Snowflake raises outlook after 37% product revenue growth

Snowflake reported second-quarter fiscal 2027 revenue of USD $1.55 billion and product revenue of USD $1.49 billion, and raised its full-year outlook for product revenue growth and non-GAAP operating margin.

Product revenue grew 37% from a year earlier, marking Snowflake's third straight quarter of faster growth. Total revenue rose 35%, and the net revenue retention rate was 126%.

Snowflake added 692 net new customers in the quarter, up 32% year on year, including 14 new Forbes Global 2000 customers. It ended the period with 829 Forbes Global 2000 customers and 828 customers generating more than USD $1 million in trailing 12-month product revenue, up 27% from a year earlier.

Profitability also improved on Snowflake's preferred measure. Non-GAAP operating income reached USD $237.0 million, for a non-GAAP operating margin of 15.3%, an expansion of more than 400 basis points from a year earlier.

On a GAAP basis, Snowflake posted an operating loss of USD $263.0 million, or a negative 17.0% margin. Product gross profit was USD $1.06 billion on a GAAP basis and USD $1.11 billion on a non-GAAP basis, with a non-GAAP product gross margin of 74.7%.

Cash generation was weaker than the top-line growth figures suggested. Net cash provided by operating activities was USD $91.4 million, free cash flow was USD $83.8 million, and adjusted free cash flow was USD $92.3 million.

Guidance raised

For the third quarter, Snowflake expects product revenue of USD $1.588 billion to USD $1.593 billion, representing year-on-year growth of 37% to 38%. It forecasts a non-GAAP operating margin of 15.5% for the quarter.

For the full year, Snowflake raised its product revenue target to USD $6.07 billion, implying 36% growth from a year earlier. That compares with previous guidance of USD $5.84 billion, or 31% growth.

Management also increased full-year non-GAAP operating margin guidance to 14.5% from 13.5%. The full-year outlook includes a non-GAAP product gross margin of 74.0% and a non-GAAP adjusted free cash flow margin of 23.0%.

Remaining performance obligations, a measure of contracted future revenue not yet recognised, rose 30% to USD $9.00 billion. Snowflake noted that this figure does not directly predict product revenue growth because customer consumption can vary widely over time.

AI products

Snowflake linked the quarter's momentum to adoption of its AI-related products and broader use of its data platform. CoCo surpassed 9,100 accounts after adding more than 2,000 in the quarter, while CoWork expanded to 5,800 accounts.

It launched more than 330 products to general availability in the first half of the fiscal year, up 35% from a year earlier. Snowflake also highlighted the introduction of Cortex Sense and Cortex AI Gateway, the latter extending its AI offering through the integration of Natoma.

Snowflake cited customer examples including 1Password, Indeed, and Sayari. It said Sayari cut costs by more than half and is using CoCo in the migration of 12 billion records.

Chief Executive Officer Sridhar Ramaswamy said the quarter reflected broad demand across both the core platform and AI-related services.

"Snowflake delivered another strong quarter, with product revenue of $1.49 billion, up 37% year-over-year, as Snowflake continues to power the enterprise AI revolution," said Sridhar Ramaswamy, Chief Executive Officer, Snowflake.

"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. Our rapid pace of innovation, tight go-to-market execution, and operational discipline position us well to capture the opportunity ahead. The Agentic Enterprise runs on Snowflake, and we're just getting started."

Chief Financial Officer Brian Robins said the results showed a balance between faster growth and margin expansion.

"Q2 marks our third consecutive quarter of product revenue growth acceleration, driven by strength in both our core data platform and a meaningful step-up in AI revenue," said Brian Robins, Chief Financial Officer, Snowflake.

"Importantly, we delivered this accelerating growth while expanding operating margin. Balancing growth with discipline remains a top priority, and we are raising our full-year product revenue growth guidance to 36% year-over-year."