Snowflake CEO Sridhar Ramaswamy and CFO Mike Scarpelli highlighted the company's evolution from a data warehouse to an AI-powered data platform, driven by products like Snowflake Intelligence and Cortex. Despite data modernization challenges, the core business remains strong, with product revenue growing 30% in Q4 and RPO up 42%. A key focus was Cortex, a coding agent that accelerates development on Snowflake, demonstrating the transformative potential of AI. While free cash flow margin guidance dipped to 23% due to the Observe acquisition, management reaffirmed a path to GAAP profitability by reducing stock-based compensation to 27% of revenue this year.

Key Takeaways

• Revenue Acceleration: Q4 product revenue grew 30% year-over-year, re-accelerating to $9.8 billion in total revenue, with RPO growing 42%.
• Large Deal Momentum: Snowflake signed its largest-ever deal worth over $400 million and closed seven other nine-figure deals in the quarter.
• AI Product Traction: Cortex, a coding agent, is driving efficiency by automating complex tasks like data pipeline creation and governance, serving as a "massive unlock" for customers.
• Free Cash Flow Impact: FY27 free cash flow margin guidance is 23%, down from 25% in FY26, largely due to a 150 basis point headwind from the Observe acquisition.
• Headcount Decoupling: Revenue growth has decoupled from headcount; despite 30% revenue growth in Q4, net headcount added was only 37 due to AI-driven efficiencies and a small reduction in force.
• Path to GAAP Profitability: Stock-based compensation (SBC) has decreased from 41% of revenue two years ago to a target of 27% this year, creating a clear path to GAAP profitability.
• Hyperscaler Relationships: Partnerships with AWS and Azure remain strong, while collaboration with Google Cloud is improving due to the rise of Gemini and a shift away from BigQuery-centricity.
• Capital Allocation: Snowflake has $1.1 billion remaining on its share buyback authorization and continues to pursue disciplined M&A, such as the recent Observe acquisition.

Q&A

Sanjit Singh (Morgan Stanley): Was the strength and durability in the core business over the past year driven by data modernization initiatives or other factors?

• Sridhar Ramaswamy: While data modernization is important, it is often slow and complex; the real driver was the growing understanding of AI value, exemplified by products like Snowflake Intelligence which demonstrate the power of agentic AI on top of data.

Sanjit Singh (Morgan Stanley): What factors allowed Snowflake to land seven nine-figure deals and a record $400 million deal in the quarter?

• Mike Scarpelli (CFO): These were existing customers expanding their commitment, betting on Snowflake’s data and AI strategy to generate positive business outcomes, rather than just new customer acquisition.

Sanjit Singh (Morgan Stanley): Outside of the Observe acquisition, what factors should investors consider regarding the decline in free cash flow margins to 23%?

• Mike Scarpelli (CFO): The Observe acquisition created a ~150 basis point headwind; the guidance is set at a comfortable level that the company aims to overachieve.

Sanjit Singh (Morgan Stanley): Why did Snowflake build its own coding agent, Cortex, and how does it unlock growth?