Snowflake (SNOW) shares are up almost 40% year over year and roughly year to date, with a big lift from the Q1 earnings report. The stock has doubled in about 4 months. It trades near $316. Earnings are due tonight, and expectations sit very high, leaving no room for error.
What the print needs to show
The market is pricing SNOW for perfection. Investors want proof that product revenue growth keeps speeding up. The company guided to 30% product revenue growth this quarter. The buy side likely expects about 35%, but 35% probably will not be enough - the number needs to come in higher. Q3 has hard year-over-year comparisons, so Q4 is the quarter drawing the most attention, and product revenue growth there needs to be closer to 40%. The core question: are the AI products SNOW is building actually leading to higher revenue?
The main revenue driver in the second half is Cortex code. Investors want fresh detail on Cortex and want the company to guide second-half revenue to reaccelerate.
Lessons from other software prints
A beat and raise may not be enough. MongoDB (MDB) reported the prior night, beat and raised, yet fell double digits - down 10%. The drop was not about the numbers themselves but about high investor sentiment going into the report. SNOW faces the same risk given how large its own potential beat and raise is.
Cloudflare (NET) offers a positive read for SNOW. Its AI agent usage rose 50% quarter over quarter, and net users on its profile roughly doubled this year over last year. That points to real, growing AI demand.
Training phase to inference phase
The AI economy is shifting from the training phase to the inference phase. In the training phase, the winners were narrow: semiconductors, memory, networking equipment, and optical makers. Those remain investable and should stay in play through the inference phase. But the set of winners widens in the inference phase, where AI agents run in the background of workflows. That opens the door for software companies that were beaten down for a long time to do well, with SNOW a leading example. The current game is picking the winners and losers across software. The sector sold off hard early in the year, then recovered, helped by earnings.
An example options trade
Expectations run high, so hitting the numbers, beating on guidance, and giving a solid outlook on EPS and revenue might still not be enough. The option market prices a move of plus or minus about 11% either direction, roughly $36 on a one-day basis. Because SNOW is a high-priced stock near $316, that shapes the trade choice.
A short-term, neutral-to-bullish put vertical lets you take a directional bias without being aggressive, using leverage and better odds. The trade uses the September 4th weekly options, expiring in two days. Sell the out-of-the-money 280 strike put and buy the 270 strike put - a short $10-wide put vertical. It collects about a $2.30 credit, so $230 per spread, with about $770 in risk.
The break-even sits at 277.70, over 12.5% below the current price, outside the one standard deviation range the option market is pricing. The 280 strike you sold has about a 78% probability of finishing above 280 - out of the money - at Friday's close, which is the goal. You risk far more than you can make, but the trade is passively bullish: if the stock rises, holds flat, or even drops while staying above 277.70, it stays profitable. After the big run-up, this structure takes advantage of the higher implied volatility going into the report. Software is showing some softness into the print, with MDB down 10%.
