Snowflake Accelerates to 37% Growth as CoCo and CoWork Drive Half of the Upside, Management Says AI Products and Core Platform Are Now Contributing Equally
Q2 fiscal 2027 earnings call, September 2, 2026
Snowflake delivered its third consecutive quarter of revenue growth acceleration, with product revenue reaching $1.49 billion, up 37% year-over-year, and non-GAAP operating margin expanding more than 400 basis points to 15%. The company has now added 7 points of growth acceleration in just two quarters after exiting fiscal 2026 at 30%. Management raised full-year product revenue guidance to $6.07 billion, implying 36% growth, an increase of more than 500 basis points from the prior outlook.
AI Products Now Drive Half the Acceleration, Not Just the Halo Effect
The most consequential disclosure of the call came when CEO Sridhar Ramaswamy quantified, for the first time, how much of Snowflake's acceleration is coming from its newer AI products versus the core data platform. Asked by Evercore ISI's Kirk Materne to separate the two, Ramaswamy said "I would roughly call it even," adding that AI products including CoCo, CoWork, AI functions and the new AI Gateway "contributed approximately half of the acceleration that we are seeing." That is a meaningfully more balanced mix than what the company described just one quarter earlier, when CFO Brian Robins noted that most of the prior guidance increase had come from CoCo specifically. JPMorgan's Samik Chatterjee pressed on this shift, and Robins confirmed that customers adopting CoCo and CoWork are also increasing consumption within the core platform, reinforcing management's "flywheel" framing rather than suggesting AI is cannibalizing legacy workloads.
CoCo Adoption Triples Sequential Pace, Now Touches Nearly Every Function Internally
CoCo, Snowflake's AI coding and operations assistant, surpassed 9,100 accounts, adding more than 2,000 net new accounts in the quarter, while CoWork grew to 5,800 accounts, up 11% sequentially. What stood out was management's granularity on internal usage: Robins disclosed that finance alone runs CoCo across deal desk, tax, accounting, internal audit, FP&A and treasury, with adoption "almost at 100%" inside that organization. Marketing eliminated $400,000 in annual agency spend by brining search optimization in-house, cutting keyword research time from 10 hours to 20 minutes and content production from 24 hours to 2. Sales has automated prospecting for over 125,000 contacts, with 70% of inbound outreach emails now AI-generated before a rep is involved. Finance's long-range planning function shrank from a 3-person team managing 50-plus spreadsheets to a single analyst running models. These aren't hypothetical use cases; they are Snowflake's own operations, and management is explicitly using them as sales collateral, with Christian Kleinerman, EVP of Product, noting the internal deployment "informs the quality and completeness of our products" while also serving as proof points for customers.
Model Neutrality Becomes an Explicit Competitive Weapon Against Frontier Labs
UBS analyst Karl Keirstead's question on model mix drew out one of the call's more strategically important answers. Kleinerman stated plainly that model neutrality "is a competitive advantage," explaining that "we have heard from many, many customers that they made large commitments to one specific model company and later on are saying, 'Oh, I should have wanted to do a different model.'" Snowflake's new Cortex AI Gateway routes tasks dynamically across frontier, open-weight and Snowflake's own Arctic-family models based on customer-defined cost and performance policies. Kleinerman also flagged an "early but real" emerging trend of customers wanting to post-train open models on Snowflake's platform, framing this as a new monetization avenue. On margins, Robins acknowledged the mix shift toward AI workloads is diluting gross margin, guiding fiscal 2027 non-GAAP product gross margin down to 74%, but insisted the company remains committed to operating margin expansion, raising full-year operating margin guidance to 14.5% from 13.5%.
Migrations Are Happening at a Pace Management Says Was Previously Impossible
Ramaswamy has discussed migrations on "pretty much every single earnings call over the past 6 quarters," but the examples this quarter were more concrete. A large Australian bank migrated its financial-crime platform processing 17 billion transactions onto Snowflake with 10x faster query performance, and is now using AI agents to automate legacy data discovery for the rest of its estate. A major network equipment manufacturer is completing a Teradata migration in under three quarters, a project Ramaswamy said "would have taken probably 2 to 3 years in any previous time." Risk-intelligence firm Sayari is using CoCo to migrate 12 billion records while cutting infrastructure costs by more than half. Management attributed this to a metric it tracks internally called time-to-80%-of-purchased-consumption, which Ramaswamy said has "very, very visibly improved" for the newest customer cohorts, evidence, he argued, that AI is compressing time-to-value rather than merely pulling forward future spend.
Guidance, Retention and the Underlying Numbers
Net revenue retention held at 126%, and the company added 692 net new customers, a 32% year-over-year increase in net new adds, including 14 from the Global 2000, bringing that cohort total to 829, now representing 41% of the Global 2000. Customers spending above $1 million in trailing 12-month product revenue grew to 828, with 65 customers now above the $10 million threshold. Remaining performance obligations rose 30% to $9 billion, though Robins noted bookings are increasingly weighted toward fourth-quarter renewals. Headcount discipline remains a margin lever: Snowflake added only 334 employees year-to-date, including 173 from the Observe acquisition, compared with 935 in the year-ago period. The company reiterated its path to GAAP profitability in the fourth quarter of fiscal 2028 and its 23% full-year adjusted free cash flow margin target. For the third quarter, Snowflake guided product revenue of $1.588 billion to $1.593 billion, representing 37% to 38% growth, and non-GAAP operating margin of 15.5%.