Snowflake, Inc. Reports Strong Q3 Earnings and Growth

Snowflake, Inc. ((SNOW)) has held its Q3 earnings call. Read on for the main highlights of the call.

TipRanks Cyber Monday Sale

• Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
• Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off

In a highly positive earnings call, Snowflake, Inc. showcased its impressive financial performance and strategic advancements. The company reported strong revenue growth, record customer additions, and significant progress in AI adoption and strategic partnerships. Despite minor challenges such as a hyperscaler outage and lower Q4 operating margin guidance, Snowflake’s overall performance and future outlook remain robust.

Strong Product Revenue Growth

In the third quarter, Snowflake reported product revenue of $1.16 billion, marking a 29% increase year over year. The company’s remaining performance obligations also saw a significant rise, totaling $7.88 billion with a 37% year-over-year growth. This robust growth underscores Snowflake’s strong market position and demand for its offerings.

Record Customer Additions

Snowflake achieved a record by adding 615 new customers in Q3, highlighting the strong market demand for its products. This milestone demonstrates Snowflake’s ability to attract and retain a growing customer base, further solidifying its market presence.

AI Revenue Milestone

The company reached a notable milestone in AI revenue, achieving a $100 million run rate one quarter earlier than anticipated. This reflects the strong adoption of Snowflake Intelligence and underscores the company’s leadership in the AI space.

High Net Revenue Retention

Snowflake maintained a healthy net revenue retention rate of 125%, indicating strong customer satisfaction and expansion. This metric highlights the company’s ability to retain and grow its existing customer relationships.

Strategic Partnerships and Ecosystem Expansion

Snowflake announced new strategic partnerships with major companies like SAP, Workday, Splunk, Palantir, and UiPath. These collaborations enhance integration capabilities and expand Snowflake’s go-to-market reach, positioning the company for further growth.

Operational Efficiency and Margin Expansion

The company reported a significant expansion in non-GAAP operating margin, which increased by more than 450 basis points year over year to 11%. This improvement reflects Snowflake’s efficient scaling and operational efficiency.

Impact from Hyperscaler Outage

Snowflake’s revenue was impacted by approximately $1 million to $2 million due to a hyperscaler outage. Despite this challenge, the company’s overall financial performance remained strong.

Operating Margin Guidance for Q4

For the fourth quarter, Snowflake provided a non-GAAP operating margin guidance of 7%, which is lower compared to Q3. This indicates potential cost pressures or increased investment as the company continues to scale.

Forward-Looking Guidance

Looking ahead, Snowflake provided robust guidance for the upcoming quarter and full fiscal year. The company projects Q4 product revenue to reach between $1.195 billion and $1.200 billion, reflecting a 27% year-over-year increase. For the full fiscal year 2026, Snowflake raised its product revenue guidance to approximately $4.446 billion, marking a 28% year-over-year growth. The company also reiterated its margin targets, expecting a non-GAAP product gross margin of 75%, a non-GAAP operating margin of 9%, and a non-GAAP adjusted free cash flow margin of 25%.

In conclusion, Snowflake, Inc.’s earnings call highlighted a strong financial performance with significant growth in revenue and customer base. The company’s strategic advancements in AI and partnerships, along with its robust forward-looking guidance, underscore a positive outlook. Despite minor challenges, Snowflake’s overall sentiment remains optimistic, positioning it well for future success.