Snowflake (SNOW)

Business Overview

Snowflake sells cloud data capacity on consumption pricing. FY2026 (year to 31 January 2026) revenue was $4.7B, up 29.2%. Gross margin was 67.2%. GAAP operating margin was -30.6%. R&D was 42.0% of revenue and sales and marketing 44.0%. Stock-based compensation was 34.1% of revenue.

Free cash flow was $1.1B, or 23.9% of revenue, but -$0.5B after stock pay (-10.2% of revenue). Product revenue, recognised as customers consume, was 95.5% of the total. Net revenue retention was 125% (126% a year earlier), measured over two years on a cohort of capacity customers. Remaining performance obligations were $9.8B, up 42% from $6.9B, with about 46% due within twelve months. Capex was 2.2% of revenue.

How the Numbers Read

Reported free cash flow looks healthy until stock pay is charged: 23.9% becomes -10.2%. Revenue growth of 29.2% plus FCF margin of 23.9% sums to 53.1 before stock pay; after stock pay the sum is 19.0. GAAP operating loss at -30.6% and positive reported FCF can coexist because stock pay is added back in the cash-flow presentation many filers highlight.

Net revenue retention of 125% on a two-year capacity cohort is not the same as a trailing-twelve-month ARR net retention at a seat SaaS company. Usage pricing also means customers can cut consumption in a downturn, so net retention can swing below 100%. The usage-pricing guide covers that volatility. Capex at 2.2% is low; stock pay at 34.1% is the capital claim that matters.

How the Model Values This Kind of Company

For a usage-priced platform, consumption and net retention on the filer's own cohort definition are the revenue drivers, and both can swing when customers cut usage. Stock pay at this intensity is the cash driver that turns reported free cash flow negative once charged as a cost.

Capacity customers typically pay a year in advance, so deferred revenue still builds as the business grows: it added $755M of cash in FY2026, while revenue waits on consumption. Capex is usually light; the wedge between reported FCF and FCF after stock pay is the valuation question.

What to Watch in the Financials

Net revenue retention and its cohort definition. 125% on a two-year capacity cohort (from 126%). A shift in cohort rules or a consumption downturn moves this before revenue fully shows it.

Stock pay as a share of revenue. 34.1% in FY2026. That single line turns 23.9% FCF margin into -10.2% after stock pay.

Product revenue share. 95.5% recognised on consumption. Services mix is small; almost all growth and volatility sit in product.

Current share of RPO. About 46% of $9.8B. Capacity contracts can swell RPO without near-term consumption.

Key Risks

Stock-pay intensity. At 34.1% of revenue, stock pay exceeds reported free cash flow of 23.9% of revenue, so free cash flow after stock pay is negative.

Consumption volatility. Customers can optimise or pause usage; net retention can fall faster than in seat-based models.

GAAP operating loss. -30.6% operating margin means profitability on a GAAP basis still depends on cutting stock pay, R&D or sales intensity relative to revenue.

Definitional NRR. A two-year cohort rate is not comparable to peers' trailing measures without reading both definitions in the definitions guide.