0001640147-25-000187
SEC filingConsumption-driven product revenue growth of 32% YoY drove 68% gross margin, with free cash flow of $58M.
Total revenue for Q3 FY26 (three months ended July 31, 2025) was $1.14B, a 32% increase from $868.8M in the prior year period. Product revenue, representing 95% of total, grew 32% to $1.09B, fueled by increased consumption from existing customers, evidenced by a net revenue retention rate of 125%. Professional services and other revenue grew 38% to $54.5M, but remains a small portion of total revenue. Gross profit rose 33% to $773.2M, with total gross margin improving 100 bps to 68% (product gross margin flat at 72%, professional services margin improving to -28% from -33%). Operating loss narrowed to $340.3M (30% of revenue) from $355.3M (41% of revenue) a year ago, driven by improved gross margin and operating expense leverage — sales and marketing declined from 46% to 44% of revenue, R&D from 51% to 44%, and G&A from 11% to 10% (excluding the $108.6M impairment charge in the six-month period). Net loss attributable to Snowflake Inc. was $298.0M, an improvement from $316.9M a year ago. Free cash flow was $58.2M, slightly lower than $58.8M in the prior year, due to higher capex and working capital outflows.
Product revenue remains the core driver, with 32% YoY growth as customers deepen usage. The number of customers with trailing 12-month product revenue >$1M reached 654 (up 30% YoY), and these large customers contributed ~67% of product revenue. RPO grew 32% YoY to $6.9B, signaling strong contracted future revenue, though revenue recognition depends on customer consumption patterns. Professional services continues to operate at a gross loss (-28% margin in Q2 vs -33% a year ago) as Snowflake invests in helping customers realize platform value.
Management expects sales and marketing and R&D expenses to decrease as a percentage of revenue over time but to increase in absolute dollars due to business growth and investments in AI Technology. The company anticipates continued positive operating cash flows for fiscal 2026. No specific quantitative guidance is provided. The weighted-average remaining life of capacity contracts was 2.4 years, and approximately 50% of RPO is expected to be recognized as revenue in the next 12 months. Key risks include macroeconomic conditions impacting customer consumption and the pace of new customer acquisition. The recent acquisition of Crunchy Data (PostgreSQL technology) and the issuance of $2.3B convertible senior notes (offset by capped calls) position Snowflake for further product expansion and capital flexibility.
As of July 31, 2025, Snowflake held $1.88 billion in cash and cash equivalents, with an additional $1.71 billion in short-term investments and $1.01 billion in long-term investments, for a total cash and investment portfolio of approximately $4.22 billion. Total assets stood at $8.20 billion, down from $9.03 billion at January 31, 2025, primarily due to share repurchases and an operating loss. Total liabilities were $5.82 billion, including $2.28 billion in convertible senior notes (net). Stockholders' equity was $2.38 billion, a decrease from $3.01 billion at the start of the fiscal year largely driven by the accumulated deficit and buybacks. The company also held $1.96 billion in total cash, cash equivalents, and restricted cash.
Snowflake disclosed $38.4 million in commitments for operating leases signed but not yet commenced as of July 31, 2025, with lease terms ranging from 5.3 to 6.1 years. The company also has significant non-cancelable contractual obligations primarily related to third-party cloud infrastructure and subscription arrangements, though no material new obligations outside ordinary course were noted for the period. The company's remaining performance obligations (RPO) were $6.9 billion, of which approximately 50% is expected to be recognized as revenue in the 12 months ending July 31, 2026.
Snowflake repurchased 3.214 million shares for $490.6 million during the six months ended July 31, 2025. The board had previously authorized an additional $2.5 billion in buyback authority in August 2024, extending the program through March 2027. As of July 31, 2025, $1.5 billion remained available for future repurchases. The company did not pay dividends. Capital expenditures were $61.7 million, primarily for property and equipment. In September 2024, the company issued $2.3 billion in convertible senior notes (0% coupon), with net proceeds used in part for capped call transactions and share repurchases. There were no debt repayments during the period.
The company operates as a single reportable segment. Revenue for the six months ended July 31, 2025 was $2.19 billion, with the United States contributing $1.65 billion (75.2% of total), EMEA $354 million, Asia-Pacific and Japan $127 million, and Other Americas $60 million. Product revenue was $2.09 billion, while professional services and other revenue was $99.7 million. The company's long-lived assets (property, equipment, and operating lease ROU assets) were primarily located in the United States ($440 million) and other countries ($106 million).
Net cash from operations (CFO) was $303M for the six months ended July 31, 2025, compared to a net loss of $728M. The large gap is primarily due to non-cash charges: stock-based compensation ($784M), depreciation/amortization ($104M), asset impairment ($109M), and non-cash lease costs ($34M). Working capital was a net use of cash, notably deferred revenue declined by $324M (a negative headwind), partially offset by a $276M reduction in accounts receivable. CapEx (PP&E) was $62M, up from $22M a year ago, reflecting increased investment in infrastructure. Free cash flow (CFO minus CapEx) was approximately $242M, a decrease from $390M in the prior period. The company continues to generate positive cash flow from operations despite GAAP losses, indicating strong underlying business cash generation. Significant share repurchases ($491M) were funded by operating cash flows and existing cash reserves. Financing activities also included $88M in proceeds from stock options and ESPP, offset by $294M in tax payments for equity awards. Overall, cash flow quality is solid, supported by recurring revenue and efficient working capital management, though the deferred revenue contraction bears watching.