Snowflake (SNOW) Q4 2026 earnings review
RPO Acceleration Signals Revenue Upside, While Margins Hit Inflection
Snowflake closed FY26 with a strong Q4: product revenue of $1.23B grew 30% YoY, sustaining the pace set throughout the year. The standout metric was RPO, which accelerated for a second straight quarter to $9.77B (+42% YoY), fueled by the largest deal in company history ($400M+) and 7 nine-figure contracts. Non-GAAP operating margin expanded 410bp YoY to 10.5% for the full year. Net new customer additions hit a record 740 (+40% YoY). AI adoption inflected meaningfully, with 9,100 accounts using AI features. FY27 guidance of $5.66B in product revenue (27% growth) includes ~1pp from the Observe acquisition, implying organic growth of ~26%—a slight deceleration from FY26's 29%. However, the massive RPO build suggests the guide may prove conservative.
🐂 Bull Case
RPO grew 42% to $9.77B—10+ points faster than product revenue. This gap has widened for two consecutive quarters. Historically, RPO leads revenue. With 7 nine-figure deals and the largest contract ever ($400M+), the backlog has never been this strong.
AI accounts reached 9,100 (+largest sequential increase ever). Snowflake Intelligence scaled to 2,500 accounts in just 3 months. Cortex Code has 4,400 customers. AI is influencing 50% of bookings. This isn't promotional—it's showing up in consumption and commitments.
Non-GAAP operating margin jumped from 6.4% to 10.5% in one year. SBC fell from 41% to 34% of revenue. FY27 guides to 12.5% operating margin and 27% SBC—the path to real profitability is visible and accelerating.
🐻 Bear Case
Stripping out Observe's ~1pp contribution, FY27 organic product revenue growth is ~26%, down from 29% in FY26. At $4.5B in product revenue, Snowflake is beginning to face the law of large numbers. The guide implies no acceleration despite the RPO build.
Snowflake lost $1.33B on a GAAP basis in FY26. SBC-related charges totaled $1.71B—36.5% of revenue. Even with the declining trend, FY27's guided 27% still means ~$1.6B in equity dilution. Non-GAAP profitability obscures the true cost structure.
The $600M acquisition of Observe is expected to contribute just ~1pp of revenue growth but creates a 150bp headwind to adjusted FCF margin (25.5% → 23%). Snowflake is spending real capital to enter the crowded $50B observability market against entrenched competitors.
⚖️ Verdict: 🟢
Bullish. This was Snowflake's strongest bookings quarter ever, with RPO momentum that clearly outpaces the revenue guide. AI adoption is genuinely inflecting—not just in accounts but in deal sizes and commitment lengths. The margin expansion story is credible and accelerating. The organic growth deceleration and persistent GAAP losses are real concerns, but the combination of durable ~27% growth, expanding margins, and a massive RPO reservoir makes a compelling case for sustained premium valuation.
Key Themes
Record Bookings Signal Deepening Enterprise Commitment
Q4 was Snowflake's strongest bookings quarter in history. RPO surged to $9.77B (+42% YoY), accelerating from 37% in Q3 and 33% in Q2. The company signed its largest deal ever—a $400M+ multi-year contract with a financial services customer—and closed 7 nine-figure deals in Q4 alone (vs 2 in Q4 FY25). These are not consumption spikes; they're long-term capacity commitments that reflect customers embedding Snowflake into their core data and AI strategies. The widening gap between RPO growth (42%) and product revenue growth (30%) suggests a building reservoir of future revenue that the current guide may understate.
AI Workloads Reaching Critical Mass
AI is transitioning from narrative to quantifiable growth driver. Over 9,100 accounts now use AI features weekly—the largest sequential increase ever. Snowflake Intelligence, launched just 3 months ago, has already reached 2,500 accounts (nearly doubling QoQ). Cortex Code is used by 4,400 customers and is being described by partners as transformational—one partner compressed '16 workweeks into less than a month.' Critically, AI influenced 50% of bookings in the quarter. Management noted AI workloads are a 'growing contribution' to the FY27 guide, though they carry lower product gross margins (75% guided vs 76% in FY26).
New Customer Engine Accelerating
Snowflake added 740 net new customers in Q4, up 40% YoY—the strongest quarter ever for new logo acquisition. Full-year additions totaled 2,339 across 13,300+ customers, including 15 new Forbes Global 2000 organizations in Q4. Equally important, the expansion engine is working: customers above $1M TTM spend grew 27% to 733, and those above $10M reached 56 (+56% YoY)—a record. The combination of a dedicated 'hunter' sales motion (implemented by CRO Mike Gannon) and AI-powered tools that shorten proof-of-concept timelines is producing results at both ends of the customer lifecycle.
Operating Leverage Becoming Structural
Non-GAAP operating margin expanded from 6.4% in FY25 to 10.5% in FY26—a 410bp improvement—and is guided to 12.5% in FY27. The efficiency gains are coming from multiple vectors: a Q4 reduction in force (~200 employees) where AI automation replaced headcount (Q4 net adds were just 37), SBC declining from 41% to 34% of revenue (27% guided for FY27), and internal AI tools projected to recoup the equivalent of 90 FTEs in productivity. Non-GAAP EPS grew 51% YoY to $1.25 in FY26, outpacing revenue growth—a clear sign that scale economics are kicking in.
Organic Growth Decelerating Beneath the Headline
FY27 product revenue guidance of $5.66B represents 27% growth, but approximately 1pp comes from the Observe acquisition, putting organic growth at ~26%. FY26 delivered 29% organic growth. The deceleration is modest and partially obscured by the Observe contribution, but it's real. Q1 FY27 guides to 27% growth, and the remaining quarters imply ~26.5%—no acceleration despite the massive RPO build. At Snowflake's scale, maintaining ~27% is impressive, but investors pricing in reacceleration should note the guide doesn't explicitly support that narrative. The company's guidance philosophy is conservative (based on 'observed behavior'), which historically has left room for upside.
GAAP Losses and SBC Remain Substantial
Snowflake reported a $1.33B GAAP net loss in FY26, with SBC-related charges of $1.71B (36.5% of revenue). While the trend is improving—SBC as a percentage of revenue is guided to 27% in FY27—the absolute dollar amount remains enormous. On a GAAP basis, Snowflake is deeply unprofitable. The non-GAAP weighted-average diluted share count rose from 363M to 372M YoY. The company repurchased $874M in stock in FY26, partially offsetting dilution, but net dilution continues. Until SBC compresses to mid-teens or below as a percentage of revenue, GAAP profitability remains years away.
Observe Acquisition: Meaningful Bet on Crowded Market
Snowflake acquired Observe for ~$600M in cash and stock, entering the $50B+ IT operations and observability market. It's expected to contribute just ~1pp of FY27 product revenue growth (~$45M) while creating a 150bp headwind to adjusted free cash flow margin (25.5% → 23%) and adding 178 employees in Q1. The observability market has entrenched incumbents (Datadog, Splunk/Cisco, New Relic). Snowflake's angle—Observe was built on Snowflake and offers cost advantages for high-volume data—is logical but unproven at scale. Integration risk is moderate given the native architecture, but the near-term financial drag is clear.
Platform Evolution: From Analytics Engine to AI Control Plane
Snowflake is systematically expanding its surface area. OpenFlow (GA) brings structured and unstructured data in. Snowflake Postgres (GA) adds transactional workloads. Cortex Code accelerates development. Snowflake Intelligence provides agentic access for business users. MCP server support enables interoperability with external agents. The company launched 430+ capabilities in FY26. CEO Ramaswamy is explicitly positioning Snowflake as 'the control plane for the agentic era.' This is an ambitious vision that, if executed, dramatically expands TAM. But it also means competing on many fronts simultaneously—databases, data engineering, AI platforms, and now observability.
Accounts Receivable Growing Faster Than Revenue
AR increased 41% YoY to $1.30B, significantly outpacing the 30% revenue growth. Approximate DSO increased from 84 to 91 days. The most likely explanation is the record Q4 bookings activity—7 nine-figure deals generate large invoices near quarter-end. Current deferred revenue grew 30%, roughly in line with revenue, which is healthy. This is likely a timing issue rather than a collection problem, but it warrants monitoring. If AR continues to outpace revenue in coming quarters without a corresponding acceleration in deferred revenue, it could signal billing vs. consumption misalignment.
Strategic Partnership Ecosystem Deepening
Snowflake continues to build moats through partnerships. The quarter saw a $200M expanded partnership with OpenAI, deepening of the Anthropic integration, and native access to Google's Gemini models—making Snowflake the only platform to host all three leading AI model providers natively. The SAP landmark partnership is driving real customer wins (Expand Energy). Cloud partnerships are strong: Snowflake surpassed $2B in AWS Marketplace sales in a single year. Accenture committed 5,000+ trained professionals. These partnerships create ecosystem lock-in and expand go-to-market reach without proportional sales expense.
Other KPIs
FCF surged 84% YoY from $415M in Q4 FY25, driven by strong collections on the massive Q4 bookings. Full-year FCF reached $1.12B (24% margin), up 27% from $884M. Adjusted FCF was $1.19B (25.5% margin). Q4 seasonality was pronounced—68% of full-year FCF came in Q4, up from 47% the prior year. FY27 adjusted FCF margin is guided to 23%, reflecting the Observe headwind, but absolute FCF should still grow to an estimated ~$1.4B.
Declining. Down from 76% in Q4 FY25 and 75.8% for full-year FY26. The compression is directly attributed to AI workloads, which carry lower margins than the core business. Management is offsetting this by finding efficiencies in the core (free pool optimization, storage lifecycle policies). FY27 guides to 75%, suggesting AI mix shift will continue to weigh. The company's philosophy is clear: drive adoption first, then optimize margins. At 75%, product gross margins remain healthy for a consumption cloud platform.
Stable. NRR has been in a tight 124-126% range for five consecutive quarters. This reflects healthy expansion within existing accounts—customers continue to grow consumption at a meaningful rate. The stability is notable given the rapid new customer additions (40% YoY), which will eventually enter the NRR cohort with smaller initial bases. The 56% growth in $10M+ customers (now 56 total) shows the high end of the base is expanding faster than the overall retention metric suggests.
The company repurchased 3.8M shares at an average of approximately $230 in FY26. In Q4 specifically, $150M was used to buy ~668K shares at ~$225 average. $1.1B remains on the current authorization. Combined with $4.8B in cash and investments, the balance sheet supports continued buybacks alongside strategic M&A. FY26 buybacks were significantly lower than FY25's $1.93B, reflecting higher share prices and the Observe acquisition.
Guidance
Stable. The 27% guide includes ~1pp from Observe, implying organic growth of ~26% vs FY26's 29%. The guide is built on 'observed customer behavior' with no changes to guidance philosophy. Consistent ~27% growth is implied across all quarters (Q1 guided at 27%, remaining Q2-Q4 implied at ~26.5%). The gap between 42% RPO growth and 27% revenue guidance is the widest it's been—historically, Snowflake beats initial guidance by 3-4pp through the year. At the beginning of FY26, they guided 24% and delivered 29%.
Stable. The midpoint of $1,264.5M implies +3.1% sequential growth from Q4's $1,226.6M. At Q1 FY26 ($996.8M), the YoY growth comes in at 27%—consistent with full-year guidance. Q1 is typically the lightest quarter seasonally and faces the impact of the Q1-weighted Observe headcount addition (178 employees), which is why operating margin is guided at 9% vs 12.5% for the full year.
Accelerating. Up 200bp from FY26's 10.5%. The Q1 dip to 9% reflects seasonal hiring concentration (including 178 Observe employees) and likely the annual sales kickoff expense. The back-half ramp to achieve 12.5% for the year implies Q2-Q4 margins of ~14%, which would be new territory. SBC is expected to decline from 34% to 27% of revenue, with the company citing AI-driven productivity gains and a Q4 reduction in force of ~200 people as structural efficiency improvements.
Decelerating. Down from 25.5% in FY26, primarily due to a 150bp headwind from the Observe acquisition. Excluding Observe, the underlying FCF trajectory would be ~24.5%—roughly flat with FY26. Seasonality will mirror FY26, with 60%+ of cash collection concentrated in Q4. On an absolute basis, the ~$1.36B implied adjusted FCF still represents meaningful cash generation and growth from FY26's $1.19B.
Key Questions
Current RPO Breakdown
RPO surged 42% to $9.77B, but you didn't disclose current RPO (to be recognized in the next 12 months). With the $400M+ mega-deal and longer contract durations, how much of the RPO acceleration is driven by longer contract terms vs. genuine consumption acceleration? What is cRPO growth?
AI Revenue Quantification
You disclosed a $100M AI revenue run rate in Q3 FY26 but provided no update this quarter despite significant adoption gains. Where does AI revenue stand now? What percentage of total product revenue is AI-influenced consumption vs. core analytics?
Observe Revenue Trajectory
At ~1pp of growth on a $4.47B base (~$45M), Observe contributes modestly relative to its $600M price tag. What is the 3-year revenue target? When does it reach breakeven? How do you plan to compete against Datadog and Splunk in a market where they have deep moats?
NRR Floor Amid Rapid New Customer Growth
NRR has been range-bound at 124-126% for five quarters while net new customer adds accelerated 40% YoY. As these newer, smaller customers enter the NRR cohort, is there a risk NRR drifts lower even as the underlying business remains healthy? What NRR level would concern you?