Snowflake Raises Guidance as Product Revenue Growth Accelerates to 37%

Snowflake Inc. (NYSE: SNOW) reported stronger-than-expected financial results for the second quarter of fiscal year 2027, raising its full-year guidance on the back of accelerating product revenue growth. The data cloud company's performance, fueled by demand for its artificial intelligence offerings, sent its stock price surging over 18% in subsequent trading.

Strong Results and Raised Outlook

For the quarter ending in July, Snowflake announced results that significantly beat analyst consensus estimates. The company delivered a combination of accelerating growth and expanding profitability that markets tend to reward.

• Total Revenue: $1.55 billion, an increase of 35% year-over-year, compared to expectations of $1.48 billion.
• Product Revenue: $1.49 billion, up 37% from the prior year, marking the third consecutive quarter of accelerating growth.
• Adjusted EPS: $0.62, well ahead of the anticipated $0.45.
• Operating Margin: Non-GAAP operating margin expanded to 15.3%, up from 11% in the same quarter a year earlier.

Reflecting this momentum, Snowflake raised its full-year 2027 product-revenue guidance to $6.07 billion, up from its previous forecast of $5.84 billion. The company's guidance for third-quarter product revenue implies continued strong growth of approximately 37% to 38%.

AI Adoption Fuels Customer Spending

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The acceleration in revenue was largely attributed to growing adoption of the company's AI-related products, which reportedly accounted for about half of the incremental growth. This trend is also visible in customer spending patterns.

According to a report from Rosenblatt cited in the source, Snowflake posted a net revenue retention rate of 126%. This key metric indicates that existing customers increased their spending by an average of 26% over the past year, a strong signal of platform value and successful upselling.

Valuation and Risks in Focus

While the operational performance was strong, some metrics warrant caution and highlight the high expectations embedded in the company's valuation. Snowflake's shares have gained nearly 120% over the past six months, according to the source data from September 3, 2026.

One area of concern for investors is the growth in remaining performance obligations (RPO), which represents future revenue under contract. Total RPO grew 30%, a deceleration from the 38% growth reported in the prior quarter. Additionally, free cash flow reportedly missed consensus estimates, and the company remains unprofitable on a GAAP basis with a net margin of -23.8% as of April 30, 2026. This suggests that while top-line growth is impressive, the path to sustained profitability and cash flow consistency remains a key focus for the market.