Snowflake Stock Surges 10% as Q1 Earnings Smash Expectations, Revenue Forecast Raised

Snowflake Delivers Stellar Q1 2025 Results: A Deep Dive into the Cloud Data Giant's Performance

Snowflake Inc. (NYSE: SNOW) has kicked off its fiscal year with a bang, reporting first-quarter results that exceeded Wall Street expectations across key metrics. The cloud data warehousing leader announced its Q1 FY2026 earnings on May 21, 2025, revealing impressive growth figures that sent its stock soaring nearly 10% in pre-market trading on May 22.

The company reported adjusted earnings per share of $0.24, significantly outperforming the consensus estimate of $0.21 - representing a 9.09% earnings surprise. This marks a substantial improvement from earnings of $0.14 per share in the same period last year. Revenue reached $1.04 billion, exceeding analyst expectations of $1.01 billion and reflecting a robust 25.8% year-over-year increase.

This strong performance continues Snowflake's trend of consistently beating analyst projections, having now surpassed consensus EPS estimates in each of the past four quarters. The previous quarter saw an even more impressive earnings surprise of 76.47%, when the company delivered $0.30 per share against predictions of $0.17.

The market's positive reaction to these results is evident in Snowflake's stock performance, which has risen approximately 18.4% since the beginning of the year, significantly outpacing the S&P 500's modest 1% gain during the same period.

Breaking Down the Numbers: Revenue Growth and Customer Expansion

Diving deeper into Snowflake's Q1 performance reveals several key metrics that highlight the company's continued expansion and market penetration.

Product revenue, which forms the core of Snowflake's business model, reached $996.8 million, representing a 26% increase year-over-year. When adjusted for the leap year effect, this growth rate rises to an even more impressive 28%. The company's professional services and other revenue streams contributed an additional $45.26 million, growing at 15.7% compared to the previous year.

Customer acquisition remains strong, with Snowflake adding 451 new customers during the quarter - a 19% increase from the previous year. More impressively, the company now boasts 606 customers with product revenue exceeding $1 million over the trailing 12 months, slightly surpassing analyst estimates of 603 such high-value clients.

Remaining performance obligations (RPO) - a crucial indicator of future revenue potential - totaled $6.7 billion, showing robust growth of 34% year-over-year and exceeding the average analyst estimate of $6.55 billion. This metric provides strong visibility into Snowflake's future revenue streams and suggests continued momentum in the company's business.

The net revenue retention rate stood at 124%, indicating that existing customers are expanding their usage of Snowflake's platform. While this represents a slight decline from the 126% reported in the previous quarter, it still demonstrates strong customer loyalty and the company's ability to grow within its installed base.

Profitability Metrics Show Significant Improvement

Beyond top-line growth, Snowflake demonstrated impressive improvements in profitability metrics during the quarter.

Non-GAAP product gross margin reached 75.7%, reflecting the company's ability to efficiently deliver its core services. The non-GAAP operating margin expanded to 9%, representing a significant improvement of 442 basis points compared to the same period last year. This expansion highlights Snowflake's focus on driving greater efficiency across the organization while continuing to invest for growth.

The company's non-GAAP adjusted free cash flow margin was 20%, though management noted that this year's free cash flow is expected to be more weighted toward the second half of the fiscal year due to certain large customers' purchasing patterns.

GAAP product gross profit reached $711.54 million, surpassing analyst expectations. However, the professional services segment recorded a GAAP gross loss of $18.25 million, slightly worse than the average prediction of a $14.84 million loss from analysts.

Snowflake's balance sheet remains strong, with the company ending the quarter with $4.9 billion in cash, cash equivalents, and investments. During Q1, Snowflake used $491 million to repurchase 3.2 million shares at an average price of $152.63 per share, with $1.5 billion still remaining on its authorization through March 2027.

Raised Guidance Reflects Management Confidence

Perhaps the most encouraging aspect of Snowflake's earnings report was management's decision to raise its full-year outlook, signaling confidence in the company's growth trajectory.

For the second quarter of fiscal 2026, Snowflake projects product revenue between $1.035 billion and $1.045 billion, representing approximately 25% year-over-year growth. The midpoint of this range exceeds analyst expectations of $1.021 billion.

More significantly, the company increased its full-year product revenue forecast to $4.325 billion, up from its previous guidance of $4.28 billion and above the consensus estimate of $4.29 billion. This revised outlook represents a 25% growth rate compared to the previous fiscal year.

Snowflake also provided guidance on its Q2 non-GAAP operating margin, which it expects to be around 8%. This continued focus on profitability alongside growth reflects management's balanced approach to scaling the business.

The raised guidance comes despite ongoing macroeconomic uncertainties and competitive pressures in the cloud data space, underscoring management's confidence in Snowflake's market position and growth strategy.

Strategic Initiatives and Product Innovation

Snowflake's strong performance can be attributed in part to its continuous product innovation and strategic partnerships in the rapidly evolving data and AI landscape.

The company introduced over 125 new product features during the quarter, doubling the number launched in Q1 of the previous year. This accelerated pace of innovation demonstrates Snowflake's commitment to enhancing its platform capabilities and maintaining its competitive edge.

Snowflake is actively integrating artificial intelligence into its cloud offerings through collaborations with leading AI companies like OpenAI and Anthropic. These partnerships enable clients to create and implement more sophisticated AI models that can efficiently manage extensive datasets, positioning Snowflake as a key player in the AI-driven data analytics space.

The company's Snowflake connectors, which leverage technology from its acquisition of Datavolo, enable seamless connectivity and data integration with key platforms like Google Drive, Workday, Slack, and SharePoint. This allows customers to tap into critical data across their business ecosystems. Global pharmaceutical leader AstraZeneca, for example, can now analyze critical business data from systems like SAP and Workday with ease.

Additionally, Snowflake's data sharing capabilities continue to gain traction, with customers like CloudZero leveraging hundreds of powerful active data sharing connections to securely exchange data with their partners and customers, driving value across the ecosystem.

Market Position and Competitive Landscape

Snowflake continues to strengthen its position in the competitive cloud data warehousing market, though it faces persistent competition from major players such as Microsoft and AWS.

The company's focus on creating product cohesion to make it easier for customers to innovate faster and unlock more value from their data is resonating with enterprise clients. Companies like Canva and JPMorgan Chase are betting their businesses on Snowflake because of its ease of use, connected ecosystem, and trusted platform.

Snowflake is benefiting from increased corporate expenditure as organizations transfer their operations to the cloud while aiming to develop AI-driven applications. The company's partnerships with various startups in the AI space have expanded its ability to serve a broader range of clients interested in building AI agents via its platform.

Analysts remain optimistic about Snowflake's prospects, with several raising their price targets following the earnings announcement. Brent Bracelin from Piper Sandler increased his target from $175 to $215, while Alex Zukin of Wolfe Research and Kash Rangan from Goldman Sachs both raised their targets to $230, highlighting Snowflake's transformation into a comprehensive data and AI platform.

The market's positive reaction to Snowflake's results reflects investor recognition of the company's ability to outperform competitors in terms of growth and free cash flow margins, even in the face of macroeconomic uncertainties.

Looking Ahead: Catalysts and Challenges

As Snowflake moves forward in fiscal 2026, several factors could influence its continued growth and market performance.

The upcoming Snowflake Summit on June 25 is anticipated to be a significant catalyst, where the company is expected to showcase its evolution into a comprehensive data and AI platform. This event could provide further momentum for the stock if new innovations and partnerships are announced.

While Snowflake's net revenue retention rate remains strong at 124%, the slight decline from previous quarters bears watching. Maintaining high retention and expansion rates within the existing customer base will be crucial for sustaining growth, particularly if new customer acquisition slows.

The competitive landscape continues to evolve, with major cloud providers enhancing their data warehousing and analytics offerings. Snowflake's ability to differentiate through innovation and strategic partnerships will be key to maintaining its market position.

Macroeconomic factors and IT spending trends could also impact Snowflake's growth trajectory. However, the company's focus on helping customers derive value from their data investments positions it well even in challenging economic environments.

Overall, Snowflake's Q1 results demonstrate that the company is executing effectively on its strategy and capitalizing on the growing demand for cloud-based data solutions. With its raised guidance, strong product innovation, and strategic AI initiatives, Snowflake appears well-positioned to continue its growth momentum throughout fiscal 2026.