Snowflake Inc.: third straight quarter of product growth acceleration, yet GAAP losses remain the norm

2 сентября Snowflake Inc. раскрыла результаты за второй квартал 2027 финансового года (закончился 31 июля 2026): выручка выросла на 35,1% год к году до 1 546,8 млн долл., продуктовая выручка – на 37% до 1 491,9 млн долл., а чистый убыток сократился до -191,7 млн долл. с -298,0 млн годом ранее. Акции после публикации потеряли 4,4%, но затем отыграли рост на 5,4% к 4 сентября. Мы считаем бумагу скорее привлекательной: ускорение роста продукта и повышение прогноза по марже говорят о том, что компания наконец балансирует между экспансией и дисциплиной, хотя GAAP-прибыль всё ещё далека.

Key takeaways

— Product revenue accelerates for the third straight quarter: +37% YoY in Q2 FY2027

— GAAP loss narrows but remains deep: -$191.7M for the quarter vs -$298.0M a year earlier

— EBITDA margin improved from -24.9% to -12.6% YoY, but is still negative

— Operating cash flow for the last twelve months was $1,200M, but quarterly OCF is volatile: from $781M to $74.9M

— The company raised its full-year FY2027 product revenue growth guidance to 36% from 31%

— Net revenue retention rate was 126%, and the number of large customers grew 27% YoY

— Net debt is negative: -$2,366.9M, providing a cushion for investments

Attractiveness

Key figures, USD bn

Product revenue accelerates for the third straight quarter: +37% YoY in Q2 FY2027

In Q2 FY2027 (ended July 31, 2026), Snowflake Inc.'s product revenue reached $1,491.9M, up 37% YoY. This is the third consecutive quarter of acceleration: prior quarters saw growth of +33.5%, +30.1%, and +28.7%, respectively. The company attributes the acceleration to strong demand for its AI platform and increased consumption.

Total revenue grew 35.1% to $1,546.8M, in line with product revenue dynamics. Professional services and other revenue grew more modestly, but their share is small – about 4%.

Management raised its full-year FY2027 product revenue growth guidance to 36% from 31% previously, signaling confidence in sustaining the momentum. This is an important signal: the acceleration is not one-off but backed by operational drivers.

GAAP loss narrows but remains deep: -$191.7M for the quarter vs -$298.0M a year earlier

GAAP net loss in Q2 FY2027 was -$191.7M versus -$298.0M in the same quarter last year. The improvement of $106M is primarily due to revenue growth and slower growth in operating expenses.

Operating loss narrowed from -$340.3M to -$263.0M. Sales and marketing expenses grew 22%, R&D 15%, while revenue grew 35%. This indicates the company is gaining operating leverage.

Nevertheless, GAAP profitability remains elusive: the cumulative loss over the last twelve months (LTM) is approximately -$1.1B (sum of quarterly values). The main reason is significant stock-based compensation: for the quarter it was $423.6M, almost twice the operating loss.

EBITDA margin improved from -24.9% to -12.6% YoY, but is still negative

In Q2 FY2027, EBITDA margin was -12.6% versus -24.9% a year earlier. The improvement of 12.3 percentage points is the result of revenue growing faster than expenses.

In absolute terms, EBITDA for the quarter was -$194.3M versus -$285.4M a year earlier. It is still negative, but the trend is clear: the company is moving toward EBITDA breakeven.

Note that EBITDA excludes depreciation and stock-based compensation, so the GAAP operating loss is deeper. Nevertheless, the margin improvement is a key signal for investors watching the path to profitability.

Operating cash flow for the last twelve months was $1,200M, but quarterly OCF is volatile: from $781M to $74.9M

Over the last twelve months (LTM), Snowflake Inc.'s operating cash flow was $1,200M, significantly higher than the GAAP net loss over the same period. This is typical for companies with large non-cash expenses, primarily stock-based compensation.

However, quarterly OCF dynamics are highly uneven: from $781.2M in Q4 FY2026 to $74.9M in Q2 FY2025. In Q2 FY2027, OCF was only $91.4M, notably below the average level.

The reason for volatility is changes in working capital, particularly accounts receivable and deferred revenue. In Q2, accounts receivable increased by $146.6M, while deferred revenue decreased by $278.6M, compressing cash flow.

Capital expenditures in Q2 were minimal at $7.6M, so free cash flow was $83.8M (per the report). After adjustments for payroll taxes on stock transactions, adjusted free cash flow reached $92.3M.

The company raised its full-year FY2027 product revenue growth guidance to 36% from 31%

Snowflake Inc. raised its full-year FY2027 product revenue growth guidance to 36% from 31% previously. This corresponds to expected product revenue of $6,070M for the year.

At the same time, the company raised its non-GAAP operating margin guidance to 14.5% from 13.5%, indicating improved operational efficiency. The non-GAAP product margin guidance was maintained at 74.0%.

The guidance raise is a strong signal: management sees sustained demand and the ability to convert growth into margin. It also confirms that the Q2 growth acceleration was not a fluke.

Net revenue retention rate was 126%, and the number of large customers grew 27% YoY

Net revenue retention rate (NRR) was 126%, meaning existing customers on average increase platform consumption by 26% per year. This is a high figure for cloud software, confirming the product's value.

The number of customers with product revenue over $1M in the last twelve months reached 828, up 27% YoY. The company also added 692 net new customers in the quarter (+32% YoY), including 14 from the Forbes Global 2000 list.

Growth in NRR and the number of large customers are key drivers of revenue acceleration. They show that Snowflake Inc. is not only attracting new clients but also expanding relationships with existing ones, especially in AI workloads.

Net debt is negative: -$2,366.9M, providing a cushion for investments

On Snowflake Inc.'s balance sheet, cash and investments significantly exceed debt: net debt is -$2,366.9M (per the latest balance sheet). Negative net debt means the company is funding growth with its own resources.

Over the last twelve months, net debt decreased by $0.2B (in ruble equivalent), reflecting cash accumulation despite losses. The company also spent $300M on share repurchases in H1 FY2027.

Convertible notes of $2,284M (net) are the main debt instrument, but with current cash levels ($3,707M including short- and long-term investments), the debt burden is not a concern. This gives the company flexibility to invest in AI and acquisitions.

Valuation on the latest reported figures

Bottom line

Snowflake Inc.'s Q2 FY2027 report shows a rare combination: accelerating product revenue growth (+37% YoY) and margin improvement (EBITDA margin from -24.9% to -12.6%). The raise of the full-year guidance to 36% growth and 14.5% non-GAAP operating margin confirms that management sees sustained demand, especially in the AI segment. However, GAAP losses remain deep due to stock-based compensation, and operating cash flow is highly volatile, raising questions about earnings quality. At the same time, the company has negative net debt and a high NRR of 126%, providing a foundation for further growth. We view the shares as rather attractive: the key risk is the prolonged path to GAAP profitability, but current growth rates and margin improvement justify a premium to the market.