Snowflake Surges on Strong Q1 Beat, Raised Outlook, and AI Momentum

Snowflake (SNOW) kicked off fiscal 2026 with a strong first quarter, delivering solid upside across key metrics and boosting full-year guidance. Product revenue jumped 26% year-over-year to $996.8 million, surpassing both management's forecast and consensus estimates. The company raised its fiscal 2026 product revenue outlook to $4.325 billion, up from $4.28 billion, reflecting confidence in robust demand across AI, data analytics, and core warehousing segments. Snowflake shares rose over 6% after hours, with analysts broadly praising execution, efficiency gains, and strengthening customer adoption of its AI offerings, notably Cortex and Snowpark.

The Q1 beat was driven by both core consumption growth and expanding use of Snowflake’s emerging AI/ML features. Product revenue of $996.8 million topped Street expectations of $959.2 million, while adjusted EPS of $0.24 exceeded the consensus $0.21. Management emphasized that two $100M+ deals delayed from Q4 closed in Q1, illustrating strong deal flow. Operating margin came in at 9%, well above the 5% guide, while adjusted free cash flow margin landed at 20%. Remaining performance obligations (RPO) grew 34% y/y to $6.69 billion, also ahead of forecasts.

Guidance for Q2 product revenue is $1.035–$1.04 billion, or about 25% y/y growth, beating consensus expectations of $1.021 billion. For the full year, SNOW reiterated its 25% growth forecast, signaling no visible macro pressure on enterprise data spend. AI remains a standout growth lever: over 5,200 customers used AI features weekly in Q1, and Cortex saw increasing traction in use cases like search, internal document chatbots, and customer service automation. Management indicated that AI is becoming a central component of Snowflake’s value proposition, even though it’s not yet a separate SKU.

Positively, analysts from Goldman Sachs, Evercore, and Wolfe Research raised their price targets, with GS citing a 3.6% revenue beat and growing strategic commitments as signs of durable momentum. Evercore noted the Q1 outperformance as evidence that management's FY26 target is well underpinned, while Canaccord and Piper highlighted the company’s operating leverage and traction in new product lines. However, some firms noted risks tied to macro uncertainty in H2 and flagged that the raised FY guide mostly reflects Q1’s upside being pulled forward. Free cash flow, while solid at $183.4M, missed consensus by a wide margin due to timing shifts, though management maintained full-year targets.

From a valuation standpoint, SNOW trades at 12.4x CY26 EV/Sales—above heavyweight peers averaging 11x, but slightly below its three-year historical average. Analysts generally view the premium as justified given Snowflake’s role in enabling enterprise AI adoption, improving sales productivity, and its increasingly differentiated data cloud platform. The stock’s after-hours rally added to a recent uptrend, now up 16% YTD.

In summary, Snowflake’s Q1 results demonstrated a well-rounded performance marked by strong product growth, improving margins, and accelerating AI adoption. Despite missing on free cash flow, robust bookings, renewed confidence in large deals, and solid consumption trends bolstered sentiment. The company remains well positioned to capitalize on the long-term shift to cloud data platforms and enterprise AI, even amid an uncertain macro environment. Analysts expect SNOW to remain a top-tier growth name in the software space through FY26.