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Snowflake (SNOW) stock has returned about 37% over the past three months, against 4.8% for the S&P 500, and trades about 8% below its 52-week high. The stock has gained more than 30% in under two months on 10 occasions since 2020, most recently in 2026, and six of those gains topped 50%. The case for another leg rests on what sits behind three straight quarters of faster growth: Snowflake’s AI tools are getting customers to use more of its core data platform.
Snowflake's product revenue saw significant year-over-year growth, climbing 37% in fiscal Q2 2027 to $1.49 billion, an acceleration from previous quarters. The company's management has increased its fiscal 2027 product revenue forecast to $6.07 billion, attributing this surge to both its AI offerings and its foundational data platform. Two prominent AI products, Cortex Code and CoWork, enable users to interact with company data using natural language, driving increased consumption across the entire data platform. The CEO indicates that AI products collectively contributed roughly half of this accelerated growth. Furthermore, existing workloads are migrating to Snowflake at an unprecedented pace; for example, a major Australian bank moved its financial crime platform to Snowflake and is leveraging AI agents to migrate the remainder of its data, while a large network equipment manufacturer is completing a migration in less than three quarters, a process that would typically take two to three years.
Snowflake is experiencing some impact on its gross margin due to the rapid growth of AI workloads, which inherently carry a lower contribution margin. Consequently, management adjusted its fiscal 2027 non-GAAP product gross margin guidance downwards to 74% from 75%. Despite this, the company raised its fiscal 2027 non-GAAP operating margin forecast to 14.5% from 13.5%, primarily due to a reduction in headcount expenses offsetting rising cloud infrastructure costs. Snowflake's CFO credits the company's internal use of AI for streamlining operations and reducing dependence on headcount growth. The CEO highlighted instances where CoWork facilitated bringing marketing's search optimization in-house, cutting agency spending, and how long-range planning tasks that previously required a three-person team are now managed by a single analyst. While GAAP profitability is targeted for fiscal Q4 2028, a key concern is the durability of the current growth—whether it signifies sustained higher consumption or merely an acceleration of projects pulled forward.
Management has not disclosed specific data on how much more AI adopters consume, though the CEO noted that newer customer cohorts are achieving 80% of their purchased consumption faster than older ones. The most reliable indicator for sustained consumption will be the fiscal Q3 2027 report. Snowflake's guidance is based on already observed consumption, and they anticipate product revenue growth of 37% to 38% for the quarter. This new range is considered a conservative 'floor' rather than a precise forecast, especially given that the fiscal Q2 2027 product revenue growth significantly exceeded the earlier 30% guidance, coming in at 37%. Should the company fall short of this new guidance, it would provide the first tangible evidence supporting concerns that the recent surge might be due to projects being pulled forward rather than a long-term increase in usage.
While Snowflake's AI tools are driving increased consumption and accelerated growth, it is advisable to consider the upcoming fiscal Q3 2027 report as an early indicator rather than definitive proof of sustained long-term consumption. Before making investment decisions, it's prudent to compare Snowflake with other companies whose outlooks are improving for verifiable reasons. If concentrating an investment in one company's AI initiatives seems too risky, the Trefis High Quality Portfolio offers a strategy that diversifies exposure across a broader range of businesses. This portfolio has demonstrated a consistent ability to outperform the three major market indices, providing a more balanced approach to investment.