A month has gone by since the last earnings report for Snowflake Inc. (SNOW). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Snowflake due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
Snowflake Q2 Earnings Beat Estimates, Revenues Up Y/Y
Snowflake reported second-quarter fiscal 2026 non-GAAP earnings of 35 cents per share, beating the Zacks Consensus Estimate by 34.62%. The company reported earnings of 18 cents per share in the year-ago quarter.
Revenues of $1.15 billion beat the consensus mark by 5.51% and rallied 31.8% year over year. Americas, EMEA (Europe, the Middle East and Africa) and APJ (Asia Pacific and Japan) contributed 78%, 16% and 6% to revenues, respectively.
SNOW’s Q2 Details
Snowflake’s product revenues contributed 95.2% to total revenues. The figure was $1.09 billion, up 31.5% year over year. Professional Services and other revenues contributed 4.8% of total revenues. The figure was $54.5 million, up 37.7% year over year.
In the fiscal second quarter, Snowflake saw a net revenue retention rate of 125% for existing customers. The company reported 19% year-over-year growth in the number of customers, reaching 12,062 in the reported quarter. The company now has 654 customers with trailing 12-month product revenues greater than $1 million (up 27% year over year) and 751 Forbes Global 2000 customers.
The non-GAAP gross margin contracted 10 basis points (bps) year over year to 72.8%. Product gross margin was 76% in the reported quarter.
Research & development expenses, as a percentage of revenues, decreased 420 bps on a year-over-year basis to 21.6%. General & administrative expenses, as a percentage of revenues, were 6%, down 80 bps year over year. Sales and marketing expenses, as a percentage of revenues, declined 130 bps on a year-over-year basis to 34.2%.
Operating margin expanded 610 bps on a year-over-year basis to 11.1%.
SNOW’s Balance Sheet & Cash Flow Details
As of July 31, 2025, Snowflake had cash, cash equivalents and short-term investments of $3.59 billion compared with $3.91 billion as of April 30.
The remaining performance obligations at the end of the second quarter of fiscal 2025 were $6.9 billion, up 33% year over year. Snowflake expects nearly 50% to be recognized as revenue over the next 12 months.
The adjusted free cash flow was $67.8 million in the reported quarter.
SNOW Offers Positive Guidance
For the third quarter of fiscal 2026, Snowflake expects product revenues in the range of $1.125-$1.13 billion. The projection range indicates year-over-year growth between 25% and 26%. The operating margin is expected to be 9% for the fiscal third quarter.
For fiscal 2026, Snowflake expects product revenues of $4.395 billion, indicating 27% year-over-year growth. Product gross margin expected to be 75%, operating margin of 9% and free cash flow margin of 25%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Snowflake has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock has a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Snowflake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Snowflake belongs to the Zacks Internet - Software industry. Another stock from the same industry, Workday (WDAY), has gained 6.2% over the past month. More than a month has passed since the company reported results for the quarter ended July 2025.
Workday reported revenues of $2.35 billion in the last reported quarter, representing a year-over-year change of +12.6%. EPS of $2.21 for the same period compares with $1.75 a year ago.
For the current quarter, Workday is expected to post earnings of $2.12 per share, indicating a change of +12.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Workday. Also, the stock has a VGM Score of C.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Snowflake Inc. (SNOW): Free Stock Analysis Report Workday, Inc. (WDAY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
