Snowflake Inc.

Good afternoon, and thank you for joining us on Snowflake's Q1 fiscal 2026 earnings call. Joining me on the call today are Sridhar Ramaswamy, our Chief Executive Officer, Mike Scarpelli, our Chief Financial Officer, and Christian Kleinerman, our Executive Vice President of Product, who will participate in the Q&A. During today's call, we will review our financial results for the first quarter fiscal 2026 and discuss our guidance for the second quarter in full year fiscal 2026. During today's call, we will make forward-looking statements, including statements related to our business operations and financial performance These statements are subject to risks and uncertainties, which could cause them to differ materially from our actual results. Information concerning these risks and uncertainties is available in our earnings press release, our most recent forms 10K and 10Q, and other SEC reports. All our statements are made as of today based on information currently available to us. Except as required by law, we assume no obligation to update any such statements. During today's call, we will also discuss certain non-GAAP financial measures. See our investor presentation for a reconciliation of gap to non-gap measures and business metric definitions, including adoption. The earnings press release and investor presentation are available on our website at investors.snowflake.com. A replay of today's call will also be posted on the website. With that, I would now like to turn the call over to Sridhar. Thanks, Jimmy.

And hi, everyone. Thank you all for joining us today. We are off to a strong start to the year, and I couldn't be more proud of our team. Our core business is very strong. Our product delivery remains in overdrive and our go-to-market engine continues to get stronger and stronger. We are in the zone and there's still an enormous opportunity ahead. At Snowflake, our mission is to empower every enterprise to achieve its full potential through data and AI. Our AI data cloud helps customers get more value out of their data, innovate faster, and remove friction from their business operations. And as I have shared the past few quarters, we are extending that value throughout the data lifecycle. We remain disciplined in driving operational rigor across our business, gaining greater efficiency, even as we continue to invest progressively in growth. We are building on our strengths in executing with urgency and focus to capture the opportunities ahead and sustain durable momentum. Product revenue for Q1 was $997 million, up a strong 26% year-over-year. Excluding the impact of leap year, product revenue grew 28% year-over-year. Our growth rate was stable quarter-over-quarter, showing no deceleration. Remaining performance obligations totaled $6.7 billion, with year-over-year growth of 34%. Our net revenue retention was a very healthy 124%. As you can see, we have started the year with strong revenue growth and overall very healthy results, and we are increasing our growth expectations for the year. As I've shared the past few quarters, Snowflake is obsessed with creating product cohesion to make it easier and easier for our customers to innovate faster and unlock more value from their data. from ingestion to insults. Enterprise leaders like Canva and JPMorgan Chase bet their business on Snowflake because our platform is easy to use, connected to enable fluid access to data wherever it sits, and trusted by companies of all sizes and industries. And we are continuing to deliver on our vision of being the end-to-end technology provider for our customers' data journey. We've made important progress in delivering an extensible and flexible connectivity platform for unstructured as well as structured data. Snowflake Connectors, which leverages the technology from our acquisition of DataVolo, enables customers with seamless connectivity and data integration with key platforms like Google Drive, Workday, Slack, SharePoint, and more to tap into critical data across the business. Global pharmaceutical leader AstraZeneca, for example, can now analyze critical business data from systems like SAP and Workday with ease. And customers like Cloud Zero leverage hundreds of powerful active data sharing connections to securely exchange data with their partners and customers, driving value across our ecosystem. As our data engineering business continues to show strength, we are helping our customers streamline and scale their data pipelines with less and less friction and realize meaningful cost savings. By consolidating data in Snowflake, Dentsu, a global marketing agency managing data for numerous Fortune 500 clients, reduced costs by 30% to simplify data architecture and reduce dependence on third party tools. They now use Snowflake DataClean Group to help global brands securely combine customer data without compromising privacy, enabling more personalized marketing campaigns while reducing risk. On the analytic front, our world-class solutions continue to power mission-critical operations for our customers. Global technology leader Siemens is collaborating with Snowflake to help manufacturers unlock new levels of operational efficiency and scale. This enables customers unify the information technology data, such as supply chain management and financial data, with operational technology data, like data from plant floor systems and industrial equipment, leveraging Siemens Industrial Edge and Snowflake's AI data cloud to gain better insights, improve machine performance, and optimize production processes across their business. And as AI reshapes the enterprise, Snowflake is helping our customers lead the way with AI-ready data. Take Samsung Ads, a leader in connected TV advertising. They leverage Snowplay to connect advertisers with millions of Samsung consumers while upholding strict privacy standards. By unifying their data on Snowplay, Samsung Ads drives innovation in personalized customer experiences and accelerates the development of new AI and ML-powered advertising features enabling advertisers to deliver more relevant content and enhance the advertising expertise. We have incredible product momentum, and we are continuing to innovate at lightning speed. In fact, this quarter alone, we have brought over 125 product capabilities to market, a 100% increase over what we delivered in Q1 of last year. We continue to see strong adoption of open data formats, especially truly open modern table formats like Apache Iceberg. We recently announced that our customers can now leverage many of Snowflake's core capabilities, including data sharing, security, and performance optimization using Apache Iceberg, giving them even more flexibility to manage and query data at scale. When it comes to AI, it's pretty amazing to see our progress. A year ago, we were just getting started. Now, We have over 5,200 accounts using our AI and machine learning on a weekly basis. Cortex AI has gone from a nascent product area to a foundational pillar of enterprise AI strategies for customers around the world. It's accelerating clinical research for healthcare companies with unified access to information and turning automotive customer reviews into actionable insights to help them personalize their search. As one of the world's largest food and beverage companies, Kraft Heinz is leveraging Snowflake Cortex to empower its employees with innovative AI tools like HOT or Kraft Heinz AI, their new internal AI assistant. This initiative is designed to revolutionize internal workflows, enhance efficiency, and drive AI adoption across the organization, paving the way for future advancement in agentic AI. Earlier this year, we launched Cortex Agents, which is now helping customers like Luminate Data, a leading provider of entertainment insights, scale how they process and retrieve both unstructured and structured data. That foundation is critical for developing, deploying, and orchestrating the data agents driving their AI applications. And we have further solidified our leadership by continuing to integrate cutting-edge models into Cortex, ensuring day one availability of Meta's Lama Foremark. As I shared last quarter, we announced an expanded partnership with Microsoft to host open AI models on Microsoft Azure region. We continue to provide our customers with choice and flexibility to leverage the world's leading models for their enterprise AI applications. We also launched the first of our AI-powered migration enhancements. Now, Our customers can use Cortex to test and review issues during their migration journey, making a time-intensive process much more efficient. And this is just the start of what AI can do to make migrations go fast. All of these innovations are focused on driving real value for our customers. We are making it easy to tap into structured data. We are making it easy to tap into unstructured data as well. And we are helping our customers build a strong foundation to lead in the era of agentic AI. We are continuing on this momentum, and you'll see even more from us in just a few weeks. During the first week of June, we'll be joined by tens of thousands of customers, partners, and developers at Snowflake Summit, a four-day event, one of our biggest yet, where we will reveal some truly exciting new capabilities we are bringing to market to support our customers at every stage of their data journey. As we innovate, we remain committed to scaling efficiency. Under the leadership of our new Chief Revenue Officer, Mike Gannon, we have renewed focus and rigor across our go-to-market needs. We are growing our go-to-market operations while maintaining our close collaboration across engineering, product, marketing, and sales to bring products to market effectively. This ensures that we are able to deliver greater value to our existing customers while continuing to win new ones. We are also expanding our addressable market. With the launch of Snowflake Public Sector Inc. and our recent Department of Defense impact level provisional authorization, we are now equipped to deliver mission-critical data and AI solutions to the national security community, including the United States Department of Defense, its military branches, and industry partners. We also introduce new automotive solutions as part of our AI data cloud for manufacturing. These solutions empower companies like CarMax and Nissan with advanced data and AI solutions to drive innovation and efficiency. And we are using our own AI internally to boost productivity. Our go-to-market teams use our sales knowledge assistant powered by CarTest to access insights from our sales knowledge base using natural language. With fast intuitive streamlit apps like our Customer 360 app, they can tap into rich insights on customer consumption trends. I'm proud of the discipline and efficiency we've built across the business. We've got a strong operational rhythm, we're investing strategically for growth, and we're laying the groundwork for scale. Why? Why don't you take us through more of the financial details?

Thank you, Sridhar. In Q1, product revenues grew 26% year-over-year to reach $997 million. As Sridhar mentioned, we saw no deceleration in the business when adjusting for lead debt. We continue to see meaningful growth from new product offerings. Both snow parks and dynamic tables outperformed expectations in Q1. Other areas of strength, including technology and retail sectors. Q1 was a strong quarter for bookings. On our last call, I noted two large customers ran out of capacity in Q4 and elected to delay their larger renewals. As expected, both of these accounts signed $100 million-plus contracts in Q1. We view this variability in bookings as normal for our model. Our focus on new customer acquisitions is yielding positive results. We added 451 net new customers in Q1, growing 19% year over year. Turning to margins. In Q1, our non-GAAP product gross margin was 75.7%. Our non-GAAP operating margin was 9%, up 442 basis points year over year. We continue to focus on driving greater efficiency across the entire company while investing for growth. Non-GAAP-adjusted free cash flow margin was 20%. As discussed on our last earnings call, we had several large customers purchase as they consumed in Q4. This booking behavior impacts the seasonality of our free cash flow. We expect this year to be more second-half weighted. In Q1, we used $491 million to repurchase 3.2 million shares at an average weighted price we still have $1.5 billion remaining on our authorization through March 2027. We ended the quarter with $4.9 billion in cash, cash equivalents, short-term and long-term investments. Now moving to our outlook. We expect Q2 product revenue between $1.035 and $1.04 billion, representing 25% year-over-year growth. We expect Q2 non-GAAP operating margin of 8%. For FY26, we are increasing our revenue guidance to $4.325 billion, representing 25% year-over-year growth. As always, we forecast based on observed customer behavior. We expect non-GAAP product gross margin of approximately 75%, non-GAAP operating margin of 8%, non-gap adjusted free cash flow margin of 25%. Finally, we will host our Investor Day on June 3rd in San Francisco in conjunction with Snowflake Summit. If you are interested in attending, please email ir at snowflake.com. Before opening up the line for questions, I just wanted to update you on my transition as mentioned on the Q4 conference call last quarter. We are in the process of interviewing many great candidates We will make an announcement in the future when we have more firm details to share. With that, operator, you can now open up the line for questions.