Snowflake Earnings Show AI MomentumSnowflake, Inc.BATS:SNOWmoonyptoSnowflake’s growth acceleration is starting to look more like a trend than a one quarter jump Product revenue grew 37% Y/Y to $1.49 billion, accelerating from 34% last quarter and 30% two quarters ago. Total revenue increased 35% Y/Y to $1.55 billion, beating estimates by $70 million, while nonGAAP EPS came in at $0.62, $0.17 above expectations Management also raised FY27 product revenue guidance by $230 million to $6.07 billion, pushing expected growth to 36% Y/Y Looking at the bigger picture, Snowflake’s FY27 product revenue growth outlook has gone from 27% to 31% to 36% in just six months. And the momentum may not be slowing. Q3 guidance calls for 37% to 38% product revenue growth, slightly ahead of Q2 CEO Sridhar Ramaswamy said AI products directly account for roughly half of Snowflake’s recent growth acceleration. But the overall impact could be even bigger because AI is also helping drive migrations and increasing usage across Snowflake’s core data platform Key numbers Net revenue retention: 126% (+1pp Y/Y) $1M+ customers: 828 (+27% Y/Y) Remaining performance obligations: $9.0 billion (+30% Y/Y) NonGAAP operating margin: 15% (+4pp Y/Y) GAAP operating margin: -17% (+13pp Y/Y) RPO was one of the weaker numbers, falling from $9.2 billion to $9.0 billion sequentially despite growing 30% Y/Y. Management pointed to Q2 renewal seasonality and customers consuming more quickly than their contractual schedules. Given Snowflake’s consumption-based model, actual usage and product revenue are arguably better indicators of the underlying business The gap between GAAP and adjusted margins is still significant, largely because of Snowflake’s heavy use of stock-based compensation, which represented 27% of revenue. That’s still a very high level, but it has fallen 12 percentage points from a year ago, so the trend is moving in the right direction AI is strengthening the core business Cortex Code (CoCo) surpassed 9,100 accounts, adding more than 2,000 during the quarter. CoWork also grew to 5,800 accounts These products generate direct AI consumption, but the bigger opportunity may be what they do for the rest of Snowflake’s platform As companies deploy more AI applications, they need more governed data for those systems to access. More employees can interact with that data through conversational interfaces, while AI agents can retrieve information, analyze it, and eventually take actions. Every new workload can translate into more Snowflake consumption AI is also helping Snowflake move existing workloads onto its platform faster. Coding models can automate parts of legacy migrations that previously required large teams and months or even years of manual work That creates an interesting flywheel. AI generates new workloads while also making it easier to migrate existing ones to Snowflake. That helps explain why the core business is accelerating alongside the AI portfolio instead of being replaced by it. The customer numbers tell a similar story. Snowflake added 692 net new customers, up 32% Y/Y. The number of customers generating more than $10 million in trailing annual product revenue also jumped to 65, compared with 45 a year ago. For a consumption based business, that expansion is important. Snowflake needs customers to keep finding new ways to use their data, and AI is creating plenty of those opportunities The gross margin tradeoff Snowflake lowered its FY27 non-GAAP product gross-margin outlook from 75% to 74%, partly because AI workloads come with additional model and inference costs At the same time, the company raised its operating-margin guidance from 13.5% to 14.5% That combination is important. Snowflake is accepting some additional AI-related costs at the gross-margin level while still finding operating leverage as revenue grows Snowflake’s AI story is starting to look less defensive and more like a genuine growth driver. Product revenue has accelerated from 30% to 37% in just two quarters, while operating margins continue to improve