Snowflake has a secret weapon that's powering its stock toward a huge gain

By Nora Redmond and Hannah Pedone

The company's AI-powered coding assistant is driving major sales momentum

Snowflake posted blowout earnings results for the July quarter on Wednesday.

Analysts are running out of superlatives to describe Snowflake's earnings results, deemed to be "outstanding" and "exceptional." And artificial intelligence is the driving force behind the company's momentum.

Specifically, Snowflake (SNOW) is benefiting from agentic AI, or the process by which AI tools can act autonomously on a user's behalf. Snowflake operates CoCo, an AI-powered coding agent formerly called Cortex Code. Snowflake CEO Sridhar Ramaswamy said on the earnings call that CoCo was among the "easiest sales that we have done to our customers."

Jefferies analyst Brent Thill wrote Wednesday that CoCo has become Snowflake's "killer capability," helping drive better-than-expected product revenue that excited investors.

Snowflake delivered product revenue of $1.49 billion, which surpassed Wall Street's estimate of $1.42 billion. That revenue category includes sales of professional services.

Snowflake's stock rose about 17% on Thursday, to its highest close since December 2021. Jefferies trading strategist Jeffrey Favuzza wrote that "it's reasonable to make the case" that the company delivered the best earnings report within the software sector this quarter.

"An incredibly squeaky clean print to say the least," he wrote.

Another highlight was management's decision to boost its outlook on product revenue. The company raised its full-year product-revenue forecast to $6.07 billion from $5.84 billion.

As for October-quarter product revenue, the company issued a forecast of between $1.588 billion and $1.593 billion, which comes in above the $1.504 billion analysts were expecting.

Management also indicated that CoCo users are consuming more of Snowflake's core platform, reinforcing Thill's view that "AI is additive rather than cannibalistic."

BNP Paribas analyst Stefan Slowinski wrote in a note that Snowflake's implied outlook for the fiscal fourth quarter, which ends in January, "embeds some moderation in growth trends." He believes this is a product of Snowflake's forecasting methodology, which "remains anchored to observable trends and fails to capture the exponential growth of newer AI products." He said product-revenue growth is "likely to exceed 40% over the coming quarters."

That growth rate amounted to 37% in the latest quarter.

"We expect Snowflake to continue to grow revenue at a rapid scale," JPMorgan analysts, led by Samik Chatterjee, wrote in a Wednesday note.

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-Nora Redmond -Hannah Pedone

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09-03-26 2035ET