Snowflake’s Make-or-Break Moment: Can AI Fears Finally Be Silenced?

Snowflake reports after the close on Wednesday, February 25, and it’s arriving as a fresh stress test for large-cap software just as the “AI destroys SaaS” narrative has started to lose a little momentum at the margin. Workday’s initial post-print drop on guidance and subsequent recovery has been a small but notable signal that oversold software is finally attracting buyers willing to underwrite “bad news, but not getting worse.” Snowflake now gets to find out whether that bid is real, or just tourists buying the first green candle.

The immediate setup is that expectations are no longer heroic. Wall Street is looking for adjusted EPS of about $0.27 on revenue around $1.26B (compared to $0.30 and $986.8M a year ago), and product revenue around $1.2B, which implies roughly 27% year-over-year growth. Those numbers matter, but in this tape the scorecard is forward indicators: consumption behavior, retention, backlog, and guidance framing. If you’re trying to handicap whether “AI fear” is becoming “AI math,” you won’t find it in a one-quarter revenue beat.

Start with what management already put on the table. Coming out of fiscal Q3, Snowflake guided Q4 product revenue to $1.195B–$1.2B and a non-GAAP operating margin of 7%. The company also raised full-year FY26 product revenue guidance to about $4.446B (28% y/y) and reiterated longer-run margin targets (non-GAAP product gross margin 75%, non-GAAP operating margin 9%, adjusted free cash flow margin 25%). That guidance is important because the market is already primed to punish any hint that profitable growth is slipping, even if top-line optics remain fine.

To understand “ erosion risk ,” you have to anchor the key Q3 run-rate metrics and then look for cracks. In Q3, Snowflake reported product revenue of $1.16B (+29% y/y), net revenue retention (NRR) of 125%, and remaining performance obligations (RPO) of $7.88B (+37% y/y). If Q4 product revenue prints below the guided range or product growth drops meaningfully below that ~high-20s trajectory, the market will read it as more than seasonality—it will read it as consumption softness. The company’s own framing has conditioned investors to think a modest beat to plan is “solid,” so the magnitude of the beat (or lack of one) will matter more than usual.

Here are the key things to watch to assess whether the business is bending, not just bouncing:

Product revenue growth and “re-acceleration” optics. The buyside is sensitive to whether product growth can reprint with a “3-handle” (30%+) after Q3’s 29% and Q4’s guided ~27%. A clean beat that lands growth closer to 30% can help reprice the narrative from “structural slowdown” to “stable core + new workloads.” Conversely, a print that confirms a step-down (with cautious FY27 guide) keeps the stock in the penalty box regardless of “AI buzz.”

NRR and consumption commentary. Snowflake’s consumption model is one reason many analysts argue it sits “above the AI disruption fray,” because increased data volumes and inference workloads can actually drive higher usage rather than compress seat counts. Still, if NRR slips from 125% or management describes customers optimizing usage aggressively, that’s your first real sign the environment is tightening.

Backlog signals (RPO) and the quality of demand. RPO growth at 37% in Q3 is strong; investors will want to see that backlog growth remains healthy and isn’t being propped up by contract structuring while real consumption slows. This is where you listen for commentary on migrations, workload expansions, and whether new use cases are broadening beyond core warehousing.

Large-customer health and scaling. Snowflake had 688 customers with trailing 12-month product revenue over $1M (as of Q3). Watch whether that cohort expands meaningfully and whether management highlights more large, multi-year migrations—because that’s the clearest evidence the platform remains strategic in enterprise data stacks.

The AI debate is the headline, but Snowflake’s version is more nuanced than “agents replace apps.” Snowflake is selling the idea that AI increases the value (and usage) of governed enterprise data: more analytics, more pipelines, more feature-store-like behavior, more inference running close to data. A big proof point here is the company’s multi-year $200M partnership with OpenAI to bring advanced models directly into Snowflake for enterprise customers, which is designed to make Snowflake a governed gateway for AI agents and natural-language data interaction. If management can point to material adoption of Cortex/Snowflake Intelligence workflows—especially in production, not just pilots—that strengthens the “AI helps” framing. If the talk stays abstract (“excited,” “early,” “building”) while consumption commentary softens, the market will assume AI is a roadmap slide, not a revenue lever.

Guidance is the other landmine. Investors are already focused on FY27 framing, especially because this is the first time new CFO Brian Robins will be setting the full-year guide, and the Street is debating whether FY27 growth assumptions are too optimistic relative to FY26’s net-new dollars. That’s why even a decent quarter can still produce volatility if the FY27 product revenue outlook is merely “in line” but framed conservatively. (Barron's) In short: beat the quarter, don’t miss the story.

Technically, the stock appears to be trying to build a floor around the $157 area. That matters because it suggests capitulation may be behind it, but a V-shaped recovery is hard to sustain without a clean guide—especially in a market that’s been treating software multiples like they’re perishable goods. A solid print with constructive FY27 commentary could put $185 in play as the next logical reclaim zone; disappointment on product growth or a cautious outlook likely reopens the question of whether “bottom” was just a temporary ceasefire.

Bottom line: for this earnings call, treat Snowflake as a “consumption + guidance” story wearing an AI costume. If product growth stabilizes/re-accelerates, NRR holds, RPO stays healthy, and management can tie AI partnerships to real workloads, the stock can credibly rotate from “AI victim” to “AI enabler.” If any of those pillars wobble, the market will conclude the software group’s anxiety isn’t oversold—it’s underwritten.