On September 2, Snowflake (NYSE:SNOW) reported second-quarter fiscal 2027 results that showed an unusual pattern for a company of its size: growth speeding up rather than slowing down. Product revenue hit $1.49 billion, up 37% year over year, and it was the third straight quarter that growth rate climbed instead of fading. Total revenue reached $1.55 billion, a 35% increase from the same period last year.
The AI Flywheel Is Turning
Snowflake’s pitch has always centered on being the place enterprises store and govern their data, but AI is now pulling new workloads onto that platform and pushing existing customers to use more of it. Net revenue retention came in at 126%, meaning customers already on Snowflake are spending well beyond what they paid a year earlier, driven by fresh migrations and new AI use cases. The company added 692 net new customers in the quarter, a 32% jump in the pace of additions compared to the same quarter last year, and its roster of high-value customers, those spending more than $1 million annually, grew 27% to 828.
Two AI products are doing a lot of that work. CoCo, which brings governed AI and coding agents to data operations, is now used by more than 9,100 accounts after adding over 2,000 net new accounts in the quarter alone. CoWork, which lets people query enterprise data in plain language, has reached 5,800 accounts. Customer Sayari used CoCo to migrate 12 billion records to an AI-ready foundation and cut costs by more than 50%, while an Australian financial institution reported tenfold faster query performance after moving its financial crime platform onto Snowflake.
Management raised full-year product revenue guidance to $6.07 billion, up from a prior estimate of $5.84 billion, and lifted its non-GAAP operating margin guidance to 14.5% from 13.5%, with margin already expanding to 15.3% in the quarter from 11% a year earlier.
Cheaper AI Workloads Squeeze Margins
The growth is not free of trade-offs. CFO Brian Robins told investors the revised outlook “includes a higher revenue mix from fast-growing AI workloads which carry a lower contribution margin today,” a direct acknowledgment that the fastest-growing part of the business is also the least profitable part right now. Non-GAAP product gross margin came in at 74.7%, and the shift toward AI is the reason it is not higher.
Robins also flagged that bookings are expected to be “increasingly weighted towards the fourth quarter,” a seasonal pattern that can make remaining performance obligations, which stood at $9 billion and grew 30% year over year, look lumpier from quarter to quarter than the underlying business really is. Roughly 54% of that $9 billion is expected to convert to revenue over the next 12 months, and while that recognition rate rose 42% from the prior year’s estimate, it also means nearly half the backlog sits further out, subject to renewal timing that management itself says is shifting later in the year.
Wall Street Is Still Pricing In Growth
Hedge fund ownership climbed to 103 funds holding Snowflake, up from 80 the prior quarter, a notable pickup in institutional interest. Short interest sits at 5.25% of float, a level that suggests a real but not dominant bear camp rather than heavy organized skepticism. The stock’s forward P/E of 166.67, as of September 11, shows the market is pricing in a lot of future earnings growth rather than valuing the company on what it earns today. That combination points to a market that largely believes the acceleration story management just delivered, even as the number itself leaves little room for a stumble.
Where This Leaves Investors
Snowflake’s quarter answered the question that mattered most: whether AI adoption actually shows up in the numbers, and it did, across revenue growth, customer additions, and margin expansion all at once. The open question is whether that growth can keep compounding without dragging product gross margins down further as AI workloads make up a bigger share of the mix. For the growth story to keep working, CoCo and CoWork need to keep pulling in new accounts at their current pace.
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