0001640147-25-000110
SEC filingSnowflake's revenue grew 26% YoY driven by existing customers, but operating loss widened on R&D and $106.5M impairment.
Snowflake's Q1 FY26 revenue grew 26% YoY to $1.042B, driven primarily by existing customers increasing consumption (product revenue +26% to $996.8M). Professional services revenue rose 16% but remains a small contributor. Gross margin held steady at 67% (product 71%, services -40%). Operating loss widened to $447.3M from $348.6M as total operating expenses grew 26%, outpacing revenue growth. Key expense drivers: R&D increased 15% (47% of revenue), G&A surged 125% due to a $106.5M asset impairment on the San Mateo office, and sales & marketing rose 14%. Stock-based compensation remains elevated at $379.5M (36% of revenue). Net loss expanded to $430.0M from $317.8M.
Product segment is the core growth engine, with consumption-based revenue scaling 26% YoY. The number of customers with >$1M TTM product revenue grew 27% to 606, contributing 66% of product revenue. Net revenue retention rate declined to 124% from 126% sequentially, reflecting slower expansion amidst macro optimization trends. Professional services remain a loss-leading investment to support platform adoption, with gross margin of (40%). No material mix shift between segments.
Management did not provide quantitative guidance but highlighted strategic priorities: investing in AI/ML technology, international expansion, and scaling the AI Data Cloud ecosystem. Expect sales and marketing to remain the largest operating expense, though declining as a % of revenue over time. R&D spend will increase in absolute dollars as software capitalization policies change (ASC 985-20). Free cash flow generation is expected to remain positive for fiscal 2026. Key risks include slower customer consumption, macroeconomic pressure on budgets, and competitive dynamics. No forward-looking metrics or revenue guidance were provided in this MD&A.
As of April 30, 2025, Snowflake held $2.24 billion in cash and cash equivalents and $2.62 billion in short-term and long-term investments (available-for-sale debt securities), for a total of $4.52 billion in cash and investments. Total assets were $8.16 billion. The company had $2.27 billion in convertible senior notes (net of issuance costs) and total stockholders' equity of $2.41 billion. Deferred revenue stood at $2.32 billion (current) and $13.7 million (non-current). Remaining performance obligations (RPO) were $6.7 billion, with approximately 50% expected to be recognized as revenue in the next twelve months.
Snowflake disclosed $48.2 million in commitments for leases signed but not yet commenced, net of tenant incentives, with lease terms ranging from 5.3 to 12.8 years. The company also has other contractual commitments related to third-party cloud infrastructure agreements and subscription arrangements, but no material obligations outside the ordinary course of business were entered into during the quarter. The company had $20.8 million in cash-collateralized letters of credit outstanding, primarily for leased facilities.
During the three months ended April 30, 2025, Snowflake repurchased 3.214 million shares of Class A common stock for $490.6 million (weighted-average price of $152.63 per share). As of April 30, 2025, $1.5 billion remained available under the stock repurchase program (originally $2.0 billion authorized in February 2023, with an additional $2.5 billion authorized in August 2024 and the program extended to March 2027). No dividends were paid. Capital expenditures were $45.0 million (4.3% of revenue). The company issued $2.3 billion in convertible senior notes in September 2024 (0% coupon, due 2027 and 2029), with net proceeds used partly to repurchase $399.6 million of common stock and pay $195.5 million for capped call transactions.
Snowflake operates as a single reportable segment. Revenue by geography for the three months ended April 30, 2025: United States $784.5 million (75.3%), Other Americas $29.7 million (2.8%), EMEA $168.8 million (16.2%), and Asia-Pacific and Japan $59.1 million (5.7%). No individual country outside the U.S. exceeded 10% of revenue. Long-lived assets (property, equipment, and operating lease ROU assets) were $552.3 million, with $443.0 million in the U.S. and $109.3 million in other countries.
Operating cash flow (CFO) of $228.4 million was significantly lower than the prior year's $355.5 million, a decline of 35.8%. Net loss widened to $430.0 million from $317.8 million, but CFO remained positive due to large non-cash charges: stock-based compensation of $379.5 million, asset impairment of $106.5 million, and depreciation/amortization of $48.8 million. The primary driver of the CFO decline was a large working capital outflow from deferred revenue (-$271.4 million vs. -$261.2 million) and a smaller accounts receivable inflow ($393.7 million vs. $579.3 million).
Capital expenditures (capex) more than doubled to $45.0 million (from $16.5 million), representing 19.7% of CFO. Free cash flow (CFO minus capex) was approximately $183.4 million, down from $338.9 million in the prior year. Share repurchases of $490.6 million far exceeded free cash flow, indicating reliance on existing cash reserves or debt capacity. No dividends were paid.
Anomalies include a $106.5 million asset impairment related to an office facility exit and a $29.7 million unrealized loss on strategic investments. The company also capitalized no internal-use software costs in the current period (vs. $7.4 million in Q1 FY2026). Overall, cash generation weakened materially, with capital returns outpacing operating cash flow.