Snowflake (NYSE: SNOW) shares surged about 22% in premarket trading Thursday after the cloud-data company delivered a fiscal second-quarter earnings beat, accelerated product revenue growth, and raised its full-year outlook. The stock was trading around $378.80, reflecting investor enthusiasm over the company's ability to capitalize on artificial intelligence demand.
For the quarter ended July 31, Snowflake reported revenue of $1.55 billion, up 35% year over year, while product revenue climbed 37% to $1.49 billion. Adjusted earnings came in at 62 cents per share, well above the 45 cents analysts had expected. The company also added 692 net new customers, a 32% increase from the prior year, and customers generating more than $1 million in trailing 12-month product revenue rose 27% to 828.
AI becomes a growth engine
Management highlighted that AI products are now driving roughly half of the company's growth acceleration, countering earlier concerns that AI-native platforms might disrupt Snowflake's position in enterprise data. CEO Sridhar Ramaswamy described a "flywheel effect" across the business, with the company's CoCo product surpassing 9,100 accounts and CoWork expanding to 5,800 accounts during the quarter.
CFO Brian Robins noted that stronger AI revenue contributed meaningfully to the acceleration. This supports a bullish thesis that AI adoption is not only creating demand for individual products but also increasing data and computing consumption across Snowflake's broader platform, turning AI into a multiplier for its core business.
Guidance lifts sentiment
Investors had set a high bar heading into the report, with some analysts warning that a simple beat might not suffice. Snowflake raised its fiscal 2027 product-revenue guidance to $6.07 billion from $5.84 billion, implying 36% growth. For the third quarter, the company expects product revenue of $1.588 billion to $1.593 billion, representing growth of 37% to 38%.
Profitability also improved alongside growth. Non-GAAP operating margin reached 15.3%, and Snowflake lifted its full-year margin outlook to 14.5% from 13.5%. This combination of faster revenue growth and expanding margins is rare in high-growth software, making the stock particularly attractive to investors.
Analyst reactions
Deutsche Bank analyst Brad Zelnick called the quarter "another outstanding set of results," noting that product revenue outperformance reached 5.2%, marking the first back-to-back quarterly beats above 5% in years. The firm raised its price target to $400 from $350 and maintained a Buy rating. Rosenblatt's Blair Abernethy also highlighted a "significant medium-term growth opportunity" from cloud-data migration and newer AI capabilities, raising his target to $345.
The strong results come amid a broader AI trade that has seen mixed reactions across the sector. For instance, Broadcom options imply a 7% swing as AI doubts cloud its earnings, while Dell shares slipped as AI demand meets supply limits. Snowflake's performance suggests that AI is proving to be a tailwind for companies that can effectively monetize it.
Investors will be watching whether Snowflake can sustain this momentum, especially as the AI landscape evolves. The company's raised guidance and expanding margins provide a strong foundation, but competition remains intense. For now, the market is rewarding Snowflake for delivering on its AI promise.
This article is for informational purposes only and does not constitute financial advice.
