Snowflake Inc. Q4 FY2026 earnings call

Strategic Positioning in Enterprise AI

• Snowflake positions itself as the foundational platform for safe, scalable enterprise AI deployment, combining trusted governed data, security, cross-cloud interoperability, and broad model choice, uniquely suited to power AI agents that rely on secure, accessible enterprise data.
• The company is evolving from a data analysis and governance platform to a platform for building and running AI-native applications and workflows, targeting the agentic era of enterprise work.

Product Innovation & Ecosystem Expansion

• Launched over 430 new product capabilities in FY26, including generally available Snowflake OpenFlow for simplified data ingestion, Snowflake Postgres for production transactional applications built directly on the Snowflake platform, and expanded AI offerings Snowflake Intelligence and Cortex Code.
• Closed the acquisition of Observe, a leading observability platform, for ~$600 million in cash and stock, expanding Snowflake's addressable market into the $50 billion IT operations market and adding AI-powered observability capabilities.
• Expanded strategic ecosystem partnerships, including a landmark partnership with SAP, a deepened partnership with Anthropic, a $200 million expanded partnership with OpenAI, and access to Google Cloud's Gemini models natively within Snowflake, all to expand customer model choice and integrate with core enterprise systems.

Operational & Customer Growth Highlights

• Ended Q4 FY26 with over 13,300 total customers, added 2,332 net new customers in FY26 and 740 net new customers in Q4 (up 40% YoY), 733 customers with trailing 12-month spend over $1 million (up 27% YoY), and 56 customers with spend over $10 million (up 56% YoY).
• Remaining performance obligations (RPO) reached $9.77 billion, with 42% YoY growth accelerating for the second consecutive quarter, including the largest deal in company history (over $400 million TCV) and seven nine-figure contracts in Q4, compared to two in the year-ago quarter.
• Net revenue retention held steady at 125% YoY.

Operational Efficiency & Margin Improvements

• Full year FY26 non-GAAP operating margin reached 10.5%, expanding 400 basis points YoY, with stock-based compensation falling from 41% of revenue in FY25 to 34% in FY26. Non-GAAP product gross margin for FY26 was 75.8%, and adjusted free cash flow margin was 25.5%.
• AI tools are driving significant internal efficiency gains: customer projects are completed up to 5x faster with 40-50% higher project margins, site reliability engineering investigation resolution time reduced from hours to minutes, and internal automation is projected to recoup productivity equivalent to 90 full-time employees and deliver millions in annual cost savings.
• Repurchased $150 million of shares in Q4 at a weighted average price of $225, with $1.1 billion remaining in repurchase authorization, and ended the quarter with $4.8 billion in cash, cash equivalents, and investments.

Snowflake reports consolidated product segment results only in this call, no separate breakdown of multiple product segments. Q4 FY26 product revenue grew 30% year-over-year to $1.23 billion. Full year FY26 product revenue contributed to a 27% year-over-year growth target for FY27 total product revenue of $5.66 billion, with the recently acquired Observe segment contributing 1 percentage point of that FY27 growth. As of Q4 FY26, the AI product sub-segment had over 9,100 total accounts using AI capabilities, with 2,500 accounts using Snowflake Intelligence and 4,400 customers using Cortex Code. Core data cloud business contributed stable underlying growth, while AI workloads now provide an increasing step-up in overall growth contribution.

• Q1 FY27 product revenue is guided between $1.262 billion and $1.267 billion, representing 27% year-over-year growth.
• Full year FY27 product revenue is guided to approximately $5.66 billion, representing 27% year-over-year growth, with 1 percentage point of growth coming from the Observe acquisition. Guidance maintains Snowflake's historical stable forecasting philosophy based on observed customer consumption patterns, with confidence driven by stable core growth and expanding AI workload contribution.
• FY27 non-GAAP product gross margin is guided to 75%, Q1 non-GAAP operating margin is guided to 9%, and full year FY27 non-GAAP operating margin is guided to 12.5% (expanding 200 basis points from FY26).
• FY27 non-GAAP adjusted free cash flow margin is guided to 23%, including a 150 basis point headwind from the Observe acquisition. Bookings are expected to remain weighted to the fourth quarter, and free cash flow seasonality will mirror FY26 patterns.
• Stock-based compensation as a percentage of revenue is expected to decline further to 27% in FY27 from 34% in FY26.

No material unexpected underperformance or new material risks were explicitly discussed on the call. Management noted that all forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially, with additional risk detail available in Snowflake's recent SEC filings. The only potential risk discussed was customer concern around consumption-driven price unpredictability for new AI agent workloads, which management is addressing through upcoming product features like user and account-level consumption caps.

Q: What is the durability of the 27% FY27 growth guidance, and what is the growth momentum of AI offerings outside of the core business? / A: Guidance is based on observed stable core business growth, growing AI contribution, and the 1 percentage point addition from Observe, following Snowflake's long-standing consistent forecasting philosophy. Snowflake Intelligence, now with 2,500 customers, is a major cross-lifecycle growth driver that supports adoption by incentivizing enterprises to organize their data on Snowflake, and works with open data from external systems like AWS S3. Cortex Code is a transformative game-changer that accelerates every step of the data lifecycle by 10x or more, including data ingestion, pipeline building, debugging, and Snowflake Intelligence agent development, with extremely positive customer and partner feedback. (312 words)

Q: Can you describe the $400 million record deal, and is the strong Q4 bookings growth sustainable? / A: The $400 million+ deal is with an existing large financial services customer, and reflects deep customer buy-in to Snowflake's long-term AI and product roadmap, following previous large deals in the $250 million range. While the sales compensation plan was adjusted to include bookings incentives, this is a reversion to past practices, not a one-time change. Strong bookings growth is sustainable, driven by faster product innovation velocity that increases customer confidence in Snowflake as a long-term platform. Q4 had seven nine-figure deals, confirming broad strong demand, not just one outlier. (241 words)

Q: How does the Observe acquisition fit into Snowflake's observability market strategy? / A: Observability is a $50 billion+ market, and AI agent workloads generate massive volumes of log data that need analysis, making it a critical growing data problem that is a natural extension of Snowflake's data platform role. Observe was built natively on Snowflake, making integration very simple, and delivers far greater cost efficiency than traditional observability offerings, which is a major pain point for customers with large data volumes. There is large overlap between existing Snowflake customers and potential Observe customers, creating immediate cross-selling opportunities that make the acquisition highly complementary. (208 words)

Q: How do you address customer concerns about sticker shock from increased consumption from AI agents, and what is your approach to third-party agent workflows using Snowflake data? / A: Snowflake's consumption pricing model aligns costs with value delivered, as AI agents typically replace more expensive legacy tools that already deliver lower ROI. To add price predictability, Snowflake will soon launch per-user and per-account consumption caps for Snowflake Intelligence to limit customer exposure. For external agent workflows, interoperability across all stack layers is a core Snowflake principle: the company supports open standards like Iceberg, makes semantic models accessible to third parties, and Snowflake Intelligence agents can act as MCP servers for external agents, while still delivering a superior fully integrated experience for customers that build end-to-end on Snowflake. (235 words)