Snowflake expects annual product revenue above estimates as AI boosts demand
The company logo for Snowflake Inc. is displayed on a banner to celebrate the company's IPO at the New York Stock Exchange (NYSE) in New York, U.S., September 16, 2020. REUTERS/Brendan McDermid
Feb 25 : Snowflake forecast fiscal 2027 product revenue above Wall Street estimates on Wednesday, as booming enterprise demand for artificial intelligence tools drives clients to the company's cloud-based data analytics platform.
Enterprise clients are increasingly shifting their workloads to the cloud while making investments to develop AI applications, boosting demand for companies like Snowflake.
Shares dropped about 2 per cent in extended trading after Snowflake's results and forecasts failed to impress investors amid market fears that the growing use of AI tools would erode demand for traditional software.
"Investors are skeptical about all software companies right now ... As Snowflake continues to accelerate throughout the rest of the year, we would expect investors to realize Snowflake is benefiting significantly from the growth of AI," said D.A. Davidson analyst Gil Luria.
Snowflake offers a platform where clients store and integrate their data in one place to generate business insights, build AI tools and solve crucial operational problems.
The company made its Snowflake Intelligence agentic platform available in November. It is now adopted by more than 2,500 customers, CEO Sridhar Ramaswamy told Reuters.
"We also signed the largest deal in our history of over $400 million," Ramaswamy said, without disclosing the client name.
Snowflake expects product revenue of $5.66 billion for the fiscal year ending January 31, 2027, above analysts' average estimate of $5.50 billion, according to data compiled by LSEG.
First-quarter product revenue forecast of $1.26 billion to $1.27 billion came in above estimates of $1.23 billion at its midpoint.
It expects fiscal 2027 product gross margin of 75 per cent, while it reported fiscal 2026 product gross margin of 75.8 per cent.
The company, which competes with AI startup Databricks, has struck two separate multi-year $200 million deals with both OpenAI and Anthropic to integrate their advanced models into its platform for boosting enterprise AI adoption.
Snowflake bought app-monitoring platform Observe for $600 million in a cash-and-stock deal, seeking to enhance its ability to troubleshoot software, system and data performance issues.
The company, which has more than 13,000 clients, including names such as Figma and BlackRock, said its fourth-quarter product revenue rose about 30 per cent to $1.23 billion, beating estimates of $1.18 billion.
Adjusted earnings per share of 32 cents beat estimates of 27 cents.
