Snowflake (NYSE: SNOW) continues to prove it is more than a data warehouse company. In the second quarter of fiscal 2026, revenue reached $1.1 billion, up 32 percent year over year, with product revenue accounting for $1.09 billion. The company reported a net revenue retention rate of 125 percent, showing that existing customers are not just staying but meaningfully increasing their spending. Snowflake now counts 654 customers generating over $1 million in product revenue across the past 12 months and serves 751 companies from the Forbes Global 2000. Remaining performance obligations rose to $6.9 billion, also growing 33 percent year over year — a strong indicator of future revenue visibility.
AI Demand Fuels Growth, but With an Expensive Cost Structure
Snowflake's evolution from a cloud data warehouse to a full-scale AI Data Cloud is the core of its current growth story. Thousands of customers are now using Snowflake’s AI capabilities weekly, including model fine-tuning, retrieval-augmented generation, vector search, and predictive analytics. However, each of these services increases computational demand, and as workloads scale, spending can rise faster than budgets, creating friction with customers focused on cost control.
According to Alex Kugell, Chief Technology Officer at Trio, Snowflake’s competitive strength lies in its ability to keep data centralized, secure, and query-ready across different cloud environments. He notes that developers appreciate Snowflake’s structured governance, ease of deployment, and native AI integration. However, he also points to one of the platform’s most persistent challenges: compute efficiency. Unlike open data lake platforms or on-premise systems, Snowflake charges per second of compute usage, and AI workloads require sustained compute sessions, sometimes leading to unpredictable bills. Kugell believes Snowflake's next phase of success will depend on whether it can give enterprises the benefits of AI-native infrastructure without inflating total cost of ownership.
Platform Stickiness Is Still Strong, but Competition Is Catching Up
Net revenue retention at 125 percent reflects deep customer loyalty, but it has come down from the 150 percent range during the pandemic era. This indicates that while customers continue to expand usage, they are no longer scaling data consumption at the same explosive pace. Snowflake has responded by moving beyond just storage and analytics toward application platforms, AI automation, and developer services. This includes Snowpark, Cortex AI, and Native Apps — tools that allow developers to build AI-powered data applications directly within Snowflake’s environment.
However, competition is no longer just legacy data firms. Snowflake now competes with Databricks, which combines lakehouse architecture with fast AI model training; Google BigQuery, which offers deep integration with Vertex AI; and Microsoft’s Fabric platform, which ties data, analytics, and AI into one ecosystem. The core question is whether Snowflake’s architecture — which separates compute and storage — remains the superior approach in a world where AI relies heavily on unstructured and semi-structured data.
Financial Strength and Emerging Profitability
While Snowflake is not yet traditionally profitable on a GAAP basis, it has strong cash reserves and operates with disciplined capital spending. The company’s path to profitability relies on expanding its margin profile as AI services scale. Gross margins remain high because Snowflake does not own physical infrastructure; instead, it runs on public cloud providers like AWS, Google Cloud, and Microsoft Azure. This asset-light model helps preserve capital flexibility but also means Snowflake shares revenue with hyperscalers.
Remaining performance obligations of $6.9 billion demonstrate high visibility into future revenue. The number of large-scale enterprise customers is rising steadily — up 30 percent year over year among those contributing over $1 million annually. This reinforces the narrative that Snowflake is deeply embedded in the digital infrastructure of the modern enterprise.
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