Q4 2025 Summary
Published Feb 27, 2025, 8:27 PM UTC- Expecting acceleration in product revenue growth in the second half of fiscal year 2026, driven by a strong core business, new products entering production, and new customer acquisitions starting to contribute.
- Continued momentum with large customers, with growth in the number of $1 million, $5 million, and $10 million customers. The sales organization has improved in identifying new workload opportunities, and professional services are enhancing migrations, which will drive new workloads next year.
- Customers are consuming more than their contracted capacity, indicating higher-than-expected usage. This increased consumption is a positive sign, suggesting that customers are in a happy place and demand for Snowflake's services is growing.
- Net Revenue Retention Rate may decline to 124%, down from 126%, indicating potential slowing growth from existing customers. Michael Scarpelli mentioned, "I think NRR is pretty stable. I'm not saying it's not going to go to 125% or 124%, but I don't really see it. It's going to be in the mid-120s is what we are predicting."
- Some large customers have exhausted their commitments but have not immediately renewed, possibly leading to uncertainties in customer renewals and revenue timing. Michael Scarpelli stated, "We just had a few big customers that that happened to in this quarter, and I fully expect, sometime over the next month to 6 months, those people will sign new contracts."
- Increasing product complexity may hinder sales effectiveness, as it is becoming unreasonable for anyone to expect to know everything Snowflake offers. Sridhar Ramaswamy said, "We are at a place where it's pretty unreasonable for anyone to expect that they're going to know everything that Snowflake does."
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +27% YoY | Total Revenue increased to $986.77M from $774.70M, driven by strong product adoption and heightened customer activity relative to Q4 2024. This further builds on prior period momentum with additional platform consumption and enterprise upgrades contributing to revenue gains. |
Operating Income (EBIT) | ~40% further decline | Operating losses deepened to –$386.68M versus –$275.51M, primarily due to significantly higher operating expenses including R&D and sales & marketing. These cost increases, consistent with prior period investments, have now outpaced revenue growth, indicating ongoing margin pressures. |
Net Income | ~92% relative deterioration | Net Income worsened to –$325.72M from –$169.35M as the larger loss was driven by higher operating expenses, increased stock-based compensation, and additional charges compared to Q4 2024. This deterioration underscores deeper cost burdens relative to the previous period’s performance. |
EPS – Both Basic and Diluted | Nearly doubled (from –$0.51 to –$0.99) | EPS declined significantly due to the larger net loss and a slightly higher weighted-average share count. The increased losses per share reflect the compounding effects of higher expenses and dilution effects that built on trends seen in the prior period. |
Net Change in Cash | –47% YoY decline | Net cash decreased to +$532.44M from +$1,007.60M mainly because of reduced cash flows from financing activities and a less favorable mix of investing activities. The decline suggests that, despite healthy operating cash gains, increased investment outflows and strategic financing moves have reduced the net cash buildup compared to Q4 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Product Revenue | Q1 2026 | no prior guidance | Between $955 million and $960 million, representing 21% to 22% year-over-year growth | no prior guidance |
Non-GAAP Operating Margin | Q1 2026 | no prior guidance | 5% (which includes approximately $15 million in expenses for the annual sales kickoff event) | no prior guidance |
Product Revenue | FY 2026 | no prior guidance | Approximately $4.28 billion, representing 24% year-over-year growth | no prior guidance |
Non-GAAP Product Gross Margin | FY 2026 | no prior guidance | Approximately 75% | no prior guidance |
Non-GAAP Operating Margin | FY 2026 | no prior guidance | 8% | no prior guidance |
Non-GAAP Adjusted Free Cash Flow Margin | FY 2026 | no prior guidance | 25% | no prior guidance |
Stock-Based Compensation (SBC) as a Percent of Revenue | FY 2026 | no prior guidance | Expected to decrease to approximately 37% from 41% in FY 2025 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Accelerating product revenue growth | Consistently emphasized every quarter – Q1 reported 34% YoY growth , Q2 at 30% YoY with guidance raised , and Q3 showed $900 million at 29% YoY growth. | Q4 highlighted a 28% YoY increase with strong contributions from new products (Snowpark at 3% of FY ’25 revenue) and improved customer acquisition driving revenue. | Recurring and consistently positive. The growth story remains strong though the percentage slightly fluctuates, reflecting steady optimism. |
Core business performance | Every period underscored a robust core – Q1 showcased strong customer expansion and 7/10 top accounts growing , Q2 described the core as “rock solid” with healthy consumption patterns , and Q3 noted a stable 127% net revenue retention with broad-based consumption. | In Q4, the core remains strong with a 126% net revenue retention rate, large customer upgrades, and clear visibility from customer migrations, reinforcing the stable consumption trends. | Consistent and resilient. The sentiment remains very positive over all periods with only minor shifts in emphasis. |
Large customer deal dynamics | Q1 emphasized landmark deals including a $100 million agreement , Q2 noted two 9–figure renewals from existing customers with a focus on expansion , and Q3 highlighted several high‐value deals and structured renewals. | Q4 noted a growing number of large deals – citing an increased count of $1M, $5M, and $10M customer accounts – and detailed nuanced renewal dynamics where customers who run out of capacity sign on for new commitments soon, aided by a focused sales approach. | Recurring focus with amplified detail. The large customer segment remains critical, with Q4 emphasizing even more granular dynamics in renewals and deal sizes. |
New product innovation | Across Q1 through Q3, new products like Snowpark, Cortex AI, and Iceberg were consistently highlighted—with early adoption metrics (e.g. Cortex adoption by hundreds of customers, Snowpark contributing ~3% revenue in Q1/Q2). | In Q4, Snowflake reiterated robust innovation: Snowpark continues to contribute 3% of revenue; Cortex AI sees usage by 4,000+ weekly and Iceberg shifts from a headwind to a revenue tailwind, even as some uncertainty about short-term AI revenue impact persists. | Recurring with evolving nuance. Innovation remains a strong focus; though adoption is steady, there is emerging uncertainty about immediate monetization of AI products. |
Sales organization effectiveness | Q1 mentioned efforts to drive execution and align go‐to-market teams ; Q2 focused on prosecuting new use cases under an enhanced incentive plan ; Q3 detailed a strong capability in identifying new workloads and establishing a pipeline. | Q4 further strengthens the narrative with Michael Scarpelli highlighting that the sales team has “built up a lot of muscle” in identifying new workload opportunities, supported by the introduction of specialist teams and a dedicated Sales Engineering group. | Steady and positive. Sales effectiveness has been a consistent strength, with Q4 showing further refinement and specialization. |
International and vertical market expansion | Q1 mentioned broad‐based vertical growth with strong contributions from financial services, tech and healthcare ; Q2 included active international engagement (U.K., Germany, Canada) and vertical strength in financial services and technology ; Q3 provided detailed regional breakdowns. | Q4 pointed to EMEA as a strong market and reiterated that financial services remained the top vertical while technology customers outperformed, indicating a sustained focus on both regions and industry verticals. | Consistent with slight shift. While the focus on verticals is perennial, Q4 emphasizes EMEA strength and reaffirms financial services leadership. |
Margin pressures and cost challenges | Q1 detailed increased GPU costs and AI-related expenses (lowering margin guidance) ; Q2 provided an in-depth discussion on GPU constraints impacting the 76% non-GAAP product margin and noted regional GPU supply issues ; Q3 mentioned cost management efforts albeit less detailed. | In Q4, margin pressures remain a topic with a focus on improved outlook—expectations of easier GPU access and growing AI revenue to benefit margins while still managing cost challenges, with non-GAAP operating margin at 9% and product gross margin guidance near 75%. | Recurring with improvement expectations. GPU and AI cost pressures persist, yet the tone in Q4 suggests anticipated relief and stabilization. |
Increasing product complexity | Not mentioned in Q1, Q2, or Q3. | Q4 introduced product complexity as a challenge for sales effectiveness, leading to the creation of specialist teams and “colleges” to improve expertise among team members. | New topic. This is an emerging focus in Q4 as increasing product breadth necessitates deep specialization to maintain sales effectiveness. |
Fluctuating customer usage growth | Q1 noted seasonal fluctuations with variable daily usage (e.g., muted April due to holidays) ; Q2 reported stable buying patterns and consistent consumption trends ; Q3 observed stabilized net revenue retention (127%) and the positive impact of new features. | Q4 emphasized that large customers are exhausting their committed capacity early—a positive sign of robust usage—with customers purchasing additional capacity as needed, maintaining strong core consumption and a 126% retention rate. | Recurring and reinforcing. Evolving consumption patterns continue to be monitored, with Q4 highlighting positive signs of usage even if driven by early consumption patterns. |
Decline in deferred revenue and revenue beat momentum deceleration | Q1 discussed a decline in deferred revenue due to seasonality and noted some momentum deceleration in April, balanced by strong results overall ; Q2 and Q3 did not significantly focus on these issues. | This topic is not mentioned in Q4. | No longer a focus. The discussion of deferred revenue decline and beat momentum deceleration has dropped out in Q4, suggesting it is less of a concern or has been absorbed into other performance narratives. |
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Customer Contract Renewals
Q: Do you expect large customers not renewing to sign new contracts?
A: Yes, we fully expect these customers to sign new commitments. In Q4, some large customers exhausted their capacity commitments before their contracts ended, which is a normal occurrence. They have two options: do an early renewal with a new capacity purchase, or continue purchasing under the same terms until the end of their contract, after which they'll make a new capacity purchase equal to or greater than before. We anticipate they will sign new contracts within the next month to six months. -
Guidance Optimism
Q: What's driving the second-half acceleration optimism?
A: The acceleration is driven by both the strength of our core business and new products going into production. We're also seeing positive impact from new customer acquisitions, which will start contributing in the second half. Planned migrations from existing customers give us good visibility, and we feel confident about the second half of the year. Our Q1 guidance seems low due to one less business day because of leap year, which affects revenue growth. -
Enterprise Partnerships
Q: How should we interpret partnerships with ServiceNow, Salesforce, and SAP?
A: We have bidirectional integrations with partners like ServiceNow and Salesforce, allowing customers to bring data into Snowflake smoothly. We're uniquely positioned as a central, efficient data repository, giving customers choice over where their data resides. Regarding SAP, we're working with them to foster an open data environment and hope to share more soon. -
Growth Drivers and Demand
Q: Has demand improved, or is growth due to internal changes?
A: It's a combination of factors. We've increased product velocity, rapidly releasing AI products and investing in data collaboration and new offerings like Iceberg. We've matured in understanding customer value creation, mapping use cases, and engaging consistently. This maturity, along with improved partnerships with ISVs and system integrators, positions us better. -
AI/ML Revenue Impact
Q: When will AI/ML products unlock more workloads and revenue?
A: We're seeing broad adoption of AI and expect it to contribute meaningfully in the latter half of the year. Technologies like Snowpark and dynamic tables have driven robust adoption. As more data becomes accessible, products like Cortex Analyst and Snowflake Intelligence add value, enabling new applications for our customers and partners. -
Sales Compensation Changes
Q: Any adjustments to the sales comp model this year?
A: Yes, the biggest change is adding a total contract bookings quota alongside variable compensation based on revenue. While the bulk of earnings will still come from consumption revenue, we believe it's important for reps to also focus on bookings. -
Large Customer Trends
Q: Can you discuss trends with your largest customers?
A: Momentum with large customers continues as they grow and consume more. The number of $1 million, $5 million, and $10 million customers has increased, driving our revenue growth. Our sales organization has improved in identifying new workload opportunities, and our professional services and partners are better at migrations. Our SE organization is helping drive new workloads next year. -
Investment in Streaming
Q: How do you view adjacencies like streaming in product evolution?
A: Streaming is a critical area for us, and we aim to have a strong offering. We work with several partners in streaming and ingestion, and while building our own robust ingestion offering, we continue to partner with companies like Confluent and RedPanda. We strive to be open and clear with our partners about our investment areas. -
Cortex Agents Differentiation
Q: What differentiates your Cortex Agents offering?
A: We're uniquely positioned as a horizontal platform where customers store various types of data, enabling us to create interesting new applications. Unlike other vendors limited to specific functions, we can combine structured and unstructured data for innovative solutions. While it's too early to discuss customer use cases publicly, we're excited about internal applications and scaling with partners like Elementum using our core infrastructure. -
Role in AI-powered Advertising
Q: Is there an opportunity in AI-powered advertising workloads?
A: Yes, marketing and advertising are important verticals for us. We've been involved in this area for a long time, with customers building customer data platforms on Snowflake. We've facilitated automation and introduced capabilities like AI SQL for easy image and video analysis. As we add multimodal capabilities into Cortex and leverage AI models, generating creatives and copy becomes easier. We're moving from measurement to generative technologies that can automate testing and measurement using Snowflake. -
Impact of Iceberg and NRR
Q: Is Iceberg a tailwind or headwind in guidance? Is NRR stabilizing?
A: Iceberg is now more of a tailwind, opening up more data for us. We've yet to see massive data move out of Snowflake; storage remains at roughly 11% of revenue. We're seeing workloads that weren't accessible before. Net revenue retention is stable in the mid-120s, and our guidance is based on strong customer commitments and improved ability to identify new workloads going into production. -
Industry Developments Impact
Q: How do developments like DeepSeek models impact Snowflake?
A: The AI space is dynamic, with several players leading innovation, including open source and proprietary models. We focus on enabling customers to bring their data together and derive value. Our partnerships with leading model makers acknowledge our significant role in AI. While we're not investing hundreds of millions in data centers, we're happy to work with these partners to create value for our customers. -
Sales Kickoff Insights
Q: What were the key messages at the sales kickoff?
A: The sales kickoff focused on unifying around a common message and purpose. There was infectious enthusiasm and sophistication in how leaders conduct business. We've introduced 'colleges' within Snowflake for specialization, allowing team members to become experts in areas like machine learning. This helps in confidently taking our product to market and creating value for customers. -
Microsoft Partnership Significance
Q: What does the expanded Microsoft partnership mean for Snowflake?
A: Our partnership with Microsoft allows OpenAI's models to be accessible within Snowflake's security perimeter, ensuring customer data remains under our control. This enables us and our customers to build world-class applications without data leaving our environment or needing special licenses. OpenAI models are available out of the box, similar to Anthropic models on AWS. While it's too early to quantify revenue impact, we believe it's significant and expect upside once we see traction.