Snowflake shares surged Thursday after the cloud data company delivered second-quarter results well above Wall Street expectations, accelerated product revenue growth for a third consecutive quarter and raised its fiscal 2027 outlook as enterprise spending on artificial intelligence drove more activity across its platform.
The company reported adjusted earnings of $0.62 per share for the quarter ended July 31, easily topping the $0.45 expected by analysts surveyed by LSEG. Revenue climbed 35% from a year earlier to $1.55 billion, also beating the $1.48 billion consensus estimate.
Investors responded aggressively. Snowflake had closed Wednesday at $305.84, down 4.4% during the regular session, before jumping more than 20% in extended trading after the report. Shares remained sharply higher Thursday and finished around $356.56, a gain of roughly 17% from Wednesday’s close.
The rally reflects more than a conventional earnings beat. Snowflake’s core product revenue reached $1.49 billion, up 37% year over year and well above the $1.415 billion to $1.420 billion range management had forecast three months earlier.
Growth has also been accelerating rather than slowing. Product revenue increased 30% in Snowflake’s fiscal fourth quarter, 34% in the first quarter and 37% in the latest period.
Chief Financial Officer Brian Robins called the quarter Snowflake’s third consecutive period of accelerating product revenue growth, citing strength in both the company’s traditional data platform and a larger contribution from AI-related workloads.
That acceleration matters for investors because Snowflake operates primarily on a consumption model. Customers pay based largely on how much computing and storage capacity they actually use, meaning increasing product revenue can provide a relatively direct signal that enterprises are putting more workloads onto the platform.
Snowflake Raises Full-Year Growth Forecast
Management increased its fiscal 2027 product revenue forecast to $6.07 billion, representing 36% growth from the previous year.
The company had previously expected $5.84 billion of product revenue, or approximately 31% growth. Snowflake therefore raised its annual product revenue outlook by $230 million while also increasing its expected growth rate by five percentage points.
Profitability expectations improved alongside the revenue forecast.
Snowflake now expects a full-year non-GAAP operating margin of 14.5%, up from its previous 13.5% target. Management maintained its forecast for a 23% adjusted free-cash-flow margin.
The third-quarter outlook was also stronger than analysts had been expecting.
Snowflake forecast product revenue between $1.588 billion and $1.593 billion, representing year-over-year growth of 37% to 38%. StreetAccount’s consensus had been around $1.50 billion.
Management also expects a third-quarter adjusted operating margin of 15.5%.
If Snowflake reaches the high end of that product revenue growth range, it would extend the acceleration investors have seen over the past several quarters rather than immediately reverting to slower growth.
AI Is Starting to Show Up in Snowflake’s Numbers
Snowflake’s AI products have moved beyond being primarily a future-growth story and are beginning to contribute more visibly to platform consumption.
CEO Sridhar Ramaswamy said during the company’s earnings call that AI products were responsible for approximately half of Snowflake’s recent growth acceleration, with the remainder coming from increased use of the core data platform.
CoCo, Snowflake’s AI coding agent, surpassed 9,100 accounts during the quarter after adding more than 2,000 accounts in three months. CoWork, the company’s AI agent designed for business users, reached about 5,800 accounts.
Snowflake also launched more than 330 product capabilities into general availability during the first half of fiscal 2027, a 35% increase from a year earlier. New offerings include Cortex Sense and Cortex AI Gateway, which are aimed at helping enterprises bring additional business context, governance and AI-agent activity onto Snowflake’s platform.
The company added 692 net new customers during the quarter, 32% more than it added a year earlier. Fourteen of those additions were members of the Forbes Global 2000.
Snowflake ended the quarter with 828 customers generating more than $1 million each in trailing 12-month product revenue, up 27% year over year. Its net revenue retention rate was 126%, indicating that the existing customer base continued to expand its spending with Snowflake even after accounting for customers that reduced or stopped usage.
Remaining performance obligations reached $9 billion, up 30% from a year earlier. RPO represents contracted revenue that has not yet been recognized, although Snowflake cautions that the metric does not perfectly predict future product revenue because customers can vary when and how much capacity they consume.
Margins Are Improving, but AI Creates a New Trade-Off
Snowflake’s adjusted operating performance improved substantially during the quarter.
Non-GAAP operating income increased to approximately $237 million, producing an operating margin of about 15%, compared with $127.6 million and an 11% margin a year earlier.
The improvement gives Snowflake greater room to invest in AI while still demonstrating operating leverage as revenue grows.
There is a trade-off, however.
Snowflake reduced its expected full-year non-GAAP product gross margin to 74%, compared with the 75% forecast it issued after the first quarter. Management attributed the change to a larger mix of fast-growing AI workloads, which currently carry lower contribution margins than Snowflake’s traditional data-platform business.
That gives investors an important metric to watch as AI becomes a larger percentage of Snowflake’s revenue. Faster AI adoption can increase total consumption and revenue, but the company will eventually need to demonstrate that those workloads can scale efficiently enough to preserve or improve long-term profitability.
Snowflake Remains Unprofitable Under GAAP
Snowflake’s adjusted results were strong, but the company remains in the red under generally accepted accounting principles.
Its quarterly net loss narrowed to $191.7 million, or $0.55 per share, from $297.9 million, or $0.89 per share, a year earlier.
The GAAP operating loss improved to approximately $263 million from $340.3 million.
Stock-based compensation remains a major difference between Snowflake’s GAAP and adjusted results. Stock-based compensation-related charges totaled approximately $456.4 million during the quarter, compared with $436.2 million a year earlier.
Those charges represented about 29% of revenue, however, down from 39% in the prior-year quarter as Snowflake’s revenue base expanded more quickly than compensation costs.
Free cash flow remained positive. Snowflake generated $83.8 million in free cash flow and $92.3 million in adjusted free cash flow during the quarter, producing margins of approximately 5% and 6%, respectively.
The contrast between GAAP losses and improving adjusted profitability remains relevant when evaluating the stock, particularly after a large earnings-driven rally.
Snowflake Rally Spreads Across Software Stocks
Thursday’s reaction extended beyond Snowflake.
Software stocks broadly rallied as investors viewed the company’s accelerating consumption as evidence that enterprise AI spending is increasingly reaching software platforms rather than remaining concentrated entirely in semiconductor and data-center infrastructure companies.
ServiceNow, Salesforce and Adobe were among software names that traded higher following Snowflake’s results, while the iShares Expanded Tech-Software Sector ETF rose more than 3% during Thursday’s session.
Wall Street analysts also responded quickly. At least 34 brokerages raised their Snowflake price targets following the report, according to Reuters, with several analysts citing stronger AI-driven consumption and accelerating platform growth. Wells Fargo’s new $525 target was among the highest.
That enthusiasm comes with a higher bar.
Snowflake entered the earnings report already up roughly 39% for the year, and Thursday’s surge pushed the valuation substantially higher. The company now needs to deliver against forecasts that assume product revenue can continue growing in the mid-30% range while operating margins expand.
What Snowflake Investors Should Watch Next
The third quarter will provide an immediate test of whether Snowflake’s recent acceleration is sustainable.
Management is forecasting 37% to 38% product revenue growth, meaning another strong consumption quarter would support the argument that AI is creating additional workloads rather than simply shifting spending away from Snowflake’s existing products.
CoCo and CoWork adoption will be important, but investors should also watch whether those products lead customers to consume more of Snowflake’s underlying data infrastructure. Management has argued that AI creates a flywheel in which new AI workloads increase demand for the company’s core data platform.
Margins will be equally important. The 14.5% full-year adjusted operating-margin forecast shows Snowflake expects better operating efficiency, but the reduction in product gross-margin guidance shows that rapidly expanding AI workloads are not yet as profitable as the company’s established business.
Net revenue retention, remaining performance obligations and the number of customers spending more than $1 million annually will provide additional evidence about whether enterprise customers are increasing their long-term commitments.
Snowflake’s second quarter gave investors what they had been demanding from an AI-focused software company: faster revenue growth, higher guidance, improving adjusted profitability and measurable adoption of new AI products.
The next test is whether the company can maintain that growth as expectations rise with its stock price—and whether the AI workloads driving more consumption can eventually become as financially attractive as the data-platform business that built Snowflake in the first place.