What Snowflake’s Q2 Earnings Say About Data In The AI Era

Snowflake raised the amount of product revenue it expects to make for the full fiscal year by $70 million to about $4.4 billion, representing 27 percent growth year over year instead of the prior 25 percent growth guidance.

Data modernization’s role in the artificial intelligence era. Growing vendor competition in the data products market. And improvement in enterprise IT and AI budgets.

Results from the second quarter of data cloud vendor Snowflake’s 2026 fiscal year provided plenty of signals to the channel as enterprise interest in AI and the state of their data environments grow.

Enterprise IT and AI spending helped Snowflake break more than 12 quarters of sequential growth deceleration, analysts pointed out in reports published after Wednesday’s earnings news.

Snowflake’s 32 percent growth in product revenue beat Wall Street expectations by 5 percent, according to a report by Bernstein on Thursday. Snowflake said it now expects product revenue for all of fiscal 2026 to grow by 27 percent year over year to just under $4.40 billion.

Snowflake Q2

Snowflake said it expects about 25 percent growth in overall revenue in the third (current) fiscal quarter and a 25 percent to 27 percent year-over-year revenue increase for the fiscal year. And based on the vendor’s history, it should incrementally beat those numbers by about 3 percent.

The company has taken its channel ecosystem from 600 partners in 2022 to more than 12,000 partners worldwide.

Snowflake’s 2025 channel goals include increasing the overall percentage of company revenue that comes through the channel and enabling partners to develop an AI strategy and sell AI solutions, according to data in CRN’s 2025 Channel Chiefs list.

Here’s more of what the channel learned from Snowflake’s second fiscal quarter results Wednesday.

Data Modernization Key To AI Unlock

Growing interest in Snowflake AI products has supplemented growth in its core data business. As Snowflake CEO Sridhar Ramaswamy told listeners on Wednesday’s call, legacy systems have trouble scaling workloads and data, with more AI use cases unlocked once customers move to Snowflake.

Snowflake’s consumption strength in the quarter came in part from customers moving more workloads from on-premises data centers and first-generation cloud data warehouses to Snowflake, according to William Blair’s Thursday report.

Also in a Thursday report, Morgan Stanley called Snowflake the “best way to play the data modernization theme in Software” and pointed to data transformation initiatives to unlock AI as “one of the key IT budget priorities.

“Customers are investing aggressively in data modernization/ transformation initiatives – not just to move to the cloud, but increasingly because progress on their AI ambitions is impossible without them,” the firm said in its report.

Snowflake Grows AI Bona Fides …

Snowflake’s executives revealed Wednesday that more than 6,100 customers are now using its AI and machine learning (ML) portfolio weekly, up from 5,200 in the prior quarter.

William Blair praised the milestone in its Thursday report, saying that it illustrates “the company’s progress in creating an end-to-end solution for customers looking to build AI applications within the Snowflake Data Platform.”

The AI business is still emerging for Snowflake, with AI-native customers representing about 1 percent of the vendor’s total revenue, according to the investment firm. Still, Snowflake reported that AI influenced about 50 percent of new logo wins and was involved in 25 percent of use case deployments in the quarter.

… And Data Platform Reputation

Snowflake’s results speak to the vendor’s growing reputation as “a true data platform in the large enterprise” that can handle workloads across analytics, data science, collaboration and AI, Bank of America said in a report Wednesday after the earnings call.

The investment firm thinks that reputation will translate into larger expansion deals with customers starting with analytics, then adding other workloads, according to the report.

More customers are recognizing that the AI components of Snowflake’s data platforms can deliver enormous value, making the vendor a recipient of budgets allocated from large customers for AI projects, Ramaswamy said on Wednesday’s call.

More Competition Expected

Taking a more negative tone on Snowflake’s new product initiatives to expand beyond data warehousing, Bernstein said in a report Thursday that the new products are still early to market and invite competition from vendors—including large cloud providers Snowflake runs on top of.

The vendor faces competition from database providers, upstarts like Databricks and potentially software-as-a-service application vendors, according to Bernstein.

The firm predicts data warehousing to slow in growth and saturate as more on-premises databases move to the cloud and every SaaS vendor and hyperscaler offer a data federation and data cloud product. Bernstein pointed to Microsoft Fabric, Salesforce Data Cloud and SAP’s Business Data Cloud as some of Snowflake’s data federation competition.

Snowflake’s pivot from data storage, management and analysis to leveraging AI won’t be easy to deliver or monetize when hyperscale cloud providers can easily access customer data, according to the firm. Bernstein asks why customers will use Snowflake AI instead of hyperscalers’ competing offers.

“As more and more SaaS vendors add more powerful and expansive functionality it begs the question of where the data should be stored and where the analytics/AI should occur,” according to the firm.

Improvement In Enterprise Budgets

The strong performances during the quarter by Snowflake, database rival MongoDB and the hyperscalers shows that AI’s headwinds seen last year have abated, Bernstein said in a report Thursday.

In calendar year 2024 Snowflake, Microsoft, MongoDB and other cloud vendors saw revenue deceleration as enterprises delayed IT projects, optimized their existing usage of the vendors’ products and dedicated internal resources to learning more about generative AI, according to Bernstein.

This year, budgets look improved and it appears many organizations received additional and maybe incremental GenAI budgets. End users are also returning to cloud projects and cloud migrations.

Bernstein’s question for Snowflake is whether the vendor is seeing revenue it should have captured last year or if this is sustainable, long-term growth.

“For sustained strong growth we need to see Snowflake winning in key areas including AI and data cloud capabilities against strong competitors including the largest enterprise software companies and the hyperscale cloud providers,” according to Bernstein.

One of the signals Snowflake provided for proof the company is a greater part of the AI stack was in how 50 percent of new customers were influenced by AI. Based on the data Snowflake put out, “this quarter’s out-performance is driven by new customers,” according to Bernstein.