Snowflake (SNOW) delivered solid fiscal Q2 results with the company's Product revenue growth increasing to 37% year on year from 34% in Q1, BofA Securities said in a note Thursday.

The investment firm said that the key debate ahead of Q2 results was whether the company's Product revenue would keep growing, which it did, and Snowflake's Q3 outlook also implies more acceleration.

Also, Snowflake's management has now issued guidance for Q3 Product revenue growth of between 37% and 38%, and "assuming execution remains consistent with recent trends, even a modest 2% beat would place growth above 40%, below the 5%+ beat rates delivered in each of the past two quarters," the note said.

BofA added that investors will now increasingly expect Product revenue growth between the high-30s and the low-40s, which should support a rerating.

The investment firm noted the main downside risk for Snowflake is if the market views fiscal 2027 strength as unsustainable and starts expecting a potential slowdown in fiscal 2028. BofA said, however, that it believes that risk is "limited" due to the strength of the company's remaining performance obligations, as well as "AI product adoption, and faster cohort ramps."

BofA reiterated the company's buy rating and lifted the price target to $470 from $395.

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