Snow Stock Falls 35.4% as Margins and AI Costs Bite
Snow stock has fallen 35.4% year to date as margin pressure and AI-related costs continue to weigh on the outlook. The drop leaves Snowflake behind both the Zacks Computer and Technology sector, which gained 10.6%, and the Zacks Internet Software industry, which fell 12.1%.
Snowflake margin pressure
150 basis points of free cash flow margin (the share of cash left after operating costs and capital spending) were lost in the fourth quarter of fiscal 2026 because of the Observe acquisition. That hit sits alongside lower-margin new AI products and possible infrastructure spending tied to AI-driven initiatives, which keeps pressure on profitability even as the company pushes new features.
125% net revenue retention showed that existing customers kept expanding spending in the fourth quarter of fiscal 2026, while 740 net new customers were added, up 40% year over year. Those gains suggest demand is still broadening, but the stock is being judged more on how much of that growth turns into durable margin expansion.
Snowflake customer growth
733 customers spent more than $1 million annually in the fourth quarter of fiscal 2026, up 27% year over year, and 56 customers spent more than $10 million annually, up 56%. Snowflake also launched more than 430 product capabilities in 2026, including Snowflake Intelligence, Cortex Code, Snowflake OpenFlow and Snowflake Postgres, giving sales teams more to sell even as the economics of those products stay under scrutiny.
2,500 accounts adopted Snowflake Intelligence within three months of launch, and adoption nearly doubled quarter over quarter. Cortex Code was embraced by more than 4,400 customers, while Snowflake announced major updates to both products in April 2026. Those numbers give the company evidence that AI demand is real, but the market is still weighing whether the revenue curve can outrun the cost curve.
Q1 2027 Snowflake guide
$1.262 billion to $1.267 billion is Snowflake’s product revenue range for the first quarter of fiscal 2027, implying 27% year-over-year growth. The company also expects a 9% operating margin, while the consensus estimate calls for $1.32 billion in revenue, 26.85% growth, and 32 cents per share in earnings, with that earnings estimate unchanged over the past 30 days.
If Snowflake keeps adding customers at this pace, the next test is whether its AI lineup can scale without widening the infrastructure bill. Oracle, Amazon and Alphabet are still competing for the same AI budget, so the stock’s recovery will depend less on product launches than on whether the margin profile improves fast enough to match the growth story.
