10-Q: Snowflake Q3 Revenue Jumps 29%, Operating Loss Narrows

Snowflake Inc. reported a 29% increase in revenue for the quarter ended October 31, 2025, alongside a narrowed operating loss, driven by strong customer consumption and expansion.

Summary

• Revenue for the three months ended October 31, 2025, was $1,212.9 million, an increase of 29% compared to $942.1 million in the prior year.
• Product revenue increased 29% to $1,158.4 million for the three months ended October 31, 2025.
• Net loss for the three months ended October 31, 2025, was $(291.6) million, an improvement from $(327.9) million in the prior year.
• Operating loss narrowed to $(329.5) million for the three months ended October 31, 2025, from $(365.5) million in the prior year.
• Gross profit increased 32% to $822.0 million for the three months ended October 31, 2025, with product gross margin at 72%.
• Remaining Performance Obligations (RPO) reached $7.9 billion as of October 31, 2025, with approximately 48% expected to be recognized as revenue in the 12 months ending October 31, 2026.
• Total customers grew to 12,621 as of October 31, 2025, from 11,023 as of January 31, 2025.
• Customers with trailing 12-month product revenue greater than $1 million increased to 688 as of October 31, 2025, from 534 as of October 31, 2024.
• Forbes Global 2000 customers increased to 766 as of October 31, 2025, from 738 as of October 31, 2024.
• Net revenue retention rate was 125% as of October 31, 2025, a slight decrease from 127% as of October 31, 2024.
• Free cash flow (non-GAAP) for the three months ended October 31, 2025, was $113.6 million.
• The company acquired Crunchy Data Solutions, Inc. for $164.5 million in cash on June 6, 2025.
• Asset impairment charges of $108.7 million were recognized during the nine months ended October 31, 2025, primarily related to the cease-use of the San Mateo office facility.
• An amended third-party cloud infrastructure agreement in November 2025 commits to spending at least $530.0 million between November 2025 and October 2030.
• A renewed and expanded agreement with a third-party AI service provider in November 2025 commits to spending at least $200.0 million over a three-year term starting December 2025.
• Completed acquisitions of two privately-held companies in November 2025 for approximately $44 million in cash or a combination of cash and unregistered shares.

Sentiment

Score: 7

Explanation: Snowflake demonstrated robust revenue growth and improved operating efficiency, reflected in a narrowed operating loss and improved product gross margin. However, the slight decline in net revenue retention rate and ongoing substantial net losses, coupled with significant legal challenges and macroeconomic headwinds, temper the overall positive sentiment. The company's strategic investments in AI and acquisitions are positive for long-term growth but contribute to current expenses.

Positives

• Strong revenue growth of 29% year-over-year for both the three and nine months ended October 31, 2025, demonstrating continued market penetration.
• Product revenue also grew 29%, indicating robust adoption and consumption of the core platform.
• Operating loss narrowed significantly from $(365.5) million to $(329.5) million for the three months ended October 31, 2025, reflecting improved operational efficiency.
• Net loss improved from $(327.9) million to $(291.6) million for the three months ended October 31, 2025.
• Product gross margin improved to 72% for the three and nine months ended October 31, 2025, from 71% in the prior year periods.
• The number of customers with trailing 12-month product revenue greater than $1 million increased substantially from 534 to 688, highlighting success in attracting and expanding large customer relationships.
• Growth in Forbes Global 2000 customers from 738 to 766 indicates continued penetration into the strategic large enterprise market.
• Remaining Performance Obligations (RPO) increased to $7.9 billion, providing a strong indicator of future contracted revenue.
• Generated positive free cash flow of $113.6 million for the three months ended October 31, 2025.
• Strategic acquisition of Crunchy Data Solutions, Inc. for $164.5 million enhances PostgreSQL technology offerings.
• Renewal and expansion of an agreement with a third-party AI service provider supports ongoing AI product development and strategic initiatives.

Negatives

• Continued net losses of $(291.6) million for the quarter and $(1,019.5) million for the nine months ended October 31, 2025.
• Accumulated deficit increased to $9.0 billion as of October 31, 2025, from $7.3 billion as of January 31, 2025.
• Net revenue retention rate slightly decreased to 125% as of October 31, 2025, from 127% in the prior year, suggesting a slower pace of consumption growth from existing customers.
• Interest income decreased by $3.2 million for the three months and $4.6 million for the nine months ended October 31, 2025, primarily due to lower weighted average annual yields on cash equivalents and investments.
• Recognized significant asset impairment charges of $108.7 million during the nine months ended October 31, 2025, mainly for the cease-use of the San Mateo office facility.
• Cash and cash equivalents decreased from $2,628.8 million as of January 31, 2025, to $1,941.7 million as of October 31, 2025.
• Net cash used in financing activities was approximately $1.1 billion for the nine months ended October 31, 2025, primarily driven by stock repurchases and taxes paid related to net share settlement of equity awards.

Risks

• Difficulty in forecasting future results due to rapid revenue growth, limited operating history, new product features (AI Technology), and unstable macroeconomic conditions.
• Inability to achieve or sustain profitability in the future, with expected continued increases in costs and expenses.
• Highly competitive markets, including competition from large public cloud providers (AWS, Azure, GCP) who are also infrastructure partners.
• Failure to innovate in response to changing customer needs, new technologies (e.g., AI), or market requirements.
• Unsuccessful execution of investments in AI Technology, including access to GPUs and skilled personnel, and customer adoption challenges due to regulatory standards or internal compliance.
• Risk of security breaches or unauthorized access to customer data, company data, or the platform, leading to reputational harm, reduced demand, and significant liabilities.
• Disruptions, outages, defects, and other performance/quality problems with the platform or underlying public cloud/internet infrastructure.
• Fluctuations in financial results making future projections difficult, and potential stock price decline if expectations are not met.
• Failure to effectively develop and expand sales and marketing capabilities, including attracting and retaining sales personnel.
• Risks associated with sales efforts to large customers, such as longer sales cycles, complex requirements, and substantial upfront costs.
• Heightened risks related to special contract terms, non-standard product deployments, and compliance with additional processes, rules, and regulations when doing business with federal, state, local, and foreign governments and agencies, and heavily regulated organizations.
• Loss of key management team members or inability to attract and retain executives and employees.
• Unfavorable conditions in the industry or global economy, reductions in cloud spending, or lower than expected consumption.
• Dependence on the development, expansion, and success of partner relationships.
• General market conditions, volatility, or disruptions, including higher inflation, interest rates, bank failures, and foreign currency exchange rate fluctuations.
• Litigation risks, including intellectual property disputes, class action lawsuits (securities, data breach, copyright infringement), and regulatory investigations.
• Liability for data breaches, intellectual property infringement, and violation of applicable laws.
• Challenges in integrating acquisitions, strategic investments, partnerships, or alliances.
• Seasonality causing fluctuations in remaining performance obligations or customer consumption.
• Natural disasters, public health crises, and other catastrophic events.
• Operational challenges due to international expansion, including differing regulations, data localization, and geopolitical risks (e.g., China operations).
• Need for additional capital, which may not be available on acceptable terms, leading to dilution or debt obligations.
• Servicing debt (convertible senior notes) requires significant cash flow.
• Exposure to fluctuations in currency exchange rates.
• Risks related to strategic investments in non-marketable equity securities.
• Issues in the development and use of AI Technology, combined with an uncertain regulatory environment, potentially leading to reputational harm, liability, or adverse consequences.
• Subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws.
• Increasing scrutiny and changing expectations regarding ESG practices.
• Governmental export and import controls.
• International operations may subject the company to greater than anticipated tax liabilities.
• Changes in tax laws or tax rulings.
• Limitations on the ability to use net operating loss carryforwards.
• Volatility of stock price.
• Dilution from conversion of convertible notes or issuance of additional capital stock.
• Counterparty risk with respect to capped call transactions.
• Failure to realize anticipated long-term stockholder value from stock repurchase program.
• Reliance on stock price appreciation for investor returns as no dividends are planned.
• Significant costs and management time devoted to public company compliance.
• Inherent limitations on effectiveness of internal controls over financial reporting.
• Anti-takeover provisions in charter documents and Delaware law.
• Designation of the Court of Chancery of the State of Delaware and federal district courts as exclusive forums for certain disputes may restrict stockholders' ability to choose judicial forum.

Future Outlook

Expects costs and expenses to continue to increase in future periods due to investments in platform development, research and development teams, employee retention, and acquisitions, particularly in data science and AI Technology. Anticipates an increase in capacity contracts providing for quarterly upfront billings and monthly in arrears billings. Expects the net revenue retention rate to decrease over the long-term as customers with extended platform use become a larger portion of the customer base and consumption growth primarily relates to existing use cases. Predicts product gross margin to fluctuate due to customer consumption mix, pricing, investments in new capabilities (AI Technology), and stock-based compensation. Expects research and development expenses to increase in absolute dollars but decrease as a percentage of revenue over time due to improved spend efficiency. Anticipates general and administrative expenses to increase in absolute dollars but decrease as a percentage of revenue over time. Believes existing cash, cash equivalents, and investments, plus operating cash flows, will be sufficient for working capital, capital expenditures, debt repayment, acquisitions, and stock repurchases for the next 12 months and beyond. Expects to continue to generate positive net cash flows from operating activities for fiscal 2026. The company may seek additional equity or debt financing for future growth or acquisitions.

Management Comments

• Believe that a cloud computing platform that puts data and artificial intelligence (AI) at its core will offer great benefits to organizations by allowing them to realize the value of the data that powers their businesses.
• Our vision is a world where data and AI turn possibilities into reality.
• 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.
• Expect our net revenue retention rate to decrease over the long-term as customers that have consumed our platform for an extended period of time become a larger portion of both our overall customer base and our product revenue that we use to calculate net revenue retention rate, and as their consumption growth primarily relates to existing use cases rather than new use cases.
• Expect that our stock-based compensation will increase in absolute dollars as we continue to issue equity awards to our new and existing employees, but will decrease as a percentage of our revenue in fiscal 2026 and continue to decrease over time as we grow.
• Expect to continue to generate positive net cash flows from operating activities for fiscal 2026.

Industry Context

The company operates in a highly competitive and rapidly evolving market for cloud data platforms, with increasing demand for AI and machine learning capabilities. Competition comes from large public cloud providers (AWS, Azure, GCP) who are also infrastructure partners, as well as other established and emerging data solution vendors. The industry is seeing a shift towards open data formats (like Apache Iceberg tables) and hybrid cloud offerings, which can reduce customer lock-in and increase competition. Evolving regulatory standards (e.g., GDPR, DORA, DPDP Act, U.S. state privacy laws, AI regulations) are increasing compliance requirements and costs for companies in the data and AI space. The demand for AI-skilled personnel and GPUs is high, indicating a competitive landscape for talent and resources in AI development. Macroeconomic conditions are influencing customer spending, leading to budget rationalization and consumption optimization.

Comparison to Industry Standards

• The net revenue retention rate of 125% is a strong indicator of customer satisfaction and expansion, often considered a benchmark for successful SaaS/consumption-based models, though the slight decrease suggests some industry headwinds or maturation.
• The growth in Forbes Global 2000 customers (766) indicates strong penetration into the large enterprise market, a key segment for cloud data platforms, comparable to leading enterprise software providers.
• The company's focus on AI Technology and the AI Data Cloud aligns with broader industry trends towards data-driven insights and advanced analytics, positioning it against major cloud players like AWS, Azure, and Google Cloud Platform in the AI/ML services space.

Management Changes

Corporate Governance

Legal Proceedings

• NLRB Charge: A former employee filed a charge on March 23, 2021, alleging retaliatory termination. An administrative law judge ruled in favor of the employee on September 15, 2023, ordering compensatory and other damages (estimated range: $0 to $25 million plus interest). The company is appealing the ruling.
• Stockholder Class Action Lawsuit: Filed February 29, 2024, alleging violations under Sections 10(b) and 20(a) of the Exchange Act against the company, former CEO, and former CFO. Seeks unspecified damages. A motion to dismiss the second amended complaint was filed on June 6, 2025, with oral argument scheduled for December 11, 2025. Five related securities derivative claims are stayed pending resolution.
• Data Breach Class Actions (MDL): Filed June 13, 2024, alleging failure to secure systems leading to exfiltration of personally identifiable information. Numerous additional class actions in the US and Canada were consolidated into a Multidistrict Litigation (MDL) in the District of Montana on October 4, 2024. Motions to dismiss were denied on October 28 and 29, 2025. The company is required to file its answers to the complaints by December 15, 2025. This includes claims related to the Los Angeles Unified School District (LAUSD Claims).
• Copyright Infringement Class Action: Filed November 21, 2025, alleging unauthorized copying, storage, or use of copyrighted work to train the company's large language model. Seeks statutory and other damages, attorneys' fees, and other relief.

Related Party Transactions

• A member of the board of directors serves as the Chief Executive Officer of a privately-held company (Related Party), which has been a customer since 2018.
• In July 2025, an additional customer agreement was entered into with the Related Party for a total contract value of $67.5 million over three years.
• In August 2025, a vendor agreement was entered into with the Related Party for a total contract value of $1.1 million over five months.
• Revenue recognized from the Related Party was $6.7 million for the three months ended October 31, 2025, and $17.4 million for the nine months ended October 31, 2025.
• Strategic investments of approximately $20.0 million (nine months ended October 31, 2025) and $5.0 million (nine months ended October 31, 2024) were made by purchasing non-marketable equity securities issued by the Related Party.

Stakeholder Impact

• Shareholders: Face potential dilution from convertible notes conversion or future equity raises. Subject to stock price volatility and the impact of the stock repurchase program. Legal proceedings could lead to significant liabilities or reputational harm.
• Employees: Stock-based compensation is a significant component of their compensation. Risk of attrition if equity award value declines. Management changes could impact morale and operations.
• Customers: Benefit from increased consumption and adoption of new features. Face risks related to security breaches, service availability, and compliance with evolving regulations. May experience increased costs if consumption optimization efforts are too successful without new workloads.
• Partners: Growth depends on successful partner relationships, including global system integrators, managed service providers, and resellers.
• Creditors: The convertible senior notes represent a significant debt obligation, with potential for cash settlement upon conversion.

Next Steps

• Oral argument on the motion to dismiss in the stockholder class action lawsuit is scheduled for December 11, 2025.
• Required to file answers to the data breach Multidistrict Litigation (MDL) complaints on or before December 15, 2025.
• Will continue to invest significantly in research and development to improve the platform, including data science and AI Technology.
• Further expansion of international operations and customer base is planned.
• Pursuit of additional government certifications and personnel security clearances.
• Evaluation of the purchase price allocation for two privately-held companies acquired in November 2025.
• Continued monitoring of macroeconomic conditions and their effects on the business.
• Potential future equity or debt financing may be sought.
• Ongoing stock repurchases under the authorized program.

Key Dates

Recommendation

Snowflake continues to demonstrate strong revenue growth and expanding customer adoption, particularly among large enterprises, which are positive indicators for its long-term market position in the cloud data platform and AI Data Cloud space. The improvement in operating loss and product gross margin suggests increasing efficiency. However, the slight decline in net revenue retention rate, persistent net losses, and substantial stock-based compensation indicate that profitability remains a challenge. The company faces significant legal and regulatory risks, including multiple class-action lawsuits related to data breaches and a new copyright infringement claim concerning AI model training, which introduce considerable uncertainty and potential liabilities. While strategic investments in AI and acquisitions are forward-looking, their immediate impact on profitability is negative. Given the strong growth tempered by ongoing losses and significant legal overhangs, a 'Hold' recommendation is appropriate for a seasoned investor, awaiting clearer signs of sustained profitability and resolution of legal challenges.

Keywords

Cloud data platform, AI Data Cloud, Data warehousing, Data analytics, Machine learning, Consumption-based model, SEC filing, 10-Q, Financial results, Software development, Cybersecurity, Convertible notes, Stock repurchase, Enterprise software, Public cloud infrastructure, Data governance, Risk management, Corporate governance, Legal proceedings