What happened
Snowflake expanded its AI offerings with Cortex Code, a data-native coding agent, and SnowWork, an autonomous enterprise AI platform. The company reported product revenue growth of 30% year-over-year, with remaining performance obligations nearing $9.77 billion. Snowflake's stock is down over 41% from its November 2025 high. Management projects 27% product revenue growth for the current fiscal year, acknowledging near-term margin pressure from AI workloads relying on third-party large language models.
Why it matters
Snowflake's AI expansion introduces margin pressure and intensifies competition, despite continued demand for its core data platform. AI workloads, particularly those using third-party large language models, increase cost of goods sold, impacting gross margins. Management projects product revenue growth deceleration to 27% for the current fiscal year. Procurement teams scrutinise AI-enabled data service cost structures, especially those using third-party models, for margin impacts. CTOs and architects evaluate Snowflake's AI offerings against competitors like Databricks for integrated AI tooling.
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