Snowflake Stock Soars Over 20% as AI Demand Fuels Earnings Beat and Stronger Forecast

Key Takeaways

• Snowflake shares surged more than 20% in extended trading after quarterly revenue and adjusted earnings exceeded Wall Street estimates.
• Fiscal second-quarter revenue increased 35% to $1.55 billion, while product revenue climbed 37% to $1.49 billion.
• Snowflake raised its fiscal 2027 product revenue forecast from $5.84 billion to $6.07 billion and increased its adjusted operating margin guidance.
• AI adoption is accelerating customer usage, but Snowflake’s continuing GAAP losses, stock-based compensation and premium valuation remain important risks.

Snowflake stock soared more than 20% in extended trading after the cloud-data company reported stronger-than-expected quarterly results and raised its full-year forecast, providing fresh evidence that artificial intelligence is generating meaningful revenue for enterprise software providers.

The company’s fiscal second-quarter revenue increased 35% year over year to $1.55 billion, exceeding the approximately $1.48 billion expected by analysts. Adjusted earnings reached $0.62 per share, comfortably above the $0.45 consensus estimate.

Product revenue, Snowflake’s most closely watched growth measure, rose 37% to $1.49 billion. Management said the quarter marked the third consecutive acceleration in product revenue growth, supported by both its core data platform and a substantial increase in AI-related usage.

The results sent Snowflake shares up more than 20% after Wednesday’s closing bell. The stock had already gained almost 40% in 2026 before the earnings release, according to Investopedia.

Snowflake Earnings Beat Wall Street Estimates

Snowflake exceeded expectations across its most important quarterly financial measures.

The company generated $237 million in adjusted operating income, equivalent to a 15.3% margin. That represented an improvement from the previous year and showed that Snowflake is gaining operating leverage while maintaining rapid revenue growth.

Snowflake’s GAAP results remained negative, although its losses narrowed. The company reported a GAAP net loss of approximately $191.7 million, compared with $297.9 million a year earlier. Its GAAP operating loss improved to $263 million from $340.3 million.

The combination of faster product growth and stronger adjusted profitability was particularly important for investors. High-growth software companies have faced increasing pressure to demonstrate that spending on AI products can eventually produce higher margins rather than simply increase infrastructure and development costs.

AI Products Drive Faster Platform Consumption

Snowflake’s AI products were responsible for approximately half of the recent acceleration in the company’s growth, CEO Sridhar Ramaswamy said during the post-earnings call.

The company’s coding assistant, CoCo, surpassed 9,100 active accounts after adding more than 2,000 during the quarter. CoWork, Snowflake’s enterprise AI assistant, expanded to approximately 5,800 accounts.

These products allow businesses to build AI applications and analyse proprietary information while keeping their data inside Snowflake’s governed cloud environment. That positioning has become increasingly valuable as companies seek to use generative AI without exposing confidential data or creating separate infrastructure for every model.

Snowflake also released more than 330 generally available product capabilities during the first half of fiscal 2027, an increase of 35% from the previous year. Recent additions included Cortex Sense, which helps AI systems understand business context, and Cortex AI Gateway, which connects enterprise data with automated actions.

Management said customers including 1Password and Indeed selected Snowflake to support their data and AI strategies. Sayari, a risk intelligence company, reportedly cut costs by more than half while using Snowflake’s AI tools to accelerate the migration of 12 billion records.

The rapid adoption suggests AI is creating additional workloads for Snowflake rather than replacing its traditional cloud-data business. As customers develop AI assistants, coding tools and automated business applications, those products consume more computing, storage and data-transfer capacity.

Customer Growth and Backlog Strengthen the Outlook

Snowflake added 692 net new customers during the quarter, 32% more than it added in the comparable period last year. The new accounts included 14 companies from the Forbes Global 2000.

The company finished the period with 829 Forbes Global 2000 customers. It also had 828 customers generating more than $1 million in trailing 12-month product revenue, an increase of 27% year over year.

Snowflake’s net revenue retention rate stood at 126%. This indicates that existing customers increased their spending by approximately 26% compared with the previous measurement period, after accounting for customers that reduced or stopped using the platform.

Remaining performance obligations rose 30% to $9 billion. RPO represents contracted revenue that has not yet been recognized, providing a useful indication of Snowflake’s future business pipeline.

However, Snowflake operates a consumption-based business model rather than a conventional fixed subscription model. Customers pay according to their use of computing, storage and data-transfer resources. Contracted commitments do not automatically translate into revenue on a fixed schedule because customers can adjust when and how quickly they consume capacity.

That structure gives Snowflake significant upside when customer workloads accelerate, but it can also create volatility when companies reduce cloud usage or delay technology projects.

Snowflake Raises Its Fiscal 2027 Forecast

The strength of the quarter prompted Snowflake to raise its full-year outlook by a substantial margin.

For the third quarter, Snowflake expects product revenue between $1.588 billion and $1.593 billion, representing annual growth of 37% to 38%. The midpoint is well above the approximately $1.50 billion analysts had previously forecast.

Snowflake also expects a third-quarter non-GAAP operating margin of 15.5%.

The $230 million increase in full-year product revenue guidance indicates that management expects the current momentum to continue rather than treating the second-quarter performance as a temporary surge.

The company is now forecasting 36% product revenue growth for the year, five percentage points above its previous projection. Snowflake also increased its adjusted operating margin outlook to 14.5% from 13.5%, demonstrating that higher AI consumption is expected to improve profitability.

The complete financial guidance and customer metrics were published in Snowflake’s fiscal second-quarter results filed with the SEC.

AWS Agreement Supports Snowflake’s AI Expansion

Snowflake recently signed a five-year, $6 billion agreement with Amazon Web Services covering access to AWS infrastructure, including Graviton processors and AI computing resources.

The agreement gives Snowflake additional capacity to support growing customer workloads while potentially improving the efficiency of its infrastructure spending. Cloud-computing costs are particularly important because Snowflake must purchase capacity from providers such as AWS, Microsoft Azure and Google Cloud before selling consumption to its customers.

Efficient infrastructure management will influence whether rising AI usage results in sustainable margin expansion. AI workloads can require substantially more computing power than traditional data queries, creating both a major revenue opportunity and a potential source of cost pressure.

Snowflake’s non-GAAP product gross margin was 74.7% in the second quarter, compared with approximately 76% a year earlier. Management expects the full-year figure to settle at 74%, suggesting that increasing AI activity may place modest pressure on gross margins even as it drives faster revenue growth.

Why Did Snowflake Stock Jump More Than 20%?

The rally reflected more than a routine earnings beat. Snowflake delivered the combination investors were seeking: accelerating revenue, expanding AI adoption, stronger customer growth and improving adjusted profitability.

The results also challenged concerns that generative AI could weaken established enterprise software businesses. Snowflake is showing that AI applications require organized, secure and accessible business data, potentially increasing demand for the company’s underlying platform.

Unlike companies attempting to monetize standalone chatbots, Snowflake earns revenue as customers use its infrastructure to build and operate their own AI tools. Higher query volumes, model development and automated AI agents can therefore increase platform consumption.

The stronger forecast gives investors greater confidence that AI demand is already affecting Snowflake’s financial performance rather than representing only a long-term opportunity. Product growth has now accelerated for three consecutive quarters, while the $9 billion backlog points to continued enterprise spending.

Profitability and Valuation Remain Key Risks

Despite the strong adjusted results, Snowflake is not yet profitable under generally accepted accounting principles.

Stock-based compensation-related charges totaled approximately $456 million during the quarter, equivalent to about 29% of revenue. Excluding these and other items produced adjusted operating income of $237 million, while including them resulted in a GAAP operating loss of $263 million.

The difference means investors must determine how much weight to place on adjusted earnings. Stock-based compensation does not require an immediate cash payment, but it can dilute existing shareholders when new shares are issued to employees.

Valuation is another risk following the stock’s sharp advance. Snowflake trades at a substantial multiple of projected revenue, leaving the shares vulnerable if product growth slows or future guidance fails to exceed elevated expectations.

Competition is also intensifying. Microsoft, Amazon and Google are expanding their cloud-data and AI platforms, while privately held Databricks has become a major competitor in analytics and enterprise AI. Snowflake must continue launching new products while controlling infrastructure costs and maintaining customer loyalty.

What Comes Next for Snowflake Stock?

The next test will be whether Snowflake can achieve its forecast of up to 38% product revenue growth in the third quarter.

Investors will monitor CoCo and CoWork adoption, growth among million-dollar customers and the company’s net revenue retention rate. Continued expansion in these indicators would suggest that AI is producing durable consumption rather than short-lived experimentation.

Margins will be equally important. Faster AI adoption would be less valuable if computing costs rise more quickly than revenue. Snowflake’s ability to maintain a product gross margin near 74% while expanding its operating margin will therefore remain central to the investment case.

The earnings report provides strong evidence that Snowflake has become a significant beneficiary of enterprise AI spending. However, after a gain of more than 20%, future upside will depend on whether the company can sustain its accelerating growth while narrowing GAAP losses and delivering the profitability implied by its premium valuation.