Snowflake Inc. (NYSE: SNOW) experienced a dramatic surge in after-hours trading on Wednesday, with shares climbing 22.4% to $374.21 as of 19:27 EDT. The jump followed the company's fiscal second-quarter earnings report, which revealed stronger-than-expected revenue growth and an upbeat revision to its full-year forecast.
The stock's rally translates to an approximate $23.9 billion increase in equity value, based on the company's 349.3 million weighted-average basic shares. This market reaction far exceeds the $230 million upward adjustment to Snowflake's annual product-revenue guidance, signaling that investors are pricing in multiple positive factors, including accelerated growth and improved profitability.
Revenue Acceleration Driven by AI
Snowflake reported product revenue of $1.49 billion for the quarter, a 37% year-over-year increase. This marks the third consecutive quarter of growth acceleration, a trend that Chief Financial Officer Brian Robins highlighted as evidence of robust demand for the company's core data platform and its artificial intelligence (AI) capabilities.
Total revenue rose 35% to $1.55 billion, surpassing analysts' consensus estimate of $1.48 billion, according to FactSet data. Adjusted earnings per share came in at $0.62, well above the projected $0.45.
Guidance Raised for Fiscal 2027
Looking ahead, Snowflake management provided a optimistic outlook. For the fiscal third quarter, the company projects product revenue between $1.588 billion and $1.593 billion, implying growth of 37% to 38% year-over-year. The adjusted operating margin is expected to be 15.5%.
For the full fiscal year 2027, Snowflake lifted its product-revenue forecast to $6.07 billion, up from the previous $5.84 billion, representing a 36% growth rate compared to the earlier 31% projection. The company also raised its adjusted operating margin guidance to 14.5%, up from 13.5%.
Customer Growth and Adoption Metrics
The earnings report underscored Snowflake's success in expanding its customer base. The company added over 2,000 new accounts during the quarter, bringing its total to more than 9,100. Additionally, Snowflake reported 828 customers generating over $1 million in annual revenue, a 27% increase from the same period last year.
However, the company's contracted backlog offered a more cautious signal. Remaining performance obligations (RPO) stood at $9.00 billion, a 30% increase year-over-year but down from $9.21 billion at the end of the April quarter.
Profitability and Risk Considerations
Despite the positive revenue momentum, Snowflake continues to grapple with profitability challenges. The company reported a GAAP operating loss of $263 million, with stock-based compensation expenses totaling $456 million, representing 29% of revenue. On an adjusted basis, operating income reached $237 million, yielding a margin of 15.3%.
Investors should note that Snowflake recognizes revenue based on customer usage patterns, which can fluctuate period to period. The company's backlog does not guarantee when that usage will occur. Following this significant rally, the stock's valuation leaves little room for error if growth were to decelerate again.
Snowflake's performance comes amid a broader AI-driven rally in tech stocks, with companies like Nvidia and Dell also seeing gains on AI-related news. The market's enthusiasm for AI infrastructure and data platforms appears to be a key driver of Snowflake's resurgence.
