analytics solutions and is fast becoming a major player in artificial intelligence (AI).
This is looking like a good call, as the share price is already up about 27% year to date (versus a fall of 1% for the S&P 500 index). I reckon the tech stock has plenty of room to run, however, so it could still be worth considering.
Phenomenal earnings
Snowflake posted its earnings for the quarter ended 30 April on Wednesday night. And the numbers were very strong.
For the quarter, product revenue was $996.8m, up 26% year over year. Meanwhile, non-GAAP net income was $87.6m, up roughly 70% on the prior year period.
It’s worth noting that at the end of the period, the company had 606 customers with trailing 12-month product revenue greater than $1m (only a few years ago this figure was closer to 200). And for the period, its net revenue retention rate was 124%, signaling that existing customers are spending more with the data firm.
On the back of these results, the company raised its full-year guidance. It now expects product revenue of about $4.3bn for the current financial year, up 25% year on year.
Snowflake’s mission is to empower every enterprise to achieve its full potential through data and AI. Our focus on making the Snowflake platform easy to use, to enable fluid access to data wherever it sits, and trusted for enterprise-grade performance, is what makes us differentiated and beloved by more than 11,000 customers. We see an enormous opportunity ahead as we extend this value throughout the full data lifecycle.
Snowflake CEO Sridhar Ramaswamy
At the centre of the AI revolution
It’s worth noting that shortly after the results, CEO Sridhar Ramaswamy (who appears to be a very good operator) appeared on CNBC’s Mad Money show. Here, he told host Jim Cramer that customers are using Snowflake for critical functions such as fraud detection and that the company is right at the centre of the AI revolution.
Price target upgrades
Since the earnings, a number of analysts have raised their price targets for the stock. For example, analysts at D.A. Davidson have hiked their target price from $200 to $250. That new price target is about 28% above the current share price.
A high-risk, high-reward AI stock
Now, this stock has its risks, of course.
One I’m monitoring is competition from the likes of Databricks. I’ve heard this company’s data offering is top notch.
Another potential issue is an economic downturn. This could lead to lower spending on technology solutions.
Investors should also be aware that this stock is very volatile. It’s not well suited to those looking for portfolio stability.
If one has a long-term horizon, and is comfortable with share price volatility, however, I think it’s worth considering. This company is at the heart of the AI revolution and it has a lot of investment potential.
