Snowflake Q4 Earnings Beat Expectations, Stock Surges Over 11%

Snowflake (SNOW) delivered a stronger-than-expected fourth-quarter earnings report after the market closed, pushing its stock up over 11% in after-hours trading. The cloud data platform provider exceeded analyst estimates on both earnings and revenue, demonstrating solid momentum despite ongoing macroeconomic concerns and competitive pressures.

The company reported adjusted earnings per share of $0.30, surpassing the $0.18 consensus estimate. Revenue for the quarter rose 28% year-over-year to $986.8 million, well ahead of Wall Street’s expectation of $956.26 million. Snowflake’s product revenue, which accounts for the majority of its business, climbed 28% to $943.3 million, beating forecasts of $915.8 million.

While the overall report was strong, investors also took note of the announcement that longtime Chief Financial Officer Michael Scarpelli will be retiring, marking a significant leadership transition for the company.

Key Metrics and Business Performance

Beyond headline earnings and revenue beats, Snowflake reported several other important financial and operational metrics that investors were watching closely.

- Remaining performance obligations, which represent contracted future revenue, totaled $6.9 billion, up 33% year-over-year and exceeding estimates of $6.67 billion. This signals continued strong demand for Snowflake’s services.

- Net revenue retention rate, which measures customer spending growth, came in at 126%, down slightly from 131% a year ago but above the consensus estimate of 124.4%. While still strong, this slight decline indicates some moderation in existing customer expansion.

- Gross margin was 73%, slightly below last year’s 75% but ahead of expectations of 72.2%, reflecting stable profitability despite continued investment in infrastructure and AI capabilities.

- Total customer base surpassed 11,000, with 580 customers now spending at least $1 million annually on Snowflake’s platform—up 28% from a year ago.

Stock Reaction and Investor Sentiment

Following the earnings release, Snowflake shares surged over 11% in after-hours trading, reflecting investor relief and optimism around the company’s strong performance. The stock had entered the report down about 59% from its all-time high in 2021, making this beat a welcome sign of resilience.

Investors particularly liked Snowflake’s ability to continue expanding revenue at a strong pace while maintaining healthy profitability. The 33% year-over-year increase in remaining performance obligations was another highlight, as it provides strong visibility into future revenue growth. Additionally, the company’s expanded partnership with Microsoft, which will integrate OpenAI’s models into Snowflake Cortex AI, helped reinforce its position as a leader in the AI-powered data cloud space.

Guidance and AI Growth Potential

Snowflake provided a mixed outlook for fiscal 2026.

For the first quarter, the company guided for product revenue of $955 million to $960 million, slightly below the $962.6 million Wall Street estimate. However, full-year fiscal 2026 product revenue guidance of $4.28 billion came in ahead of the consensus estimate of $4.23 billion, signaling continued solid demand.

Notably, Snowflake expects product revenue growth to accelerate as the fiscal year progresses, with AI adoption playing a crucial role. CEO Sridhar Ramaswamy highlighted that Snowflake Cortex AI is seeing significant adoption, and the company is doubling down on integrating AI capabilities to help customers unlock more value from their data.

Additionally, Snowflake is targeting an adjusted operating margin of 8% for fiscal 2026, an improvement from the 5% expected in the first quarter, indicating that the company anticipates stronger efficiency and profitability later in the year.

The Impact of CFO Michael Scarpelli’s Retirement

Alongside the earnings release, Snowflake announced that CFO Michael Scarpelli will be retiring. Scarpelli, who has been with the company since 2019, played a key role in taking Snowflake public and guiding it through a period of explosive growth.

While leadership transitions can sometimes create uncertainty, Snowflake’s strong financial position and long-term growth trajectory should help ease investor concerns. The company has not yet announced a successor, and the market will be watching closely for updates on this front.

Competitive Landscape and Market Positioning

Snowflake continues to lead the cloud data management space, but competition remains fierce. Databricks, a major rival, has been rapidly expanding its AI and data analytics offerings, while hyperscalers like Amazon Web Services, Microsoft Azure, and Google Cloud are developing their own solutions.

Despite this, Snowflake has differentiated itself by focusing on AI-driven data analytics, seamless integrations with major cloud providers, and its unique consumption-based pricing model. Its expanding Microsoft partnership further solidifies its positioning in the AI ecosystem.

Valuation and Growth Potential

Even after its post-earnings surge, Snowflake remains a high-growth stock trading at a premium valuation. The company currently trades at 161 times forward earnings, making it one of the most expensive names in enterprise software. However, the market remains optimistic about Snowflake’s long-term potential.

For the stock to continue climbing, Snowflake will need to:

1. Sustain strong product revenue growth, particularly as AI adoption scales.

2. Maintain or improve its net revenue retention rate, ensuring existing customers keep expanding their usage.

3. Demonstrate increasing profitability, particularly as operating margins are set to improve throughout fiscal 2026.

4. Successfully navigate the CFO transition, providing clarity on leadership succession.

Conclusion

Snowflake’s fourth-quarter report was a clear win, with revenue and earnings exceeding expectations, strong customer growth, and robust remaining performance obligations signaling continued demand. The company’s guidance suggests steady expansion, though near-term headwinds could moderate growth slightly in the first quarter.

The stock’s sharp post-earnings rally reflects investor confidence in Snowflake’s ability to execute, particularly as AI-powered data management becomes a bigger driver of enterprise cloud spending.

While valuation concerns persist, Snowflake’s dominant market position and expanding AI strategy provide a compelling long-term growth story. The upcoming transition of CFO Michael Scarpelli will be closely watched, but Snowflake appears well-positioned to maintain its momentum in the quarters ahead.