Snowflake
SNOW · NYSESoftware · Data Cloud & AI
Since the Report + 14.2%
Close on Report DaySep 2
$305.84▲ 23.1%Report-Day Move
- Market Cap(Today)
- ≈ $121 B
- 1Y Return(At Report)
- + 46%
- P/E($1.68 · Trailing 12M)
- 207.9
- Net Margin(Trailing 12M)
- 20.1%
Snowflake beat expectations in the second quarter with $1.49 billion in product revenue as growth accelerated for a third straight quarter to 37% year-over-year, and the company raised its full-year product revenue target to $6.07 billion. This beat-and-raise quarter, driven by AI consumption, was met with enthusiasm and the stock jumped roughly 23% after hours. The question from here is how much of this growth converts into profit and cash while the non-GAAP operating margin is still at 15%.
Product Revenue
$1.49B
▲ 37% YoY · Third-Quarter Acceleration
Total Revenue
$1.55B
Estimate $1.48B · Beat by 4.4%
Adjusted EPS
$0.62
Estimate $0.45 · Beat by 38.7%
Net Revenue Retention
126%
Existing Customer Expansion
Remaining Perf. Obligations
$9.00B
▲ 30% YoY · Demand Visibility
Stock Reaction
▲23%
After Hours · Guidance Raised
Quarterly Revenue ($ Billion)
1.09
1.16
1.23
1.33
1.49
1.588 – 1.593
- Q2 26
- Q3 26
- Q4 26
- Q1 27
- Q2 27
- Q3 27E
- Product Revenue Growth
- ▲ 37%34% in Q1, 30% in Q4
- $1M+ Customers
- 828▲ 27% YoY
- Product Gross Margin (Non-GAAP)
- 74.7%Product Basis
Q3 FY2027 Company Guidance
- Product Revenue (Q3)1.588 – 1.593 billion
+37.5% YoY · Acceleration ContinuesStrong Growth ▲
- Product Revenue (Full Year)6.07 billion
Prior $5.84B · +36% YoYRevised Up ▲
- Operating Margin (Non-GAAP, FY)14.5%
Prior Target 13.5%Revised Up ▲
The blue band is the company's low–high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. Axis is ±0.2% around the midpoint.
- Adjusted Free Cash Flow
- $92.3MQuarter · 6.0% Margin
- Operating Margin (Quarter)
- 15.3%11.0% Year Ago
- FY27 Product Revenue Target
- $6.07BRevised Up · +36%
“AI continues to compound our advantages, creating a flywheel effect across the business. CoWork and CoCo are driving transformational outcomes for our customers, while fueling rapid adoption, user growth, new workloads, and overall platform consumption.”
- AI flywheel effect
- CoWork and CoCo adoption
- Consumption accelerating
Summary
Snowflake closed the second quarter with a strong beat. Product revenue rose 37% year-over-year to $1.49 billion, and growth accelerated for a third straight quarter after prints of 34% and 30% in the prior two. Total revenue of $1.55 billion beat the roughly $1.48 billion consensus by 4.4%, and adjusted earnings per share came in at $0.62, 38.7% above the $0.45 estimate. Remaining performance obligations (RPO) grew 30% year-over-year to $9 billion, and the net revenue retention rate held at 126%. The company pointed to AI consumption as the engine of the growth.
The market's reaction was enthusiastic: the stock jumped about 23% in after-hours trading to around $376, even though it had closed the regular session down about 4.4% at $305.84. The trigger was not just the quarter itself but the raised outlook: the company lifted its full-year product revenue target to $6.07 billion (up 36% year-over-year) from the prior $5.84 billion, and raised its adjusted operating margin target to 14.5% from 13.5%. One analyst called the results a thing of beauty. Notably, the after-hours price already exceeded the average analyst target of $331.66; upward revisions to targets are expected.
Our overall view is positive. The quarter itself was nearly flawless: revenue and earnings beat, growth accelerated, guidance was raised, and operating margin expanded more than 4 points year-over-year. Our score reflects that strength. The balance investors should keep in mind is that the company is still unprofitable on a GAAP basis (−$0.55 per share in the quarter) and the adjusted operating margin remains relatively low at 15% — meaning growth is exceptional but the conversion to profit is still early. Free cash flow was just 6% of revenue. What to watch from here is whether AI consumption can sustain this momentum and how quickly growth converts into margin expansion.
Full Review
ClaudeProduct revenue growth has accelerated for three quarters.
Snowflake's most important operating metric is product revenue, and it reached $1.49 billion this quarter, up 37% year-over-year. What matters is the direction more than the level: growth was 30% and 34% in the prior quarters and is now 37%, an acceleration for a third straight quarter. In a consumption-based model this is a very valuable signal; customers are using the platform more intensively. Net revenue retention of 126% shows existing customers are expanding their spend, and the number of customers generating $1 million or more in trailing product revenue rose to 828 (up 27% year-over-year). The company emphasized that AI workloads are the main force behind this momentum.
Beat on the quarter, and a raise on the outlook.
The strongest message of the quarter came from guidance. The company lifted its full-year (FY2027) product revenue target to $6.07 billion (up 36% year-over-year) from the prior $5.84 billion (up 31%) — a strong mid-year upward revision. The adjusted operating margin target was also raised to 14.5% from 13.5%. The third-quarter product revenue range is $1.588–1.593 billion, implying roughly 37.5% year-over-year growth, meaning the acceleration is expected to continue. This kind of beat-and-raise combination in a consumption-model company is the most concrete evidence that demand visibility is strengthening, and it is the main reason for the sharp move up in the stock.
AI consumption is creating a flywheel effect.
CEO Sridhar Ramaswamy said AI continues to compound the company's advantages and is creating a flywheel effect across the business. He noted that its CoWork and CoCo products are driving transformational outcomes for customers, which in turn fuels rapid adoption, user growth, new workloads and overall platform consumption. The core of Snowflake's thesis is this: as AI applications run, more data is processed; as more data is processed, platform consumption rises; and as consumption rises, revenue grows. This quarter's three-quarter acceleration is a sign the loop is genuinely starting to spin. As investor Brad Gerstner noted, the company has gone from $1 billion of revenue in 2021 to $6 billion today, with growth still accelerating.
Margins are expanding, but profit conversion is early.
Adjusted operating margin rose to 15.3%, up from 11.0% a year ago, an expansion of more than 4 points. Improving profitability as scale grows is a positive trend. But the other half of the picture warrants caution: on a GAAP basis the company is still losing money, at −$0.55 per share in the quarter, most of which comes from high stock-based compensation. Adjusted free cash flow was $92.3 million, just 6% of revenue — a relatively low cash conversion for a high-growth software company. So while the growth story is exceptional, how quickly that growth converts into sustainable profit and free cash flow is the key balance for investors to watch.
The stock already cleared the average target.
The roughly 23% after-hours jump carried the stock to around $376, above the average analyst target of $331.66. This shows the consensus targets lagged the quarter's results; indeed, new and higher targets began arriving immediately after the report. That confirms the strength of the story but also carries a warning: the stock is pricing in a near-perfect growth scenario. The valuation multiple on adjusted earnings remains quite high, so any slowdown in growth ahead could trigger a sharp reaction. Momentum is strong near term, but entry price and expectation levels matter more than ever in this name.
Strengths
6- Product revenue rose 37% year-over-year to $1.49 billion, with growth accelerating for three quarters
- Full-year product revenue target raised to $6.07 billion from $5.84 billion; margin target to 14.5% from 13.5%
- Net revenue retention of 126%; RPO up 30% year-over-year to $9 billion
- Adjusted operating margin expanded more than 4 points year-over-year to 15.3%
- Adjusted EPS of $0.62 beat the $0.45 estimate by 38.7%
- AI consumption (CoWork, CoCo) is fueling new workloads and platform usage
Risks
5- Still unprofitable on a GAAP basis; −$0.55 per share in the quarter, mostly from high stock-based comp
- Adjusted free cash flow just 6% of revenue; profit conversion is still early
- Stock cleared the average analyst target after hours; the valuation multiple is very high
- Near-perfect growth is priced in; a small slowdown ahead could trigger a sharp reaction
- The consumption-based model is directly sensitive to any tightening in enterprise budgets
What to Watch
4- Third-quarter results ~November 2026; product revenue target $1.588–1.593 billion (up 37.5% YoY)
- Clarity on the adoption and consumption contribution of AI products (CoWork, CoCo)
- Progress toward the full-year $6.07 billion product revenue target
- Post-earnings upward revisions to analyst price targets
Upcoming Earnings
To Understand This