Snowflake Inc. Fiscal Second Quarter 2027 Earnings

A quick primer before the numbers below.

• GAAP vs. non-GAAP. GAAP figures follow standard accounting rules. Non-GAAP figures strip out certain non-cash items, mainly stock based compensation and the amortization of acquired intangible assets, so they usually come in higher and are meant to show the underlying trend of the business.
• EPS. Simply profit divided by the number of shares outstanding, in other words profit per share. Where the company posts a loss, the same figure is shown as a loss per share.
• Operating cash flow vs. free cash flow. Operating cash flow is the cash the business actually generated. Free cash flow is what remains after paying for equipment and facilities, the cash genuinely available for paying down debt, dividends, or buybacks.
• Remaining performance obligations. Revenue the company has already signed contracts for but has not yet recorded in its reported results, in other words work already booked that shows up in future quarters.
• Guidance. Management's own forecast for the next quarter or the full year, not an audited or reported result.
• Year over year. Compares this quarter with the same quarter one year earlier, not with the most recent quarter. So "up 35 percent year over year" means revenue this quarter is 35 percent higher than it was in the same quarter last year.

Management says product revenue growth accelerated for a third straight quarter. According to CFO Brian Robins, this quarter marked the third consecutive quarter of product revenue growth acceleration, driven by strength in the core data platform and what the company called a meaningful step up in AI revenue. Product revenue grew 37 percent this quarter, reported at $1,491.9 million.

GAAP losses narrowed and non-GAAP margins expanded at the same time. GAAP operating margin improved to negative 17 percent from negative 30 percent a year earlier. Non-GAAP operating margin improved to 15 percent from 11 percent a year earlier, according to the filing. This is a meaningful data point because it shows margin improvement was not solely a function of excluding stock based compensation, since the GAAP figure improved by a similar relative magnitude.

Remaining performance obligations grew while current deferred revenue declined. Remaining performance obligations, which represent contracted future revenue not yet recognized, reached $9.00 billion, up 30 percent year over year against the same quarter last year. Current deferred revenue on the balance sheet, a different measure covering a different comparison period, was $2,568.5 million at quarter end, down from $3,347.0 million at the start of the fiscal year, according to the balance sheet.

GAAP net loss was $191.7 million, or $0.55 per share, narrowed from a loss of $298.0 million, or $0.89 per share, a year earlier. Non-GAAP net income was $235.3 million, or $0.62 per diluted share, up from $128.99 million, or $0.35 per diluted share, a year earlier. The filing attributes most of the gap between GAAP and non-GAAP results to $456.4 million in stock based compensation related charges and $42.2 million in amortization of acquired intangibles for the quarter, both added back in the non-GAAP figures.

Net cash provided by operating activities was $91.4 million, equal to 5.9 percent of revenue. Non-GAAP free cash flow, defined by the company as operating cash flow less purchases of property and equipment, was $83.8 million, a 5 percent margin. Non-GAAP adjusted free cash flow, which further excludes the timing effect of employee payroll tax payments on stock transactions, was $92.3 million, a 6 percent margin. It is this adjusted measure, not the 5 percent figure above, that full year guidance targets, see Section 6.

Net revenue retention rate was 126 percent, meaning existing customers included in the measurement cohort spent 26 percent more on the platform than they did a year earlier, according to the filing's definition. Customers with trailing 12 month product revenue greater than $1 million reached 828, up 27 percent year over year. The company added 692 net new customers in the quarter, up 32 percent year over year, according to the release.

The company stated that its CoCo product surpassed 9,100 accounts, adding more than 2,000 accounts in the quarter, while its CoWork product expanded to 5,800 accounts, based on an internal classification described in the filing as the average of the last four weeks of the quarter. The company also stated it launched more than 330 product capabilities to general availability in the first half of fiscal 2027, up 35 percent year over year.

Cash and cash equivalents were $1,707.2 million at quarter end, down from $2,828.2 million at the start of the fiscal year. Short term investments were $637.5 million, down from $1,201.5 million, while long term investments rose to $1,984.5 million from $755.0 million, according to the balance sheet. Total current assets fell to $3,493.8 million from $5,742.6 million.

Goodwill rose to $1,639.0 million from $1,194.4 million and intangible assets, net, rose to $426.5 million from $246.9 million, reflecting $254.4 million spent on business combinations during the first six months of the fiscal year, according to the cash flow statement. Convertible senior notes, net, were $2,284.0 million, roughly unchanged from $2,279.8 million. Total stockholders equity was $2,149.7 million, up from $1,924.1 million.

The company repurchased no common stock during the quarter, though it repurchased $300.0 million of common stock during the first six months of the fiscal year, according to the cash flow statement.

For the third quarter, the company guided product revenue to $1,588 million to $1,593 million, representing 37 to 38 percent year over year growth, and non-GAAP operating margin of 15.5 percent. This is management guidance.

For the full year, the company raised product revenue guidance to $6,070 million from a previous guidance of $5,840 million, and raised the non-GAAP operating margin target to 14.5 percent from a previous 13.5 percent. The company also guided non-GAAP adjusted free cash flow margin to 23.0 percent for the full year, according to the release.

Using the ratio of product revenue to total revenue seen this quarter, calculated from company reported figures, full year total revenue implied by the raised product revenue guidance would be approximately $6,320 million, and full year adjusted free cash flow at a 23.0 percent margin would be approximately $1,450 million, calculated from company reported figures. Against first half adjusted free cash flow of $357.8 million, this implies approximately $1,090 million would need to be generated in the second half, calculated from company reported figures, more than three times the first half pace.

This quarter showed Snowflake growing revenue faster while simultaneously narrowing its GAAP loss and expanding its non-GAAP margin, a combination the company has not always delivered together. Product revenue accelerating for a third straight quarter according to management, alongside raised full year growth guidance, supports the company's own description of a strengthening core business.

This quarter did not demonstrate that Snowflake can generate free cash flow at the pace its own full year guidance now implies is needed. A 5 percent non-GAAP free cash flow margin this quarter — and roughly 12 percent on the adjusted, H1 basis guidance targets — sits far below the 23.0 percent full year adjusted free cash flow margin target, and closing that gap depends on a second half performance that has not yet been demonstrated in any single quarter this fiscal year.

• Whether non-GAAP adjusted free cash flow margin steps up meaningfully in the third quarter toward the full year target
• Whether current deferred revenue stabilizes or continues declining even as remaining performance obligations grow
• Whether product revenue growth continues accelerating past the 37 percent rate delivered this quarter
• Whether cash and short term investments stabilize after the decline recorded in the first half