Snowflake’s third quarter of fiscal 2026 lands with that familiar mix of strength and tension the stock has become known for. The company posted $1.21 billion in revenue, up 29% year over year, with product revenue at $1.16 billion — also up 29% — confirming that consumption trends remain resilient. Net revenue retention held at an elite 125%. Big customers kept scaling: 688 accounts now generate more than $1 million in trailing 12-month product revenue (up 29%), and the base of Forbes Global 2000 clients reached 766 (up 4%). Meanwhile, remaining performance obligations surged 37% to $7.88 billion, a number that quietly signals future visibility is improving even more than revenue growth alone would imply.
Margins moved the way investors wanted. Non-GAAP product gross margin clocked in at 76%, non-GAAP operating margin hit 11%, and adjusted free cash flow margin reached 11%. That’s real, measurable operating leverage — finally. At the same time, GAAP numbers remain firmly in the red: a $329 million operating loss and a $294 million net loss, both heavily influenced by stock-based compensation north of $440 million. Snowflake is growing and scaling, but it’s still doing so with an expensive equity compensation structure that meaningfully dilutes shareholders.
The AI narrative is where the company is leaning hardest. Management highlighted Snowflake Intelligence’s rapid adoption — the fastest in company history — and described Snowflake as “the cornerstone of enterprise AI strategies.” Partnerships with Google Gemini, Anthropic and major enterprise platforms are positioning the AI Data Cloud as the connective layer between data, models, and applications. AI-related revenue hitting a $100M run rate earlier than expected is one of those quiet-but-important data points: customers aren’t just experimenting anymore; workloads are flowing.
Guidance for Q4 is steady rather than flashy: $1.195–$1.200 billion in product revenue (around 27% growth), a step down from Q3’s 29%, and a non-GAAP operating margin of about 7%, indicating planned reinvestment. Full-year product revenue is guided to $4.446 billion (28% YoY), with a 75% non-GAAP product gross margin and a 25% adjusted free cash flow margin. In other words: Snowflake is signaling responsible growth and disciplined profitability rather than big upside surprises.
The market response tells you everything about where investor psychology sits. Shares popped 2% in regular trading, then sank about 8% in after-hours as soon as the numbers and guidance landed. It wasn’t disappointment — it was valuation friction. Snowflake beat on revenue, beat on EPS, grew RPO faster than revenue, expanded margins… yet didn’t offer the acceleration or breakout AI monetization curve the most bullish segment of the market has been fantasizing about. The message investors effectively sent was simple: at this valuation, “solid” isn’t enough — investors want unmistakable hypergrowth reacceleration or a decisive path to GAAP profitability. Snowflake delivered good execution, not a narrative reset.
Still, the underlying fundamentals are strong. RPO outpacing revenue by nearly 800 basis points is a quiet-but-powerful leading indicator. Usage trends continue to grow. Large accounts continue to scale. The balance sheet is fortified with more than $4.4 billion in cash and investments, giving Snowflake ample room to invest, repurchase shares, and pursue strategic acquisitions. Competition from Databricks and the hyperscalers remains intense, and with cloud cost optimization now part of enterprise culture, consumption volatility is here to stay. But nothing in this quarter suggests Snowflake is losing ground — if anything, the AI adoption curve is bending in its favor.
From a stock-market perspective, SNOW is entering an awkward middle chapter. The growth story is healthy, but the company is no longer expanding at the 50–80% rates that justify extreme premiums. The profitability story is improving, but GAAP profitability is still years away unless SBC meaningfully drops. That leaves Snowflake in the valuation danger zone: too good to dismiss, too expensive to fully own without clear acceleration. The next few quarters will shape whether Snowflake becomes a durable, compounding data-AI platform — or a great company held back by an overstretched multiple and impatient shareholders.
For long-term investors who believe in the neutral AI data-cloud thesis, this quarter strengthened, not weakened, the conviction. For near-term traders, the bar for upside remains high. Snowflake is executing well — the only thing it didn’t deliver was a surprise big enough to re-rate the stock upward on the spot.