Bears Said AI Would Eat Snowflake. Instead, It May Have Reignited Growth
Analysts predicted AI would make Snowflake obsolete, but something unexpected is happening inside the company's numbers that has Wall Street scrambling to revise its entire bear case.
Snowflake’s (NYSE:SNOW | SNOW Price Prediction) growth curve is bending upward at exactly the moment bears expected AI to hollow it out, and the setup underneath the move is what separates a durable trend from a one-quarter pop.
Snowflake posted product revenue of $1.49 billion, up 37% year over year, in results reported September 2, 2026, and the after-hours reaction was sharply positive on the beat and raised guide, following a settled session that closed at $305.84. Year to date, the stock is up 39.42%, and the acceleration in the underlying business is what makes the move look sustainable rather than speculative.
Catalyst: A Beat That Reset the Narrative
The Q2 FY27 report marked the third straight quarter of accelerating product revenue growth, following 30% in Q4 FY26, 34% in Q1 FY27, and 37% in Q2 FY27. Adjusted EPS came in at $0.62 versus $0.447 consensus, a 38.7% beat and the fifth consecutive EPS beat.
Non-GAAP operating margin expanded to 15.3% from 11% a year ago, and net revenue retention held at 126%, meaning existing customers keep spending more. Remaining performance obligations reached $9 billion, up 30% year over year, giving unusually clear visibility into future revenue. Sridhar Ramaswamy attributed roughly half of the recent acceleration in growth to AI products, which directly contradicts the bear thesis that agents would bypass the data warehouse.
Forward Driver: Guidance Raised Again
Management raised full-year FY27 product revenue guidance to $6.07 billion, or 36% growth, from a prior $5.84 billion at 31% growth, the second consecutive raise from the initial $5.66 billion set in February 2026.
Full-year non-GAAP operating margin guidance rose to 14.5% from 13.5%. Cortex AI now sits inside more than 9,100 accounts, with CoCo adding over 2,000 in the quarter, and every agentic workload built on top drives more governed queries into the platform underneath. Ramaswamy said, “AI continues to compound our advantages, creating a flywheel effect across the business.”
Snowflake’s consumption model captures usage growth without contract renegotiation, which is precisely why an agent that runs thousands of queries that a human would run one shows up directly in revenue. Free cash flow reached $83.8 million in Q2 FY27, up 43.9% year over year, on top of $1.12 billion in FY26 free cash flow. The company holds $1.71 billion in cash and equivalents and repurchased $300.0 million of stock in the six months ended July 31, 2026. Governed enterprise data, role-based access, and lineage cannot be recreated inside an LLM, and that is the moat AI is expanding rather than eroding.
Risk Worth Naming
Snowflake remains unprofitable on a GAAP basis, with Q2 operating income of negative $263 million and stock-based compensation of $456 million. AI workloads also carry lower gross margins than the core platform, a point management has been candid about. That risk is real, but it is bounded: non-GAAP margins are expanding, free cash flow is compounding, and the $9 billion RPO backlog underwrites the growth even if consumption cools.
Wall Street currently carries nine strong buys and 35 buys against five holds, with an analyst target of $327.85. For investors seeking AI exposure with a real cash-flow trajectory underneath it, the accelerating product revenue, expanding margins, and $9 billion of contracted backlog should continue to translate agent activity into recurring platform consumption (we profiled seven other companies quietly powering the AI buildout, from data infrastructure to power and cooling, in a free report you can grab here). This is a momentum story with fundamental legs.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks.
