AI Boosts Snowflake Revenue
Snowflake Raises 2027 Outlook as AI Demand Drives Strong Earnings
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Key Points
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Cortex Code now serves 9,100 accounts, and CoWork's enterprise chatbot has expanded to 5,800 accounts, with more than 2,000 CoWork customers added in the quarter.
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CEO Sridhar Ramaswamy said AI offerings account for about half of Snowflake's growth acceleration.
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Remaining performance obligations reached about $9 billion, signaling strong future revenue bookings.
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Snowflake's adjusted operating margin expanded to 14.5% in the quarter, up from 10% a year earlier, highlighting profitability improvements as it scales.
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The company posted non-GAAP EPS of $0.62, beating consensus of $0.45, while GAAP net loss was $0.55 per share.
Snowflake exceeded Wall Street expectations in its second quarter, posting $1.55 billion in total revenue and raising its full-year product revenue outlook to $6.07 billion. The cloud data platform's AI-powered tools — including Cortex Code and CoWork — now serve over 14,500 customer accounts, with SiliconANGLE reporting the company's adjusted operating margin expanded to 15.3%, up sharply from 10% a year earlier.
CEO Sridhar Ramaswamy told investors that AI offerings account for approximately half of Snowflake's recent growth acceleration, creating what he called a 'flywheel effect across the business.' The earnings beat and raised guidance sent shares surging more than 20% in after-hours trading, with Seeking Alpha noting the stock reached $379.07 in premarket trading, past its 52-week high of $341.95.
AI Tools Drive Half of Growth Acceleration
Snowflake's AI-native products are transforming customer adoption patterns. Cortex Code now serves 9,100 accounts, with more than 2,000 new customers added in the quarter alone. CoWork, an enterprise chatbot, expanded to 5,800 accounts, adding over 2,000 customers in Q2. Ask Traders reported that these first-party AI tools account for roughly half of Snowflake's growth surge.
The company's total customer base reached 14,554 accounts, with 692 net new customers in the quarter. Importantly, customers spending more than $1 million climbed to 828. Net Revenue Retention hit 126%, signaling strong upsell momentum as existing customers expand their use of AI-powered features across the platform.
Earnings Beat Crushes Expectations Across All Metrics
Product revenue jumped 37% year over year to $1.49 billion, beating consensus estimates of 35% growth. The company delivered non-GAAP earnings per share of $0.62, crushing the consensus forecast of $0.45. Seeking Alpha highlighted that the beat extended to guidance, with Snowflake raising full-year product revenue to $6.07 billion, up from prior guidance of $5.84 billion.
GAAP profitability remains in the red, but losses are shrinking fast. Q2 showed a net loss of $191.7 million ($0.55 per share), down sharply from a $297.9 million loss a year prior. Management signaled that adjusted operating margins will reach 14.5% for the full year, up from 13.5% guidance, and reaffirmed a path to GAAP profitability by the fourth quarter of fiscal 2028.
Remaining Bookings Signal Strong Future Revenue Pipeline
Remaining Performance Obligations — a measure of signed contracts not yet recognized as revenue — reached $9.0 billion, up 30% year over year. This metric confirms that enterprise customers are committing to multi-year deals at a growing pace. TradingView reported this strong backlog provides visibility into Snowflake's growth trajectory well into 2027 and 2028.
The company's ability to scale margins alongside growth demonstrates operating leverage from AI adoption. CFO Brian Robins emphasized that 'balancing growth with discipline remains a top priority' as Snowflake expands margins while maintaining accelerating product revenue. Wall Street responded with bullish price target upgrades from Cantor Fitzgerald ($405), Citigroup ($395), and KeyBanc ($375).
AI Reshapes Enterprise Software Economics
Analysts highlight a critical dynamic: AI tools are not cannibalizing existing software spend. Instead, they're expanding customer adoption of Snowflake's core data warehouse and compute capabilities. D.A. Davidson noted that enterprises are building AI workflows that require deeper integration with data infrastructure, driving broader platform reliance.
This contrasts sharply with earlier concerns that generative AI agents would disrupt enterprise software demand. The strong results from Snowflake, Salesforce, and Workday in recent quarters suggest AI is instead expanding the total addressable market. The company's massive five-year, $6 billion infrastructure deal with AWS — secured prior to Q2 — further signals Snowflake's confidence in scaling AI-driven consumption at enterprise scale.
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