Cloud data analytics platform provider Snowflake (SNOW.US) released its latest financial results on Wednesday Eastern Time. While the company's product revenue forecast for fiscal year 2027 surpassed Wall Street expectations and artificial intelligence (AI) demand continues to drive business growth, its stock price fell more than 3% in after-hours trading. Concerns persist in the market regarding whether traditional software companies can maintain growth momentum in the AI era.
AI-Driven Performance Growth The financial report indicates that Snowflake expects product revenue for the fiscal year ending January 31, 2027, to reach $5.66 billion, exceeding the analyst average estimate of $5.50 billion. The company's product revenue forecast for the first quarter also surpassed market expectations, projected to be between $1.26 billion and $1.27 billion, compared to the prior analyst estimate of $1.23 billion. Currently, enterprise clients are increasingly migrating workloads to the cloud and boosting investments to develop AI applications, providing sustained growth momentum for companies like Snowflake.
Snowflake primarily provides software for organizing, analyzing, and storing corporate data in the cloud. CEO Sridhar Ramaswamy has been focused on expanding the company's product portfolio, particularly by adding tools within its platform that can apply AI technology to stored data. According to Ramaswamy, the Snowflake Intelligence smart agent platform launched last November already serves over 2,500 customers. The company also secured its "largest single deal ever," valued at over $400 million, although the client's name was not disclosed.
In its competition with AI unicorn Databricks, Snowflake has recently undertaken a series of strategic moves. The company has signed separate multi-year agreements worth $200 million each with AI firms OpenAI and Anthropic to integrate their advanced models into its own platform, aiming to accelerate enterprise AI adoption. Additionally, Snowflake acquired application monitoring platform Observe for $600 million to enhance troubleshooting capabilities for software, systems, and data performance.
For the fourth quarter ended January 31, Snowflake's product revenue increased approximately 30% year-over-year to $1.23 billion, surpassing the expected $1.18 billion. Adjusted earnings per share were 32 cents, also higher than the anticipated 27 cents.
Market Doubts Remain However, these positive figures have not entirely dispelled market concerns. Snowflake's stock has declined approximately 23% year-to-date, reflecting widespread Wall Street apprehension about the software industry's prospects in the AI era. Furthermore, many analysts believe AI's contribution to Snowflake's platform revenue remains relatively limited. In December, the company disclosed that its AI products had achieved an annual recurring revenue exceeding $100 million.
"Investors are currently skeptical of all software companies," stated D.A. Davidson analyst Gil Luria. "But as Snowflake continues to demonstrate accelerating growth throughout the remainder of the year, we believe investors will eventually recognize that the company is benefiting significantly from AI growth."
New Chief Financial Officer Brian Robins emphasized that the quarter's performance reflects the success of the company's strategy focused on two fundamental growth drivers: acquiring new customers and developing them into strategic, long-term clients. The remaining performance obligation (RPO), a measure of bookings, reached $9.77 billion for the fourth quarter, significantly higher than the average expectation of $8.28 billion. The company currently serves over 13,000 customers, including prominent firms such as Figma (FIG.US) and BlackRock (BLK.US).