10-Q: Snowflake Q2 Revenue Jumps 32% Amid Macro Headwinds

Snowflake Inc. reported a 32% increase in Q2 revenue to $1.14 billion, driven by existing customer consumption, while navigating persistent operating losses and a declining net revenue retention rate.

Summary

• Revenue for the three months ended July 31, 2025, increased 32% to $1.14 billion, up from $868.8 million in the prior year period.
• Product revenue grew 32% to $1.09 billion for the quarter, primarily due to increased consumption by existing customers.
• Net loss for the three months ended July 31, 2025, improved to $(297.9) million, compared to $(317.8) million in the same period last year.
• For the six months ended July 31, 2025, total revenue increased 29% to $2.19 billion, with product revenue also up 29% to $2.09 billion.
• Net loss for the six months ended July 31, 2025, widened to $(727.9) million, from $(635.6) million in the prior year period.
• Net cash provided by operating activities for the six months ended July 31, 2025, was $303.3 million, a decrease from $425.3 million in the prior year period.
• Free cash flow (non-GAAP) for the six months ended July 31, 2025, was $228.2 million, down from $386.6 million in the prior year period.
• Remaining performance obligations (RPO) stood at $6.9 billion as of July 31, 2025, with approximately 50% expected to be recognized as revenue in the next 12 months.
• The net revenue retention rate was 125% as of July 31, 2025, a decrease from 128% as of July 31, 2024.
• Total customers reached 12,062 as of July 31, 2025, up from 11,078 as of January 31, 2025.
• Customers with trailing 12-month product revenue greater than $1 million increased to 654 as of July 31, 2025, from 504 a year prior.
• Forbes Global 2000 customers grew to 751 as of July 31, 2025, compared to 714 a year ago.
• Acquired Crunchy Data Solutions, Inc. on June 6, 2025, for $164.5 million in cash, primarily for its talent and PostgreSQL technology.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive, reflecting strong revenue growth and an improved quarterly net loss, indicating effective cost management. However, the widening year-to-date net loss, declining free cash flow, and a decrease in the net revenue retention rate introduce caution. Significant legal risks and ongoing macroeconomic challenges temper overall enthusiasm, leading to a balanced outlook.

Positives

• Strong revenue growth of 32% for the three months ended July 31, 2025, and 29% for the six months ended July 31, 2025, demonstrating continued market adoption.
• Net loss for the three months ended July 31, 2025, improved to $(297.9) million from $(317.8) million in the prior year, indicating some progress in managing operating expenses relative to revenue growth.
• Customer base expanded to 12,062, with a significant increase in large customers (654 with >$1M product revenue), highlighting success in targeting enterprise clients.
• Forbes Global 2000 customer count increased to 751, reinforcing market penetration among top global companies.
• Professional services and other revenue increased by 38% for the quarter and 27% for the six months, reflecting successful expansion of support services.

Negatives

• Net loss for the six months ended July 31, 2025, widened to $(727.9) million from $(635.6) million, indicating persistent unprofitability on a year-to-date basis.
• Net cash provided by operating activities decreased to $303.3 million for the six months ended July 31, 2025, from $425.3 million in the prior year, suggesting reduced operational cash generation.
• Free cash flow (non-GAAP) declined to $228.2 million for the six months ended July 31, 2025, from $386.6 million, reflecting increased capital expenditures and lower operating cash flow.
• Net revenue retention rate decreased to 125% from 128%, indicating a slower pace of consumption growth from existing customers.
• Asset impairment charges of $108.6 million were recognized, primarily due to the cease-use of the San Mateo office facility, impacting general and administrative expenses.
• Stock-based compensation, net of amounts capitalized, increased to $783.7 million for the six months ended July 31, 2025, from $687.9 million, continuing to be a significant expense.

Risks

• Difficulty in forecasting future results due to rapid revenue growth, limited operating history, new product features (including AI), and unstable macroeconomic conditions.
• Lack of visibility into future financial position and results of operations due to consumption-based revenue model and customer flexibility in timing of consumption.
• History of operating losses and uncertainty in achieving or sustaining profitability in the future, with expected increases in costs and expenses.
• Highly competitive markets, with large public cloud providers (AWS, Azure, GCP) also being primary competitors, potentially leading to unfavorable pricing or exclusion from opportunities.
• Failure to innovate in response to changing customer needs, new technologies (especially AI), or other market requirements could harm business.
• Unsuccessful execution of investments in AI Technology, including generative AI, due to high demand for GPUs and AI-skilled personnel, or inability of customers to adopt new features.
• Actual or perceived security breaches or unauthorized access to customer data, company data, or the platform could harm reputation, reduce demand, and incur significant liabilities.
• Disruptions, outages, defects, and other performance and quality problems with the platform or underlying public cloud and internet infrastructure could negatively impact revenue and reputation.
• Fluctuations in financial results, making it difficult to project future results, and potential stock price decline if expectations of securities analysts or investors are not met.
• Failure to effectively develop and expand sales and marketing capabilities could harm ability to increase customer base and market acceptance.
• Sales efforts to large customers involve longer sales cycles, stronger customer leverage, more complex requirements, and substantial upfront costs.
• Heightened risks when doing business with federal, state, local, and foreign governments and agencies, and heavily regulated organizations, due to special contract terms and compliance requirements.
• Loss of key members of the management team or inability to attract and retain executives and employees needed to support operations and growth.
• Unfavorable conditions in the industry or global economy, reductions in cloud spending, or lower than expected consumption could limit business growth.
• Growth depends on the development, expansion, and success of partner relationships, including data and technology providers, data consumers, and data application developers.
• Assumption of liability for data breaches, intellectual property infringement, violation of applicable laws, and other claims, exposing the company to substantial potential liability.
• Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert management attention, disrupt business, dilute stockholder value, and adversely affect financial results.
• Seasonality in orders and consumption patterns may cause fluctuations in remaining performance obligations or customer consumption.
• Natural disasters, public health crises, and other catastrophic events could have an adverse impact on business, operations, and markets.
• International operations and further geographic expansion create a variety of operational challenges, including differing regulations, data localization, and political/economic instability.
• Operations in China through a Chinese-owned operating partner expose the company to risks associated with economic, political, and social events in China.
• Requirement for additional capital to support business growth, which might not be available on acceptable terms, if at all.
• Servicing debt (convertible senior notes) requires significant cash, and there may not be sufficient cash flow to meet these obligations.
• Conditional conversion feature of the convertible notes, if triggered, may adversely affect financial condition and operating results through cash payments or reclassification of debt.
• Exposure to fluctuations in currency exchange rates, which could negatively affect results of operations and ability to invest and hold cash.
• Strategic investments are subject to market-related risks, including volatility in public and private markets, potentially leading to impairment charges.
• Intellectual property rights may not protect business or provide a competitive advantage, and enforcement in foreign countries may be inadequate.
• Potential for intellectual property disputes, which are costly and may subject the company to significant liability and increased costs of doing business.
• Use of open-source software inconsistent with policies or license terms could lead to legal expenses, damages, or costly remediation.
• Subject to stringent and changing obligations related to data privacy and security, with non-compliance potentially resulting in significant fines and liability.
• Issues in the development and use of AI Technology, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences.
• Subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, with non-compliance leading to criminal or civil liability.
• Increasing scrutiny and changing expectations from global regulations, investors, customers, and employees with respect to ESG may result in additional compliance risk and costs.
• Subject to governmental export and import controls that could impair ability to compete in international markets or subject to liability for violations.
• International operations may subject the company to greater than anticipated tax liabilities due to challenges in transfer pricing and differing tax laws.
• Ability to use net operating loss carryforwards may be limited by Section 382 of the Internal Revenue Code and state laws.
• Changes in tax laws or tax rulings could materially affect financial position, results of operations, and cash flows.

Future Outlook

The company expects continued investments in research and development, particularly in data science and AI Technology, and further international expansion. It anticipates that sales and marketing expenses will increase in absolute dollars but decrease as a percentage of revenue over time. Research and development expenses are also expected to increase in absolute dollars due to business growth and platform investments, while decreasing as a percentage of revenue. General and administrative expenses are projected to increase in absolute dollars but decrease as a percentage of revenue. The company believes existing cash, cash equivalents, and investments, along with operating cash flows, will be sufficient to support working capital, capital expenditures, debt repayment, acquisitions, and stock repurchases for the next 12 months and beyond. However, the company cautions that customer consumption patterns may be slower than expected due to macroeconomic uncertainty and customer optimization efforts, which could impact revenue and results of operations.

Management Comments

• We believe that a cloud computing platform that puts data and artificial intelligence (AI) at its core will offer great benefits to organizations.
• Our vision is a world where data and AI turn possibilities into reality, delivering the AI Data Cloud.
• Our future success depends in large part on the market adoption of our platform, including new product functionality, such as Snowpark and our AI and machine learning technology.
• We plan to continue investing to encourage increased consumption and adoption of new use cases among our existing customers, particularly large enterprises.
• Our future success also depends on our ability to acquire new customers, making significant investments in sales and marketing and brand awareness.
• We intend to continue to invest heavily to grow our business to take advantage of our expansive market opportunity, while also focusing on cash flow and long-term profitability.
• We are continuing to monitor the actual and potential effects of general macroeconomic conditions across our business.

Industry Context

The announcement reflects the ongoing trend of increasing cloud adoption and the growing importance of AI and machine learning in data platforms. Snowflake's focus on the 'AI Data Cloud' positions it within a competitive landscape where public cloud providers (AWS, Azure, GCP) are both partners and rivals. The declining net revenue retention rate suggests that while the overall market for cloud data platforms is expanding, customer optimization efforts and macroeconomic pressures are influencing consumption patterns, a common challenge across the broader cloud software industry. The acquisition of Crunchy Data indicates a strategic move to enhance PostgreSQL technology offerings, potentially broadening appeal to developers and expanding capabilities within the data engineering ecosystem.

Comparison to Industry Standards

• NA The filing does not provide specific comparable company data or industry benchmarks for direct assessment of results against global standards.

Management Changes

Corporate Governance

Legal Proceedings

• A former employee filed a charge with the National Labor Relations Board (NLRB) on March 23, 2021, alleging retaliatory termination. An administrative law judge ruled in favor of the employee on September 15, 2023, and the company is appealing. A potential loss range is estimated between zero and $25 million, plus interest.
• A stockholder class action lawsuit was filed on February 29, 2024, in federal court against the company, its former CEO, and CFO, alleging violations of Sections 10(b) and 20(a) of the Exchange Act. Multiple amended complaints and motions to dismiss have been filed, with a reply brief due on September 19, 2025. Five additional securities derivative claims have been stayed pending resolution of the class action.
• Multiple class action lawsuits were filed starting June 13, 2024, in the U.S. (consolidated into an MDL in Montana) and Canada, alleging failure to secure consumer data, leading to exfiltration. These include claims related to the Los Angeles Unified School District (LAUSD). Motions to dismiss have been filed, with oral argument scheduled for October 6, 2025.

Related Party Transactions

• A member of the company's board of directors serves as the Chief Executive Officer of a privately-held company (Related Party) that has been a customer since 2018.
• Revenue recognized from this Related Party was $5.9 million for the three months ended July 31, 2025, and $10.7 million for the six months ended July 31, 2025.
• In July 2025, the company entered into an additional three-year customer agreement with the Related Party, with a total contract value of $67.5 million.
• Strategic investments in the Related Party amounted to approximately $20.0 million for the six months ended July 31, 2025, and $5.0 million for the six months ended July 31, 2024.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances and convertible note conversions, as well as volatility in stock price due to financial performance and legal proceedings.
• Employees are impacted by stock-based compensation, which remains a significant component of overall compensation, and management changes may affect morale and operational continuity.
• Customers benefit from continued platform innovation, including AI Technology, but face risks related to security incidents and potential service disruptions.
• Partners are crucial for growth, particularly in expanding the AI Data Cloud and providing professional services, with the company's success dependent on maintaining these relationships.
• Creditors (holders of convertible senior notes) have senior unsecured claims and may exercise conversion rights, potentially impacting the company's liquidity.

Next Steps

• Continue significant investment in research and development to improve the platform, including data science and AI Technology.
• Further expand business both domestically and internationally, focusing on highly regulated markets and geographies.
• Manage ongoing legal proceedings, including a stockholder class action and multiple data breach class actions.
• Identify and appoint a successor for the retiring Chief Financial Officer, Michael P. Scarpelli.
• Continue to execute the stock repurchase program, with $1.5 billion remaining available for future repurchases.

Key Dates

Recommendation

While Snowflake demonstrated strong Q2 revenue growth and an improved quarterly net loss, the widening year-to-date net loss, declining free cash flow, and a decrease in the net revenue retention rate signal ongoing challenges. The company operates in a highly competitive and rapidly evolving market, with significant investments in AI and international expansion. Substantial legal proceedings and management transitions add layers of uncertainty. A 'hold' recommendation is appropriate for seasoned investors, suggesting a wait-and-see approach to observe if the company can stabilize its cash flow, improve its net revenue retention, and move towards sustained profitability amidst its growth initiatives and legal exposures.

Keywords

Cloud Data Platform, AI Data Cloud, Data Warehousing, Analytics, Data Engineering, Machine Learning, Consumption-Based Model, Enterprise Software, Cloud Infrastructure, Cybersecurity, SEC Filing, Financial Results, Q2 Earnings, Product Revenue, Net Revenue Retention, Operating Loss, Free Cash Flow, Convertible Notes, Stock Repurchase, Crunchy Data