Snowflake Inc. (SNOW) reported strong fourth-quarter financial results, beating analyst estimates and driving its stock price up by 5%. The cloud data platform posted Q4 product revenue of $1.2 billion, a 30% increase year-over-year, and slightly exceeded market forecasts. The company's client base has grown to over 13,000, including major enterprises like BlackRock and Figma.
CEO Sridhar Ramaswamy highlighted a record-breaking contract valued at over $400 million, although the client's identity was not disclosed. This underscores Snowflake's growing influence in the enterprise cloud computing market.
Looking forward, Snowflake provided optimistic guidance. The company expects fiscal 2027 product revenue to reach $5.7 billion, surpassing the average analyst projection of $5.5 billion. For Q1, it forecasts product revenue of $1.3 billion, above the $1.2 billion midpoint estimate. Management noted a slight expected dip in product gross margins to 75% in 2027 from 75.8% in fiscal 2026, attributing this to the lower margins of newer AI products.
The company's growth strategy is heavily focused on expanding its enterprise AI capabilities. Snowflake is positioning itself as a platform for AI-native applications. Key moves include a $600 million acquisition of Observe, an app-monitoring platform, to integrate observability into its AI and data products. Furthermore, Snowflake has formed two separate $200 million partnerships with AI leaders OpenAI and Anthropic. These partnerships support a model-agnostic approach, allowing enterprise clients to run AI workloads across multiple platforms while using Snowflake as a secure central hub.
Despite strong performance, Snowflake faces a competitive landscape. It lags behind peers like Databricks in certain AI metrics; Databricks' AI revenue has reached a $1 billion run-rate compared to Snowflake's roughly $100 million. Snowflake's net revenue retention has also leveled off at 125%, down from a previous peak of 171%, reflecting the challenges of sustaining high growth in the competitive cloud market.
Analysts view the stock gain as a reflection of investor confidence in Snowflake's AI-driven expansion and solid financial foundation. The company's strategic acquisitions, high-value partnerships, and focus on flexible, secure solutions position it to capture long-term opportunities in the rapidly evolving AI and cloud markets.
