Snowflake Lifts 2027 Revenue Outlook to $6.07 Billion
Snowflake’s AI tools are driving a 37% acceleration in product revenue growth, prompting a raise in full-year 2027 guidance despite a slight dip in gross margins.
Snowflake raised its fiscal 2027 product revenue guidance to $6.07 billion from $5.84 billion, projecting 36% year-over-year growth. This upward revision follows fiscal Q2 2027 results where product revenue climbed 37% to $1.49 billion, marking the third consecutive quarter of accelerating growth. The company attributes this momentum primarily to its AI products, which are driving higher consumption across its core data platform.
The stock has surged 37% over the past three months, outperforming the S&P 500's 4.8% gain. According to GN stocks/sp500 data, this rally reflects investor confidence in the durability of consumption driven by AI workloads. However, management notes that these fast-growing AI tasks carry lower contribution margins, leading to a slight reduction in the expected non-GAAP product gross margin for the year.
AI Tools Drive Platform Consumption
Cortex Code and CoWork, the company’s primary AI agents, are central to this growth. These tools allow users to interact with enterprise data via conversational language, which management says increases overall platform usage. The AI product suite contributed roughly half of the recent growth acceleration. Large customers, including a major Australian bank and a network equipment manufacturer, are migrating workloads faster than anticipated, with one company completing in three quarters what previously took two to three years.
Margin Trade-Offs Offset By Efficiency
While gross margin guidance for fiscal 2027 was lowered to 74% from 75%, non-GAAP operating margin guidance was increased to 14.5% from 13.5%. This improvement stems from slower headcount growth and reduced agency spend, partly due to internal use of AI tools for tasks like marketing optimization and planning. Snowflake targets GAAP profitability for fiscal Q4 2028, balancing the lower margin profile of AI workloads with operational efficiencies.
Upcoming Report Tests Growth Durability
Management has guided fiscal Q3 2027 product revenue growth of 37% to 38%, a range that serves as a floor rather than a forecast. The company previously underestimated Q2 growth, guiding 30% when actuals hit 37%. Analysts will watch this upcoming report for evidence that consumption is sustained rather than pulled forward. If growth misses this elevated range, it would provide early evidence that the AI-driven surge may not be durable.
