Snowflake raises FY 2026 product revenue guidance to $4.395B as AI adoption accelerates
Aug. 27, 2025 8:24 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Snowflake Inc. (SNOW) Q2 2026
Management View- CEO Sridhar Ramaswamy emphasized strong execution and product innovation, stating "Snowflake has delivered yet another strong quarter...our core business remains very strong. And we continue to deliver product innovation to market at a rapid pace while strengthening our go-to-market motion for growth." He highlighted that "product revenue for Q2 was $1.09 billion, up a strong 32% year-over-year, demonstrating an acceleration in growth from last quarter." Ramaswamy reported that AI now influences "nearly 50% of new logos won in Q2," and 25% of all deployed use cases, with over 6,100 accounts using Snowflake's AI weekly.
- Ramaswamy detailed new product launches, including Snowflake Intelligence in public preview, Cortex AI SQL, Gen2 warehouses, Snowflake Postgres, OpenFlow (expanding into the $17 billion data integration market), and Snowpark Connect for Apache Spark. He noted, "In the first half of the year alone, we launched approximately 250 capabilities to general availability."
- CFO Michael P. Scarpelli stated, "In Q2, product revenue growth accelerated to 32% year-over-year... new features across all 4 product categories outperformed our expectations. With net new customer adds in the quarter up 21% year-over-year, it is clear that our new customer acquisition motion is yielding positive results." Scarpelli reported "Q2 non-GAAP product gross margin was 76.4%, non-GAAP operating margin was 11%... Q2, non-GAAP adjusted free cash flow margin was 6%."
Outlook- Scarpelli provided guidance for Q3, expecting "product revenue between $1.125 billion and $1.13 billion, representing 25% to 26% year-over-year growth. We expect non-GAAP operating margin of 9%." For the full fiscal year, "we now expect product revenue of $4.395 billion, representing 27% year-over-year growth. We expect non-GAAP product gross margin of 75%, non-GAAP operating margin of 9% and non-GAAP adjusted free cash flow margin of 25%."
- Management framed the outlook as supported by "contracted billings, a large renewal base and large deal volume in the pipeline."
Financial Results- Product revenue for Q2 was $1.09 billion, an increase of 32% year-over-year, with remaining performance obligations at $6.9 billion, up 33% year-over-year. Net revenue retention rate was reported as 125%.
- Non-GAAP operating margin increased to 11%. The company ended the quarter with $4.6 billion in cash, cash equivalents, short-term and long-term investments. Scarpelli highlighted, "$1 million-plus customers now total 654."
Q&A- Sanjit Kumar Singh, Morgan Stanley: Asked about the durability of growth after data modernization efforts. Ramaswamy responded, "data modernization is just the beginning of the journey... bringing those systems on to Snowflake is step one in value realization."
- Raimo Lenschow, Barclays: Inquired about new customer additions in Europe. Scarpelli: "Europe is still developing, but it's contributing. We are laying the groundwork there... bulk of those new customers are coming from the U.S."
- Karl Keirstead, UBS: Questioned Azure growth. Scarpelli: "Azure was our fastest-growing cloud. It actually grew 40% year-over-year."
- Kirk Materne, Evercore ISI: Asked about new product impact in guidance. Scarpelli: "Q2 surprised us on the upside. We knew it was going to be a strong quarter, but not as strong as it was, and that's just the nature of a consumption model."
- Aleksandr J. Zukin, Wolfe Research: Queried AI-related growth. Ramaswamy: "there is more and more recognition that the AI components of our data platform can deliver enormous value. And we are seeing budgets get allocated from large customers for AI projects."
- Questions also focused on professional services growth, expansion rate durability, competitive positioning against Databricks and hyperscalers, and product integration progress (e.g., Crunchy/Snowflake Postgres).
Sentiment Analysis- Analysts expressed a positive tone, congratulating management on accelerating product revenue and new customer adds, and repeatedly sought clarification on the durability of growth, AI adoption, and competitive differentiation.
- Management maintained a confident and disciplined tone in both prepared remarks and Q&A, often emphasizing operational rigor, innovation pace, and the broadening influence of AI. Ramaswamy frequently reinforced the long-term runway for growth and AI-driven opportunities.
- Compared to the previous quarter, both management and analysts displayed increased optimism and engagement, with more detailed discussion on AI monetization and platform expansion.
Quarter-over-Quarter Comparison- Product revenue growth accelerated from 26% year-over-year in Q1 to 32% in Q2. Net revenue retention improved from 124% to 125%.
- The number of net new customer adds increased from 451 (19% growth) in Q1 to 533 (21% growth) in Q2. The number of $1 million-plus customers saw a notable jump.
- Guidance for FY 2026 product revenue was raised from $4.325 billion (25% year-over-year growth) in Q1 to $4.395 billion (27%) in Q2. Operating margin guidance was increased from 8% to 9%.
- Management's tone shifted from strong and stable in Q1 to more assertively optimistic in Q2, particularly around AI's impact. Analyst questions in Q2 focused more on competitive landscape, AI monetization, and product differentiation, reflecting heightened interest in strategic direction.
Risks and Concerns- Management noted ongoing challenges in expanding European operations, with Scarpelli stating, "Europe is still developing, but it's contributing."
- Analysts probed the competitive threat from Databricks, hyperscalers, and new AI entrants, but management asserted Snowflake's leadership in AI data platforms.
- No material concerns were raised around customer health or optimization headwinds; management described customer consumption as strong and migration activity as robust.
- CFO transition remains pending, with Scarpelli noting, "We are making progress on our search, and we will make an announcement once we have more firm details to share."
Final Takeaway
Snowflake management highlighted a quarter marked by accelerating product revenue growth, increased customer wins, and rapid AI adoption across the customer base. The company raised its full-year revenue and margin guidance, driven by strong core business momentum and the expanding role of AI in enterprise data strategies. Leadership emphasized ongoing product innovation, operational efficiency, and disciplined execution as drivers of sustained high growth and continued margin expansion for the remainder of fiscal 2026.
Read the full Earnings Call Transcript |
