Snowflake Inc (NYSE:SNOW) shares surged more than 15% in early trade on Thursday as the AI data cloud firm’s second quarter earnings impressed Wall Street.
Revenue was up 32% year-over-year at $1.1 billion, ahead of estimates of $1.09 billion.
Product revenue was up 32% year-over-year at $1.09 billion, with a net revenue retention rate of 125%.
Remaining performance obligations, a measure of future revenue, totaled $6.9 billion, up 33% year-over-year.
Earnings per share were $0.35, above estimates of $0.27.
Snowflake also raised its product revenue guidance for fiscal year 2026 to $4.395 billion, which reflects a 27% increase compared to the prior year. This is an upward revision from its previous forecast of $4.33 billion.
Operating margin guidance was increased to 9% from 8%, with Snowflake reaffirming its free cash flow margin target of 25%.
For the third quarter, Snowflake guided for product revenue between $1.125 billion and $1.13 billion, representing growth of 25% to 26%, above consensus estimates of $1.12 billion.
Its Q3 operating margin is expected to be around 9%.
Wedbush analysts described the second quarter as “another quarter of solid earnings, platform approach remains strong,” highlighting that Snowflake delivered “beats across the board by a strong product revenue beat while raising guidance for product revenue and operating margin which will be viewed positively by the Street.”
The firm raised its price target to $250 from $230, maintaining its ‘Outperform’ rating.
Analysts said they have “incremental confidence in Snowflake’s ability to capitalize on the AI Revolution over the next 12 to 18 months as the company is well-positioned to benefit from the significant acceleration of AI use cases while keeping this name on our AI 30 list.”
Customer momentum also remained strong, with total customer count reaching 12,062 versus Street expectations of 11,940, they noted.
Large customers spending more than $1 million annually grew 30% year-over-year to 654, while about 6,100 accounts are now leveraging Snowflake AI.
“AI remains a driver for customers choosing Snowflake, which influenced nearly 3% of new customer adds in the quarter,” the analysts wrote.
Wedbush also pointed to profitability trends, noting that non-GAAP operating margin of 11.1% came in well above guidance of 8% and Street expectations of 8.2%.
Gross margin was 73%, ahead of estimates, with product gross margin reaching 76.4%.
They see the company “focused on investing efficiently into capturing the opportunity ahead despite aggressively hiring across all functions of the business,” analysts wrote.
“Snowflake remains at the forefront of innovation with its cloud-based data platform providing advanced capabilities for data processing and warehousing while looking to simplify platform architectures for customers across all industries,” Wedbush concluded.