Snowflake (SNOW) stock has gained about 50% since late December 2025, against 13% for the S&P 500. Microsoft, Amazon, and Alphabet all trailed the index over the same stretch. So this was not the cloud trade lifting everything at once. One number inside Snowflake moved, and management has already said what it costs to keep it moving.
Snowflake Grew Faster Three Quarters In A Row
The number is product revenue growth. It added seven points in two quarters, reaching 37% year over year in fiscal Q2 2027, and management called that the third straight quarter of acceleration. A nine-month climb needs a trend behind it. That is the trend.
Management then raised the fiscal 2027 product revenue growth guide to 36%, though roughly a point of that comes from its Observe acquisition, unchanged from its previous outlook. Its explanation for the rest is that customers running AI on Snowflake consume more across the data platform. CoWork, the layer it sells for working through enterprise data in conversational language, passed 9,100 accounts, more than 2,000 of them added in fiscal Q2 2027. Customers like 1Password, the security company trusted by more than 200,000 businesses, chose Snowflake for CoWork.
But Snowflake Pays More to Serve That Growth
In the same set of numbers, management cut its fiscal 2027 non-GAAP product gross margin outlook to 74%. The reason it gave was the mix: the revenue growing fastest now comes from AI workloads, which carry a lower contribution margin today.
The company is working on that from the cost side. Cortex AI Gateway routes each task to the right model under the customer’s own policies, with cost and governance controls built in. Snowflake also runs inference on open models itself, where management says the economics are different. The guide came down anyway, and management’s stated order of business is the customer’s best answer first and margins afterwards.
So How Does Snowflake Still Widen Its Operating Margin?
By slowing headcount expense. In the same breath as the gross margin cut, management raised its fiscal 2027 non-GAAP operating margin guide from 13.5% to 14.5%, offsetting rising cloud costs with slower headcount expense. AI workloads cost more to serve, the slower headcount expense more than covers it, and the operating margin is where that trade shows up.
That is what the 50% bought. Against $5.43 billion of total revenue over the past twelve months, Snowflake’s $117.6 billion of market value is close to 22 times that. Those margin figures are all non-GAAP, and management’s own target for a reported profit is fiscal Q4 2028. The stock has already slipped back from its 52-week high of $356.47.
So you are paying for AI consumption to keep compounding fast enough that the slower headcount expense keeps covering the higher cost of serving it. What to watch is whether the revenue guide and the operating margin guide keep going up together, which is exactly what our screen for guidance-driven momentum tracks across the companies still raising their outlook.
Enjoy The Move, Then Check What It Did To Your Allocation
A move like this is even better to own than to watch, and it is also how one holding grows into an outsized share of a portfolio. Concentration tends to arrive by accident rather than by decision. What your largest position would do to your net worth is exactly what the Trefis Wealth team computes, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.
