Snowflake, Inc. ((SNOW)) has held its Q4 earnings call. Read on for the main highlights of the call.
Snowflake, Inc.’s recent earnings call painted a picture of robust growth and innovation, tempered by a few challenges. The company reported strong revenue growth and product innovation, alongside expanded AI capabilities. However, challenges such as large customers exceeding contract capacity and slower projected growth for Q1 due to leap year effects were noted. Overall, the sentiment was positive, driven by the company’s impressive growth trajectory and innovation, albeit with some cautionary notes.
Strong Revenue Growth
Snowflake reported impressive product revenue of $943 million for Q4, marking a 28% increase year-over-year. The company’s remaining performance obligations reached $6.9 billion, growing 33% year-over-year, underscoring the strong demand for its offerings.
High Net Revenue Retention
The company achieved a net revenue retention rate of 126%, highlighting strong customer satisfaction and continued usage of Snowflake’s services. This metric is a testament to the company’s ability to retain and expand its customer base.
New Product Introductions
Snowflake introduced over 400 new product capabilities, more than doubling the previous year’s offerings. This level of product innovation demonstrates Snowflake’s commitment to enhancing its platform and meeting customer needs.
Positive Cash Flow and Margins
The company reported a Q4 non-GAAP operating margin increase to 9%, with a non-GAAP adjusted free cash flow margin of 43%. These figures reflect Snowflake’s strong financial health and operational efficiency.
Expansion of AI Capabilities
Snowflake expanded its AI capabilities by introducing Cortex AI and partnering with Microsoft to incorporate OpenAI’s models. This makes Snowflake the only platform hosting both Anthropic’s and OpenAI’s models, positioning it as a leader in AI integration.
Large Customers Exceeding Contract Capacity
Several large customers exceeded their contract capacity before the end date, opting to purchase as they consume rather than renewing. This indicates strong demand but also presents a challenge in managing customer contracts.
Q1 Revenue Growth Projections
For Q1, Snowflake expects product revenue growth of 21% to 22% year-over-year, partially impacted by the leap year. This projection, while slower than previous quarters, still reflects solid growth.
Stock-Based Compensation
Stock-based compensation is projected to decrease from 41% to 37% of revenue by FY ’26. While still high, this reduction indicates Snowflake’s efforts to improve efficiency and manage costs.
Forward-Looking Guidance
For fiscal 2026, Snowflake anticipates product revenue of approximately $4.28 billion, a 24% year-over-year increase. The company expects a non-GAAP operating margin of 5% in Q1, expanding to 8% for the full year, with a non-GAAP adjusted free-cash flow margin at 25%. These forecasts highlight Snowflake’s confidence in continued growth and operational improvements.
In summary, Snowflake’s earnings call showcased a company on a strong growth path, driven by innovation and strategic partnerships, particularly in AI. While challenges such as contract capacity and high stock-based compensation remain, the overall sentiment was positive, with a clear focus on sustaining growth and enhancing operational efficiency.