Snowflake on Track to Surpass $8 Billion in Product Revenue by Fiscal 2028, Driven by AI Momentum and Customer Expansion

Snowflake (NYSE:SNOW) delivered a standout performance on Wednesday, reporting its fiscal 2027 second-quarter results that featured a third consecutive quarter of accelerating growth, fueled in part by an expanding portfolio of artificial intelligence (AI) offerings.

Shares surged more than 20% in extended trading following the announcement, trading around $338 at the time of this writing.

Management now projects approximately $6.07 billion in product revenue for fiscal 2027 (ending January 31, 2027), representing 36% year-over-year growth. The company also raised its full-year non-GAAP (adjusted) operating margin guidance from 13.5% to 14.5%, marking the second guidance upgrade this year. Snowflake began the year forecasting 27% product revenue growth, increased that estimate in May, and now expects 36%.

This pattern of consistently outperforming internal projections puts a significant milestone within reach: $8 billion in product revenue by fiscal 2028.

Image source: Snowflake.

What Would It Take to Hit $8 Billion?

Snowflake reported $4.47 billion in product revenue for fiscal 2026, a 29% increase. The current fiscal 2027 guidance implies 36% growth on top of that figure.

Transitioning from this year’s $6.07 billion to $8 billion the following year would require approximately 32% growth. In practical terms, Snowflake could decelerate by about four percentage points and still reach the target.

Recent performance suggests this threshold is achievable. Product revenue reached $1.49 billion in the fiscal second quarter (ended July 31), up 37% year over year, following 30% growth in the fiscal fourth quarter of 2026 and 34% in the subsequent quarter. Chief Financial Officer Brian Robins attributed the third consecutive quarter of acceleration to robust demand for the core data platform combined with a notable increase in AI-driven revenue.

Customer Retention Holds Steady as RPO Growth Moderates

Perhaps the most critical metric supporting this outlook is Snowflake’s net revenue retention rate, which compares what existing customers spent over the past year against their spending from the prior year. The figure stood at 126% for a second consecutive quarter, up from 125% at the close of fiscal 2026. Remaining performance obligations (RPO), representing contracted revenue that Snowflake has yet to recognize, totaled $9.00 billion, a 30% year-over-year increase. However, this growth rate has declined from 42% at the end of fiscal 2026 and 38% last quarter.

At 126% retention, existing customers are scaling their spending at a pace sufficient to cover most of the approximately 32% growth needed. New business acquisition would need to account for the remainder.

AI products represent an emerging growth driver. CoCo, the company’s AI coding agent, surpassed 9,100 accounts, gaining more than 2,000 in just three months. While Snowflake does not disclose AI revenue in specific dollar terms, the accelerating adoption metrics and consistently upward revised forecasts indicate that customer spending in this category is gaining traction.

A Return to 27% Growth Would Fall Short

The RPO trajectory warrants close attention. Snowflake operates on a consumption-based model, where customers purchase capacity upfront and draw it down as they use the cloud computing platform, meaning revenue tracks actual usage. A slowdown in RPO growth can serve as an early indicator of where consumption is heading.

If growth reverts to the 27% pace originally guided for the current fiscal year, fiscal 2028 product revenue would land near $7.7 billion, causing the $8 billion projection to fall short.

It is worth noting that Snowflake’s initial fiscal 2028 forecast, expected when the current year concludes early next year, will likely begin below 32%. This year’s guidance started at 27% before being raised twice.

A conservative opening forecast would not necessarily derail the projection. A declining retention rate or continued deterioration in RPO growth, however, would.

Ultimately, I anticipate Snowflake clearing the $8 billion threshold. If retention remains stable, existing customers will carry the company most of the way there, and management has consistently demonstrated a pattern of setting conservative initial guidance and raising it later. While RPO growth is moderating and a consumption-based business can decelerate rapidly when customers pull back, the projection has built-in flexibility. Growth can decline by four percentage points from the full-year guidance and still produce revenue exceeding $8 billion.

Whether the growth stock represents a compelling purchase at current levels is a separate consideration. Following the post-earnings surge, Snowflake carries a market capitalization of approximately $116 billion, trading at roughly 19 times this year’s guided product revenue. This valuation multiple arguably reflects expectations of several years of strong execution.

The projection, however, concerns the underlying business rather than the stock itself. And on that front, the business appears to be firmly on track.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.

Snowflake on Track to Surpass $8 Billion in Product Revenue by Fiscal 2028, Driven by AI Momentum and Customer Expansion was originally published by The Motley Fool.

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