Snowflake CEO: AI is unleashing a flywheel effect on our business

SAN FRANCISCO, Calif. — Snowflake ( SNOW ) may have a few more surprising quarters ahead as customers pay for added AI services.

"I think this is the culmination of several quarters of AI really accelerating but turning into more of a flywheel for Snowflake," Snowflake CEO Sridhar Ramaswamy told Yahoo Finance at the Goldman Sachs Communacopia & Tech Conference (video above).

Ramaswamy added that "all the ingredients are there" for the cloud-based data platform business to accelerate in the current "back-to-basics era."

"First of all, a lot more is possible with the same number of software engineers," Ramaswamy said. "It's a question of how we, the team, or how they individually set themselves up to be more productive. And then on the go-to-market side, what has happened is the distance between a data platform like Snowflake and what you would think of as applications … has collapsed in a big way because any of us can now create applications, literally, in a matter of minutes, if not hours."

Snowflake delivered impressive fiscal second quarter financial results on Sept. 2, reporting revenue of $1.55 billion, a 35% year-over-year increase. Product revenue surged 37% to $1.49 billion, marking its third consecutive quarter of accelerating growth.

Bottom-line performance easily topped expectations as adjusted earnings per share jumped 77% year over year to $0.62, comfortably beating Wall Street consensus estimates of $0.45 per share.

The strong beat was propelled by rapid enterprise adoption of its generative AI products, such as Cortex Code, which drove management to raise its full-year product revenue guidance to $6.07 billion ($5.84 billion previously) alongside an upgraded operating margin outlook of 14.5% (13.5% previously).

Following the blowout top- and bottom-line figures and the guidance hike, Snowflake's stock rallied over 20% the next day. The stock is up 55% year to date.

"With significant AI/ML product growth in front of Snowflake, and the associated core consumption these products drive, we now see sustained 30%+ annual product-revenue growth (vs 25%+ previously) in coming years," Stifel analyst Brad Reback wrote.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the ' Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.