Snowflake Q1 Earnings Beat Estimates, Revenues Up Y/Y, Shares Rise

Snowflake SNOW reported first-quarter fiscal 2026 non-GAAP earnings of 24 cents per share, beating the Zacks Consensus Estimate by 9.09%. The company reported earnings of 14 cents per share in the year-ago quarter.

Revenues of $1.04 billion beat the consensus mark by 3.74% and rallied 25.7% 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.

Snowflake shares gained 10.88% in pre-market trading. Its shares have returned 16% against the Zacks Computer & Technology sector’s decline of 2%.

Top-Line Details

Snowflake’s product revenues contributed 95.7% to total revenues. The figure was $996.8 million, up 26.2% year over year.

Snowflake Inc. Price, Consensus and EPS Surprise

Snowflake Inc. price-consensus-eps-surprise-chart | Snowflake Inc. Quote

Professional Services and other revenues contributed 4.3% to total revenues. The figure was $45.3 million, up 15.7% year over year.

In the fiscal first quarter, Snowflake witnessed a net revenue retention rate of 124% for existing customers, down from 126% reported in the previous quarter.

The company reported 18.8% year-over-year growth in the number of customers, reaching 11,578 in the reported quarter. 

The company now has 606 customers with trailing 12-month product revenues greater than $1 million (up 27% year over year) and 754 Forbes Global 2000 customers (up 4% year over year). In the reported quarter, SNOW added 451 net new customers, representing a 19% increase year over year.

In the first quarter of fiscal 2026, the company expanded AI offerings significantly, with more than 5,200 accounts using AI/ML weekly.

Operating Details

The non-GAAP gross margin contracted 90 basis points (bps) year over year to 72.4%.

The product gross margin continued to expand, driven by product improvements, favourable cloud agreement pricing, improving scale and a growing enterprise customer base.

Research & development expenses, as a percentage of revenues, decreased 160 bps on a year-over-year basis to 22.9%.

General & administrative expenses, as a percentage of revenues, were 6.1%, down 80 bps year over year.

Sales and marketing expenses, as a percentage of revenues, declined 340 bps on a year-over-year basis to 34.3%.

Total operating expenses, as a percentage of revenues, were 63.4% compared with 69.1% reported in the year-ago quarter.

Operating income was $91.7 million in the reported quarter, compared with $36.2 million reported in the year-ago quarter.

Balance Sheet & Cash Flow

As of April 30, 2025, Snowflake had cash, cash equivalents and short-term investments of $3.91 billion compared with $4.63 billion as of Jan. 31, 2025.

The remaining performance obligations at the end of the first quarter of fiscal 2026 were $6.7 billion, up 34% year over year. Snowflake expects nearly 50% to be recognized as revenue over the next 12 months.

The adjusted free cash flow was $2.06 billion in the reported quarter compared with the previous quarter’s $4.23 billion.

Guidance

For the second quarter of fiscal 2026, Snowflake expects product revenues in the range of $1.03-$1.04 billion. The projection range indicates year-over-year growth of 25%.

The operating margin is expected to be 8% for the fiscal second quarter.

(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank & Stocks to Consider

Currently, Snowflake has a Zacks Rank #3 (Hold).

Broadcom AVGO, PagerDuty PD and GitLab GTLB are some better-ranked stocks that investors can consider in the broader sector. Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Broadcom shares have returned 25.8% year to date. AVGO is scheduled to release second-quarter fiscal 2025 results on June 5.

PagerDuty shares have lost 6.7% year to date. PD is set to report its first-quarter fiscal 2026 results on May 29.

Gitlab’s shares have lost 7.4% year to date. GTLB is set to release its first-quarter fiscal 2026 results on June 10.

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This article originally published on Zacks Investment Research (zacks.com).

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