Snowflake's (SNOW) Q3 2025 earnings report highlights a strong revenue growth trajectory, with total revenue reaching $942.1 million, a 28% year-over-year increase compared to $734.2 million in Q3 FY2024. This growth was primarily driven by product revenue, which accounted for 96% of total revenue and grew by 29% year-over-year to $900.3 million. Professional services and other revenue also increased by 17% year-over-year to $41.8 million.

The company's net revenue retention rate stood at 127%, reflecting robust customer expansion and consumption patterns. Snowflake reported having 542 customers with trailing 12-month product revenue exceeding $1 million, up from 432 customers in the prior year. Additionally, the number of customers generating over $5 million and $10 million in product revenue increased to 103 and 37, respectively, showcasing strong growth among high-value accounts.

Despite the revenue growth, Snowflake reported a net loss of $324.3 million for Q3 FY2025, compared to a net loss of $214.3 million in Q3 FY2024. This represents a net loss margin of 34%, slightly higher than the 29% margin in the prior year. Operating expenses, including sales and marketing, research and development, and general and administrative costs, increased significantly, contributing to the widened loss.

Snowflake's gross profit for Q3 FY2025 was $621.2 million, representing a gross margin of 66%, down from 69% in Q3 FY2024. The decline in gross margin was attributed to higher costs associated with product revenue, which grew by 46% year-over-year, outpacing the growth in product revenue itself. Professional services and other revenue continued to operate at a loss, with a negative gross margin of 37%.

Geographically, the Americas contributed $719.3 million to total revenue, representing a 26% year-over-year growth. The EMEA region (Europe, Middle East, and Africa) also showed strong performance, with revenue increasing by 33% year-over-year to $147.2 million. These results underscore Snowflake's ability to drive growth across diverse markets.

Snowflake's remaining performance obligations (RPO) reached $5.7 billion as of October 31, 2024, with approximately 50% expected to be recognized as revenue over the next 12 months. This metric reflects the company's strong backlog of contracted future revenue, although the timing of revenue recognition remains variable due to the consumption-based nature of its business model.

The company generated $78.2 million in free cash flow during Q3 FY2025, down from $102.3 million in the same quarter last year. However, for the nine months ended October 31, 2024, Snowflake reported $527.0 million in net cash provided by operating activities, an increase of $23.5 million year-over-year, driven by higher customer collections.

Snowflake's operating expenses increased significantly, with sales and marketing expenses rising by 23% year-over-year to $438.0 million, and research and development expenses growing by 33% to $442.4 million. General and administrative expenses also increased by 35% to $106.3 million, primarily due to higher personnel-related costs and stock-based compensation.

The company continues to face challenges related to macroeconomic conditions, including inflation and high interest rates, which have led some customers to optimize consumption and shorten contract durations. Despite these headwinds, Snowflake's focus on expanding its customer base and increasing platform adoption has driven strong growth metrics, including a 13% increase in total customers to 10,618 as of October 31, 2024.