Snowflake delivered another quarter of accelerating product growth, highlighting continued enterprise demand for cloud-based data infrastructure and emerging artificial intelligence workloads. The results come as technology companies increasingly position their data platforms as a foundation for AI applications, while investors remain focused on whether elevated infrastructure spending can translate into durable software growth and improving profitability.

Product Revenue Continues to Outpace Overall Growth

Snowflake generated $1.55 billion in quarterly revenue, representing 35% year-over-year growth and exceeding the $1.48 billion estimate. Adjusted earnings per share reached $0.62, compared with expectations of $0.45, while non-GAAP operating income increased to $237.0 million from an estimated $187 million.

The company’s primary product revenue stream reached $1.49 billion, up 37% year over year. Management raised full-year fiscal 2027 product revenue guidance to $6.07 billion, compared with the previous $5.84 billion outlook, while increasing its expected non-GAAP operating margin to 14.5% from 13.5%.

The stronger outlook indicates that Snowflake sees demand remaining resilient across its core cloud data platform. Its non-GAAP product gross margin was 75%, providing a significant contribution to the company’s ability to expand operating profitability while continuing to invest in product development.

AI Becomes an Increasingly Important Growth Catalyst

Snowflake’s management pointed to a meaningful step-up in AI revenue alongside continued strength in its core data platform. The development reflects a broader shift in enterprise technology spending, as businesses seek infrastructure capable of managing large datasets required for AI models, analytics and increasingly automated applications.

The company’s 126% net revenue retention rate also indicates that existing customers continued to expand their spending, while remaining performance obligations reached $9.0 billion, increasing 30% year over year. Snowflake also reported 828 customers generating more than $1 million in trailing-12-month revenue, up 27% from the prior year.

These metrics are important because they point to expansion within the existing customer base rather than growth relying exclusively on new customer additions. In an enterprise software environment where AI-related budgets are becoming increasingly significant, the ability to monetize existing data infrastructure could influence the sustainability of Snowflake’s growth trajectory.

Higher Guidance Comes With a Cash-Flow Watchpoint

Snowflake raised its full-year outlook while maintaining a relatively strong profitability profile. The company expects a 23% adjusted free cash flow margin for the fiscal year and a 14.5% non-GAAP operating margin, compared with 13.5% previously. For the third quarter, product revenue is projected at $1.588 billion to $1.593 billion, with a non-GAAP operating margin of 15.5%.

However, quarterly free cash flow was $83.8 million, below the $104 million estimate highlighted in the earnings figures. That divergence is relevant for investors evaluating the quality and durability of Snowflake’s earnings growth, particularly as the company continues to expand its AI capabilities and cloud infrastructure.

The next phase of Snowflake’s performance will therefore depend on whether AI adoption continues to increase consumption across its platform while margins and cash generation improve. The company’s elevated remaining performance obligations, expanding customer base and higher revenue guidance provide indicators of continued demand, but execution against those expectations will remain central to the market’s assessment of its longer-term growth profile.