EPS of $-0.89 increased by 6.3% from previous year
Gross margin of 67.5%
Net income of -298.02M
"AI is front and center. We are continuing to advance our leadership in enterprise AI with Snowflake Intelligence, in public preview." - Sridhar Ramaswamy
Snowflake Inc (SNOW) QQ2 2026 Results Analysis: AI Data Cloud Momentum, Durable Core Analytics, and Guide to Growth
Executive Summary
Snowflake delivered a robust QQ2 2026 with core analytics growth underpinning the quarterly results while AI-centric offerings accelerated the pace of value realization for customers. Product revenue reached $1.09 billion, up 32% year over year, signaling a continued rebound in demand for Snowflake’s data cloud platform as customers pursue modernization and AI-enabled workflows. Remaining performance obligations (RPO) remained strong at $6.9 billion, up 33% YoY, underscoring durable future revenue potential and healthy renewal activity (NRR of 125%). Management signaled an increase to full-year growth expectations and reinforced a multi-year AI adoption trajectory as a central driver of incremental spend. The company also highlighted meaningful platform innovations—Snowflake Intelligence, Cortex AI SQL, Gen 2 Warehouse, Snowflake Postgres, OpenFlow, and Spark integration via Snowpark Connect—alongside a broad ecosystem expansion (12,000+ partners; 40% data sharing; 1,200+ Iceberg accounts). On the financial front, non-GAAP operating margins improved to 11% despite continued investment, and management guided for Q3 product revenue of $1.125–$1.13 billion and FY2026 product revenue of $4.395 billion (27% YoY growth) with a 75% non-GAAP product gross margin, 9% non-GAAP operating margin, and 25% non-GAAP adjusted free cash flow margin. Snowflake also emphasized disciplined capital deployment, noting a CFO transition underway and no repurchases in Q2, with $1.5 billion remaining on the authorization. Taken together, Snowflake’s QQ2 performance reinforces a durable growth story supported by a large AI-inflection tailwind, expanding data-sharing network effects, and ongoing margin discipline as the company scales.
RPO: $6.9B, up 33% YoY, signaling durable revenue backlog.
Net Revenue Retention (NRR): 125%, indicating strong account expansion within existing customers.
Financial Highlights
Overview of QQ2 2026 financial and operational metrics (USD).
- Revenue: $1.1449B, up 32% YoY; QoQ growth ~9.9% (per disclosed QoQ figures).
- Gross Profit: $773.154M; gross margin 67.53% (GAAP).
- Product Revenue Growth (core focus): +32% YoY, contributing to overall topline strength.
- RPO: $6.9B, up 33% YoY, signaling durable revenue backlog.
- Net Revenue Retention (NRR): 125%, indicating strong account expansion within existing customers.
- Operating Margin (GAAP): -29.38%; Non-GAAP operating margin: 11% (company target: improving margins while investing for growth).
- EBITDA: -$240.957M; EBITDA margin negative at roughly -21% (as reported).
- Net Income: -$298.017M; Net income margin ~ -26.0%.
- EPS (GAAP and Diluted): -$0.89.
- Cash Flow: Operating cash flow $74.896M; Free cash flow $58.231M; Net change in cash -$358.57M for the period; Cash at end of period $1.960838B.
- Balance Sheet: Total assets $8.196B; total liabilities $5.750B; total stockholders’ equity $2.446B. Long-term debt $2.654B; total debt $2.692B; Net debt ~$0.812B.
- Customers: 654 customers with >$1M in trailing 12-month revenue; 15 Global 2000 customers added this quarter; 533 net new customers.
- AI / Platform Adoption: 40% of customers data-sharing; 6,100 accounts using Snowflake AI weekly; AI influences ~50% of new logos in Q2; 25% of deployed use cases powered by AI.
- Product Innovation: ~250 capabilities launched in H1; Gen 2 Warehouse delivering up to 2x faster performance; Snowflake Intelligence in public preview; Cortex AI SQL introduced; Snowflake Postgres; Snowflake OpenFlow; Snowpark Connect for Apache Spark in public preview.
- Guidance highlights: Q3 product revenue guidance of $1.125–$1.13B (25–26% YoY); FY2026 product revenue guidance raised to $4.395B (27% YoY); Non-GAAP product gross margin 75%; Non-GAAP operating margin 9%; Non-GAAP adjusted free cash flow margin 25%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.14B
31.78%
9.87%
Gross Profit
773.15M
33.13%
11.52%
Operating Income
-336.42M
5.32%
24.78%
Net Income
-298.02M
5.96%
30.71%
EPS
-0.89
6.32%
31.01%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from Snowflake’s QQ2 2026 earnings call, organized by themes:
- Strategy and AI leadership
• Sridhar Ramaswamy: AI is front and center; Snowflake Intelligence in public preview enables users to talk to enterprise data and power intelligent agents, with early adopters like Cambia Health Solutions and Duck Creek Technologies leveraging AI to drive outcomes. Quote: "AI is front and center. We are continuing to advance our leadership in enterprise AI with Snowflake Intelligence, in public preview."
• Sridhar: Data modernization is the journey’s starting point; data becomes AI-ready in Snowflake for AI-enabled workflows and applications.
- Product and platform innovation
• Sridhar noted ~250 capabilities launched in H1, highlighting breadth of platform expansion and value delivery across analytics, data engineering, AI, applications, and collaboration.
• Cortex AI and AI-native SQL (Cortex AI SQL) to unify analytics and AI; Spark integration via Snowpark Connect in public preview; Snowflake Postgres enabling AI-powered apps on Postgres inside Snowflake.
• OpenFlow accelerates data integration, expanding into the $17B market; Data sharing with 40% of customers indicates strong network effects.
- Execution and GTM
• 533 net new customers; 15 Global 2000; Azure as the fastest-growing cloud at 40% YoY; deepening collaboration with Microsoft across OneLake and Office Copilot/Power BI.
• 12,000+ global partners; renewed focus on sales efficiency and retention (NRR 125% channel expansion).
- AI adoption and monetization dynamics
• 50% of new logos influenced by AI; 25% of deployed use cases powered by Snowflake AI, with 6,100+ accounts using AI weekly; broad adoption without a heavy sales push suggests a favorable unit economics dynamic for AI-enabled usage.
• Snow Convert AI and agentic workflows illustrate practical migration and automation use cases, reducing risk and accelerating time-to-value for customers.
- Outlook and risk signals
• Management reinforced the durability of AI-led growth as a long-run driver, while also stressing ongoing investment in core analytics and migration tech to protect long-term competitive positioning. CFO transition update indicates ongoing governance around capital allocation.
AI is front and center. We are continuing to advance our leadership in enterprise AI with Snowflake Intelligence, in public preview.
— Sridhar Ramaswamy
Azure was our fastest-growing cloud. It actually grew 40% year over year. Our customers running on Azure, and we would say a lot of that is attributable to better alignment between our field and Microsoft.
— Mike Scarpelli
Forward Guidance
Outlook assessment and management’s commentary:
- Near-term guidance: Q3 product revenue expected at $1.125–$1.13B, representing 25–26% YoY growth; Non-GAAP operating margin guided at 9%; product gross margin of 75% on a non-GAAP basis; non-GAAP adjusted free cash flow margin of 25% for FY2026. These numbers imply continued reliance on both core platform growth and AI-enabled monetization while maintaining discipline on operating expenses. The revenue guide embeds the assumption of continued healthy consumption trends and open-well demand for AI-enabled workloads.
- Longer-term trajectory: Snowflake reaffirmed a multi-year AI-led growth path, with AI contributing to ~50% of new logos and ~25% of all deployed use cases in Q2. The platform is expanding into adjacent workloads (Postgres, OpenFlow, Spark integration) and continuing to invest in AI capabilities that reduce data movement and enable agent-based workflows.
- Achievability assessment: Given the sequential Q2 beat relative to prior quarters, the Q3 guide appears achievable if consumption trends persist and large-customer migrations (on-prem to cloud and workload migrations) advance as expected. However, the outlook remains sensitive to macro demand shifts and the pace of AI budget allocation across enterprises. Snowflake’s management commentary emphasizes predictable consumption-driven revenue with a large renewals base and an ability to monetize AI-driven workloads through a consumption model, which supports the credibility of the guidance.
- Key factors investors should monitor: rate of AI adoption (AI-driven use cases, new logo contribution, and upgrade cycles among Global 2000s), Azure/Microsoft collaboration effectiveness (customer wins and field alignment), the success of new products (Snowflake Postgres, OpenFlow, Spark integration) in opening new addressable markets, and the trajectory of operating margins as scale accelerates and product investments mature.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SNOW Focus
67.53%
N/A
N/A
N/A
AI
61.30%
-79.80%
-7.68%
-11.93%
SHOP
51.10%
11.80%
1.86%
121.79%
WDAY
75.50%
5.32%
1.58%
114.13%
INTU
76.40%
15.00%
2.62%
89.40%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Snowflake is positioned at the intersection of core cloud data analytics and enterprise AI adoption. The QQ2 2026 results underscore a durable growth engine: 32% YoY product revenue growth, a 125% NRR, and a large, expanding RPO. The AI-centric product suite (Snowflake Intelligence, Cortex AI SQL, Gen 2 Warehouse, Snowflake OpenFlow, Snowflake Postgres) is progressing from early adoption to broader deployment, supported by a consumption-based monetization model that aligns revenue with realized value. The Azure collaboration appears to be a meaningful accelerant, suggesting further cross-cloud penetration and enterprise-ready deployment. Management’s guidance for FY2026 product revenue of $4.395B (27% YoY) and Q3 revenue of $1.125–$1.13B signals confidence in the ongoing demand trajectory, though profitability remains a near-term constraint given continued investments in platform expansion and scale. Investors should weigh Snowflake’s sizable net debt (net debt ~ $0.812B) and a negative GAAP profitability backdrop against strong cash generation potential and strategic growth initiatives. Overall, the investment thesis remains favorable, with a constructive long-term view on AI-driven monetization, data-sharing network effects, and multi-cloud expansion, offset by near-term profitability and competitive intensity risks.
Key Investment Factors
Growth Potential
AI-powered data cloud leadership with Snowflake Intelligence and Cortex AI SQL is central to Snowflake's growth thesis. AI adoption is already influencing ~50% of new logos and powering 25% of all deployed use cases, with 6,100 accounts using Snowflake AI weekly. Platform innovations (Gen 2 Warehouse, Snowflake Postgres, OpenFlow, Spark integration via Snowpark Connect, and Iceberg openness with >1,200 Iceberg accounts) expand total addressable use cases and data-management capabilities. Azure partnership strength (Azure fastest-growing cloud at 40% YoY) supports cross-cloud adoption and diversification of revenue streams. The company’s 40% data-sharing penetration reinforces network effects, driving stickiness and cross-sell opportunities across 12,000+ partners.
Profitability Risk
Profitability remains negative on GAAP terms with near-term margin constraints as Snowflake continues to invest for growth (Q2 GAAP operating loss of -$336.4M; EBITDA -$240.96M). The AI-driven monetization model is levered on consumption, which can be volatile quarter-to-quarter and depends on customers’ AI budgeting and data-migration timelines. Competitive landscape includes Databricks, hyperscalers (Azure, AWS, Google), Palantir, and Fabric—creating potential pricing and feature-dueling dynamics. Macro headwinds could impact IT spending and data-migration budgets. Execution risk from rapid hiring and integration of new products (e.g., Crunchy/Postgres) also warrants monitoring.
Financial Position
Liquid balance sheet supported by $1.960B cash and equivalents, with total debt of $2.692B and net debt around $811.6M. Year-to-date, Snowflake demonstrated positive operating cash flow ($74.9M) and free cash flow ($58.2M) in QQ2, though free-cash-flow margin guidance is 25% for FY2026, highlighting high-growth investment phases. Strong RPO of $6.9B and a healthy NRR (125%) indicate durable revenue quality and expansion opportunities within the installed base. The company maintains a sizeable share repurchase authorization ($1.5B remaining) but chose not to deploy it in Q2, signaling a preference for deploying capital to growth initiatives and balance-sheet flexibility.
SWOT Analysis
Strengths
Leading AI-enabled data cloud platform with Snowflake Intelligence and Cortex AI SQL.
Strong unit economics in AI-driven use cases (AI powers ~25% of use cases; ~50% of new logos influenced by AI).
Robust customer metrics: 125% NRR; 654 customers >$1M trailing twelve months; 15 Global 2000 added this quarter.
Wide product breadth and open data formats adoption (Iceberg >1,200 accounts) and strong data-sharing network effects (40% of customers share data).