Snowflake (SNOW) Reports Strong Q1, Raises Full-Year Outlook

After the market closed on May 21, Snowflake Inc. (NYSE:SNOW) reported its FQ1 2026 results (FY ends in January), which were better than street expectations. It reported total revenue of $1.04 billion (+26% year-over-year) and Product revenue of $996.8 million, each beating consensus by over 3%.

It is worth mentioning here that Snowflake’s story mainly revolves around Product revenue, as they constitute over 95% of total revenue. The remaining performance obligations (RPO) at the end of the quarter stood at $6.7 billion, also ahead of the consensus, which had pencilled in $6.6 billion. RPO is a key indicator in the software industry to gauge future growth and broadly means future revenue under contract.

The company also delivered an impressive operating performance. Its adjusted operating margin expanded nearly 450 basis points year-over-year to 9%, helping the EPS grow 71% to $0.24 and exceed consensus by over 14%. SNOW generated an adjusted free cash flow of $206 million in the quarter, reflecting a free cash flow margin of 20%, down from 44% reported in the prior year quarter. Management attributed this dip to seasonality and expects better trends in the second half of the year.

Customer metrics were encouraging as well. SNOW added 451 new customers in the quarter, bringing the customer base to 11,578. While net revenue retention rate remained above 120%, customer quality continued to improve with 27% year-over-year growth in customers accounting for over $1.0 million in product revenue.

On the outlook, Snowflake Inc. (NYSE:SNOW) provided upbeat guidance for the next quarter and the full year. It expects Product revenue for Q2 to surge 25% year-over-year to $1.04 billion, which was modestly ahead of expectations. For the full year, it raised its Product revenue guidance to $4.33 billion, from $4.28 billion earlier. The management also expects to keep operating margin around 8% for the next year, which is up from 6% in FY 2025.

After the results, Kirk Materne, an analyst at Evercore ISI, commended the guidance raise amid the macroeconomic uncertainty, and believes it reflects positively on the near-term demand environment.

Snowflake Inc. (NYSE:SNOW) is a cloud-based data platform that helps organizations efficiently store, analyze, and share data. Its Data Cloud enables businesses to consolidate data in one secure and reliable place, driving innovation and valuable insights. The platform supports a variety of workloads, including data engineering, data science, and application development.

While we acknowledge the potential of SNOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SNOW and that has 100x upside potential, check out our report about the cheapest AI stock.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None.