Snowflake Boosts Growth by Doubling Down on AI

Key Points

• Snowflake added over 400 product capabilities in fiscal 2025, more than double its prior year.
• This helped generate a net retention rate of 126%; existing customers spend 26% more annually.
• Growth is moderating sequentially and on a year-over-year (YOY) basis.

While the artificial intelligence (AI) revolution relies on NVIDIA Co. NASDAQ: NVDA GPUs, low-latency networking and storage as critical components, the most essential component of all is data.

AI requires oceans of data for training and inference.

It's all about the data: storing, sharing, analyzing and managing it. Snowflake Inc. NYSE: SNOW is a data cloud platform provider in the computer and technology sector.

It enables enterprises to seamlessly manage and share their silo-free data across multiple cloud providers.

The company enjoys a net retention rate (NRR) of 126%, which means existing customers are spending 26% more on its products annually, which is driven by its triple-digit output of improvements.

Build AI Features, and They Will Buy

Snowflake has enjoyed hypergrowth driven by AI adoption and integration. Its CEO, Sridhar Ramaswamy, stated in the fiscal fourth quarter 2025 conference call that its blistering pace of innovation drives its growth: “This past year, we brought over 400 product capabilities to market, over double the amount we launched the previous year.” Product capabilities refer to new features, functionalities and enhancements added to its Data Cloud platform.

Some of these improvements include updates to Cortex and Snowpark, new AI models and cloud providers, and expanded technical abilities like faster queries and broadening data format support. The improvements also bolster upselling and expanding usage, which enhances loyalty. Over 3,200 customers are using its AI tool, Cortex and Snowpark.

Snowflake Is Growing Its Million-Dollar Client Base and RPOs

Snowflake has 745 Forbes Global 2,000 customers and has grown its client base, spending over $1 million on a trailing 12-month basis to 580 customers, up 27% year-over-year (YOY). Its remaining performance obligations (RPO) rose 33% YOY to $6.9 billion. 

These are subscription revenues that will be recognized over the remaining terms of existing contracts, which include deferred revenues (cash that’s already been collected) and backlog (expected future revenue). Snowflake typically bills customers on an annual basis, which they pay upfront, and recognizes the revenue monthly.

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Is Growth Slowing for Snowflake?

While the NRR was an impressive 126% in FQ4 2025, it actually fell sequentially from 131% in FQ3 and 128% in FQ1. While Snowflake’s FQ4 2025 revenue rose 28% YOY to $986.8 million, its early growth hit 173% YOY in fiscal 2020 to $265 million. FQ1 2025 revenues rose 33% YOY to $828.71 million.

Snowflake is definitely still growing, but the pace of growth is slowing down as it gets tougher to lap strong prior year quarters on a triple and double-digit basis. The market may be factoring in the slowing growth based on its 25.53% pullback from highs as of April 10, 2025. However, analysts still see a 36.6% upside to its $201.84 consensus price target.

Fiscal Q4 2025 Closed Out Strong

Snowflake closed out its fiscal 2025 on a strong note, reporting FQ4 earnings per share (EPS) of 30 cents, beating consensus estimates by 12 cents.

Revenues rose 28% YOY to $986.8 million, beating the $956.89 million consensus estimates. Product revenue rose 28% YOY, 943.3 million. 

Non-GAAP product gross profit margin was 76%. However, non-GAAP operating profit was $92.8 million for a 9% margin. Adjusted free cash flow was $423.51 million.

The company had 11,159 total customers, including well-known partners like NVIDIA, Microsoft Co. NASDAQ: MSFT and clients like AT&T Inc. NYSE: T and Honeywell International Inc. NASDAQ: HON. Its fiscal full-year 2025 revenues rose 30% YOY to $3.63 billion.

Fiscal 2026 Guidance Reflects Slowing Growth

Snowflake issued its fiscal 2026 guidance for $4.28 billion in product revenue, up 24% YOY. Non-GAAP product gross margin is expected at 75% and operating margin of 8%.

Snowflake Is Gaining Customers From Competitors Like Oracle

CEO Ramaswamy was very upbeat during the conference call, stating that Snowflake is the “most consequential data and AI company on the planet.” He provided some specific client use cases to demonstrate why. Many of their customers are saving upwards of 50% by migrating to their platform from Oracle Co. NYSE: ORCL and Teradata Co. NYSE: TDC.

Ramaswamy cited its competitive advantage, “Snowflake is also the de-facto circulatory system in the enterprise world. The ability to collaborate and share data is one of our core differentiators. We are seeing strong adoption of our data-sharing capabilities with customers like Stripe, NTT and Braze, which each have active data-sharing connections with over 160 partner and customer organizations. These connections enable them to securely exchange data with their partners and customers, driving value across our ecosystem.”