By Key Points
Snowflake reported Q2 results that surpassed expectations by a fair margin and raised its outlook.
The company calmed fears that AI would make its offerings irrelevant.
Snowflake stock is pricey, but investors seem content to overlook its valuation for now.
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Shares of Snowflake (NYSE: SNOW) charged out of the gate on Thursday, soaring as much as 25.6%. As of 11:21 a.m. ET, the stock was still up 21%.
The catalyst that sent the cloud-based storage company higher was a financial report that wowed investors.
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Accumulating SNOW in the forecast
For its fiscal 2027 second quarter (ended July 31), Snowflake generated revenue of $1.55 billion, up 35% year over year, driven by product revenue that grew 37% to $1.49 billion. This marked the third consecutive quarter of revenue acceleration. This resulted in adjusted earnings per share (EPS) of $0.62, which surged 77%.
For context, analysts’ consensus estimates were calling for revenue of $1.48 billion and EPS of $0.45, so Snowflake beat expectations by a wide margin.
Other metrics helped highlight the company’s solid growth. Remaining performance obligation (RPO) — a leading indicator of future revenue — grew to $9 billion, up 30%.
Snowflake’s total customer count grew to 14,554, up 32% year over year. At the same time, its most lucrative customers, those spending more than $1 million in trailing-12-month revenue, grew 27% to 828. Snowflake also continued to expand its business with existing customers, as evidenced by its net revenue retention rate of 126%.
CEO Sridhar Ramaswamy said, “AI continues to compound our advantages, creating a flywheel effect across the business.”
A long runway ahead
Investors were positively giddy as Snowflake raised its full-year outlook and provided a better-than-expected Q3 forecast. Snowflake is guiding for third-quarter product revenue in a range of $1.588 billion to $1.593 billion, or growth of about 37% at the midpoint of its guidance — which would mark another quarterly acceleration. The company also increased its 2027 guidance to $6.07 billion, up from $5.84 billion and ahead of Wall Street’s $5.85 billion estimate. And investors cheered.
There’s still plenty of growth baked into Snowflake’s valuation. The stock is currently trading at 137 times next year’s expected earnings. That said, Snowflake offered evidence that recent developments in AI haven’t eaten into its business but have instead accelerated its growth.
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Danny Vena, CPA has positions in Snowflake. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.
