SNOW
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Q4 FY2026: SBC Compression + Record Bookings Shift One Signal
Q4 FY2026 beat expectations with 30% product revenue growth, $9.77B RPO (+42%), and SBC declining from 41% to 34% with FY27 guidance at 27%. EXPECTATIONS_PRICED reclassified from STRETCHED to DEMANDING as collective execution probability improved to 22-28%. All other signals confirmed — AI revenue still undisclosed, competitive landscape unchanged.
Read the full analysis"Snowflake's Q4 FY2026 showed record execution (30% revenue, 42% RPO growth, SBC declining 41%→34%→27% guided) but AI revenue remains undisclosed and Databricks has surpassed it on ARR. Is the SBC compression trajectory enough to close the narrative-reality gap?"
Snowflake is a cloud data platform with 30% product revenue growth, $9.77B in RPO (+42%), and 733 customers spending $1M+ annually. SBC declined from 41% to 34% of revenue with FY27 guidance at 27%, narrowing the GAAP/non-GAAP gap. NRR has stabilized at 125% for 4 consecutive quarters. However, AI-specific revenue remains undisclosed, Databricks has surpassed Snowflake on ARR while growing ~2x faster, and insiders have sold ~$400M+ over 18 months with zero discretionary purchases.
Executive Summary
Cross-lens roll-up assessment
Q4 FY2026 update: Snowflake delivered its strongest quarter — 30% revenue growth (beating 27% guide), $9.77B RPO (+42%), record $400M+ deal, and SBC declining from 41% to 34% (guided 27% FY27). EXPECTATIONS_PRICED reclassified from STRETCHED to DEMANDING as collective execution probability improved to 22-28%. However, all other signals held: AI revenue remains undisclosed (CFO deflected when asked), competitive landscape unchanged (Databricks/Fabric headwinds operative), SBC-adjusted FCF still negative even at FY27 guidance, and insiders show zero discretionary buying. The SBC trajectory is the most material positive development — if 27% holds, it directly addresses the single most reinforced concern across all 5 lenses.
Snowflake's underlying business has genuine strengths (29% growth, $7.9B RPO, 688 $1M+ customers, diversified base). However, the convergence of five independent analytical lenses on the SBC/dilution structural concern (5/5), intensifying competitive dynamics (3/5), NRR decline at 2-3x peer rates (4/5), and complete absence of insider conviction (MISALIGNED) warrants HIGHER_SCRUTINY rather than PROCEED_WITH_CAUTION. The valuation requires simultaneous multi-dimensional success at 15-20% collective probability, and the narrative-reality gap on AI is materially wider than typically observed. De-escalation triggers: NRR stabilization above 125% for 4+ quarters, SBC below 28% of revenue sustained, AI revenue showing 50%+ QoQ growth, CEO or CFO discretionary purchases.
Key Takeaways
- •NARRATIVE_REALITY_GAP is DIVERGING -- AI represents 2.3% of product revenue ($100M ARR vs $4,446M guided total) despite management positioning Snowflake as 'center of today's AI revolution.' NRR declined 33 points (158% to 125%) contradicting the AI-drives-expansion narrative.
- •EXPECTATIONS_PRICED reclassified to DEMANDING (from STRETCHED) -- Q4 FY2026 revenue re-accelerated to 30% with RPO at $9.77B (+42%), SBC declined to 34% (guided 27% FY27), and adjusted FCF margin of 25.5% contradicted deterioration narrative. Collective execution probability revised from 15-20% to 22-28%. Valuation still requires multi-dimensional success but two of four pillars (growth, SBC) now show concrete progress.
- •ACCOUNTING_INTEGRITY is CONCERNING -- SBC of $1.5B (40.8% of revenue, 154% of OCF) creates a 38pp GAAP/non-GAAP margin gap; SBC-adjusted FCF is negative ($225M-$656M); shares outstanding increased 8.1M despite $3.25B in buybacks. Revenue recognition itself is clean and consumption-based.
- •COMPETITIVE_POSITION is CONTESTED -- Databricks surpassed Snowflake on ARR ($4.8B vs ~$4.4B) growing ~2x faster; Fabric at $2B+ ARR with 80% Fortune 500; multi-cloud neutrality narrowed to near-zero vs Databricks; Iceberg open standards undermine data gravity moat. Position sits at CONTESTED-ERODING boundary (~60/40).
- •REVENUE_DURABILITY is CONDITIONAL -- consumption-based revenue backed by $7.9B RPO and diversified across 12,600+ customers, but conditional on NRR remaining above ~115%, cloud COGS staying below ~75%, and maintaining competitive relevance against Databricks/Fabric.
- •GOVERNANCE_ALIGNMENT is MISALIGNED -- ~$400M in insider selling with zero discretionary purchases over 18 months; CEO's only purchase was contractually required per offer letter; no insider bought during two separate 20%+ pullbacks. Procedural compliance via 10b5-1 plans prevents escalation to CAPTURED.
Key Tensions
- •The SBC-dilution-buyback cycle is the defining financial characteristic: the company borrows ($2.3B convertible notes) to buy back SBC-driven dilution, but net dilution persists — creating a fundamental question about who captures the value of genuine business growth
- •RPO acceleration (37% YoY) coexists with revenue deceleration (32% to 27% Q4 guide) — RPO reflects sales execution while revenue reflects consumption patterns, and the two have decoupled in FY2026
- •AI may simultaneously be a real long-term growth vector (E1), currently immaterial to financials (E3, 2.3% of revenue), and structurally margin-dilutive (cloud COGS rose 64% to 72%) — a single quarter of data is insufficient to resolve this
- •Governance procedures appear functional (PwC clean audit, effective ICFR) while insider behavior signals clear misalignment (zero conviction buying) — both observations are valid within their scope
Myth Meter
Is sentiment detached from reality?
Key Metrics
Key FindingsClick to expand details
Signal AssessmentsClick for full context
| Signal | Scale | Assessment | Evidence |
|---|---|---|---|
Narrative-Reality Gap | — | DIVERGING | 3Triangulated |
Expectations Priced | — | DEMANDING | 3Triangulated |
Model Debates
Cross-Lens Insights
Where Lenses Agree
- SBC/Dilution Complex Is the Defining Structural Concern (5/5 lenses)
- NRR Decline Signals Multiple Simultaneous Risks (4/5 lenses)
- Competitive Position Is Actively Deteriorating (3/5 lenses)
- Data Breach Litigation Is an Unquantifiable Tail Risk (3/5 lenses)
Where Lenses Differ
RPO_INTERPRETATION
RPO simultaneously provides long-term contractual backlog visibility and fails as a near-term revenue predictor in a consumption-based model.
GOVERNANCE_ALIGNMENT
These lenses examined different governance facets. Procedures are functional; insider behavior is misaligned. Both observations are correct within their scope.
AI_GROWTH_VS_MARGIN_DILUTION
AI may simultaneously be a real long-term growth vector, currently immaterial to financials, and structurally margin-dilutive — a genuine uncertainty, not a resolvable tension.
The following publicly available documents were collected and extracted into a structured fact dossier that powered this analysis.
SEC Filing
- Current Report (8-K) — Q4 FY2026 Earnings (2026-02-25)
- Annual Report (10-K) — FY2025
- Quarterly Report (10-Q) — Q3 FY2026
- Quarterly Report (10-Q) — Q2 FY2026
- Quarterly Report (10-Q) — Q1 FY2026
- Quarterly Report (10-Q) — Q3 FY2025
- Current Report (8-K) — Q3 FY2026 Earnings
- Current Report (8-K) — Q2 FY2026 Earnings
- Current Report (8-K) — Q1 FY2026 Earnings
- Current Report (8-K) — Q4 FY2025 Earnings
- Proxy Statement (DEFA14A) — 2025
Earnings Transcript
- Q4 FY2026 Earnings Call Transcript
- Q3 FY2026 Earnings Call Transcript (Summary)
- Q2 FY2026 Earnings Call Transcript (Summary)
- Q1 FY2026 Earnings Call Transcript (Summary)
Research Document
- Bear Case Valuation Analysis
- Competitive Landscape Analysis
- Data Breach Litigation Summary
- Insider Activity Analysis
- Observe Acquisition Analysis
- SBC Profitability Analysis