0001640147-25-000211
SEC filingSnowflake's Q3 FY26 product revenue grew 29% YoY, driven by existing customer consumption, with gross margin improving to 68%.
For the three months ended October 31, 2025, Snowflake reported total revenue of $1.213 billion, a 29% increase compared to $942.1 million in the same period last year. Product revenue, which constitutes 96% of total revenue, grew 29% to $1.158 billion, driven primarily by increased consumption from existing customers. The net revenue retention rate stood at 125% as of October 31, 2025, indicating strong expansion within the customer base. Professional services and other revenue grew 30% to $54.5 million.
Gross profit increased 32% to $822.0 million, with total gross margin improving to 68% from 66% in the prior year. Product gross margin improved to 72% from 71%, benefiting from lower restructuring costs and stock-based compensation as a percentage of revenue, partially offset by costs from new product capabilities. Professional services gross margin improved to -28% from -37%, though management noted this segment is not meaningful due to its small size.
Operating loss narrowed to $329.5 million from $365.5 million, with operating margin improving to -27% from -39%. Net loss attributable to Snowflake Inc. was $294.0 million, compared to $324.3 million in the prior year. Free cash flow was $113.6 million, up from $78.2 million, driven by higher operating cash flow.
Snowflake operates two reportable segments: Product and Professional Services and Other. Product revenue growth of 29% was fueled by existing customers expanding their usage, as reflected in the net revenue retention rate of 125%. The number of customers with trailing 12-month product revenue over $1 million grew to 688 from 534, and these customers represented approximately 68% of product revenue. The company also highlighted 134 customers with over $5 million and 49 with over $10 million in trailing 12-month product revenue.
Professional services and other revenue grew 30%, but its gross margin remained negative at -28%, though improved from -37% in the prior year. The segment's losses are expected as the company invests in services to support customer adoption.
Snowflake did not provide specific forward guidance in the MD&A section. However, management highlighted several strategic priorities: continued investment in research and development, particularly in AI and machine learning (AI Technology), expansion of the AI Data Cloud and Snowflake Marketplace, and scaling the business both domestically and internationally. The company expects sales and marketing expenses to remain the largest operating expense but to decrease as a percentage of revenue over time. Research and development expenses are expected to increase in absolute dollars due to business growth and continued platform investments, but also decrease as a percentage of revenue. The company noted that it expects to continue generating positive net cash flows from operating activities for fiscal 2026. Key metrics to watch include the net revenue retention rate, which management expects to decrease over the long term as the customer base matures, and RPO, which stood at $7.88 billion as of October 31, 2025, with approximately 48% expected to be recognized as revenue in the next 12 months.
As of October 31, 2025, Snowflake held $1.942B in cash and cash equivalents and $2.453B in marketable securities (short-term + long-term investments), for total cash and investments of $3.9B. Total assets were $8.230B. On the liability side, convertible senior notes (net of issuance costs) stood at $2.278B, with no other debt. Stockholders' equity was $2.133B, down from $3.007B at January 31, 2025, primarily due to share repurchases and the accumulated deficit increase.
Snowflake disclosed $171M in non-cancelable cloud infrastructure purchase commitments (as of October 31, 2025, prior to a November amendment) and $72M in leases signed but not yet commenced. Subsequent to quarter end, a cloud infrastructure amendment committed at least $530M over five years (November 2025–October 2030) and an AI service provider agreement committed $200M over three years starting December 2025. These post-balance-sheet commitments are not included in the October 31 figures.
During the nine months ended October 31, 2025, Snowflake repurchased 4.3M shares for $723.5M (weighted-average price $169.95). The board authorized an additional $2.5B in August 2024, extending the program to March 2027; $1.3B remained available as of October 31, 2025. No dividends were paid. Capital expenditures were $85.6M (2.5% of revenue), with no capitalized software costs in the current period. Debt activity was limited to amortization of issuance costs; no new debt was issued or repaid.
Snowflake operates as a single reportable segment. Revenue by geography: Americas (U.S. $2.559B, other Americas $0.092B), EMEA $0.554B, Asia-Pacific & Japan $0.195B for the nine months. No single customer exceeded 10% of revenue or accounts receivable.
Snowflake's net loss widened to $1.02B from $963.5M, yet operating cash flow remained positive at $440.8M, driven by large non-cash add-backs: stock-based compensation ($1.20B), depreciation/amortization ($161.5M), and asset impairment ($108.7M). The decline in CFO from $527.0M reflects significant working capital outflows: deferred revenue fell $172.4M (vs. -$226.7M prior), accounts receivable improved (only -$12.6M vs. +$328.7M prior), and deferred commissions grew -$181.7M (vs. -$62.8M). Capex more than doubled to $85.6M, indicating higher investment in infrastructure. Free cash flow (not explicitly stated) would be CFO minus capex, approximately $355.2M. Capital returns included $723.5M in share repurchases, partially offset by stock option proceeds ($63.3M) and ESPP ($88.1M). The company also spent $164.2M on business combinations. Overall, cash generation remains solid but is pressured by working capital needs and elevated capex.