Good morning. QQQs - 40bps continuing weakness from yesterday. LT yields continue to break out with 10 year +2bps and 30 year +5bps. More macro sensitive 2 years yields dn 2bps.
BTC continues to rip making new ATHs +3%. Risk on → good for BTC. Risk off/yield worries → good for BTC. That’s been the playbook for a couple months now.
We’ll hit up SNOW, ZM, ADI Earnings recaps first then dive into the usual.
Let’s get to it…
SNOW +8.3%: Product revs beat as company firing on all cylinders
As we pointed out last night, key for us was that the guide for next q implies 25%. Product revs comp gets 4.5ppts easier so that looks like a conservative # vs this quarters 25% (especially given magnitude of beat: 5 ppts vs. their guide). Another 5ppts beat vs guide would imply an acceleration to 30%+ product revs which we haven’t seen since early 2024. Stock has been a favorite in software land among investors and this q confirms why. No strong view of where it goes from +8% today, but we continue to like the product cycle story here and now you have re-acceleration on the table beginning next q. Developer conference June 5th next catalyst.
Details:
SNOW’s product revenue was $997 million, up 26 percent and roughly 4 percent ($38 million) above the Street’s $959-960 million forecast and bogeys closer to 24-25%; excluding the leap-year day the run-rate held at 28 percent.
Non-GAAP operating margin printed 8.8 percent versus the Street’s 5.5 percent, while product gross margin was roughly in line at 75.7 percent.
RPO climbed to $6.7 billion, +34 percent and a point faster than last quarter, with cRPO up 31 percent (vs. 27 percent).
Net-revenue-retention slipped two points to 124 percent but still ran ahead of bogeys.
Free-cash-flow margin, however, dropped to 19.8 percent, below street.
Management guided Q2 product revenue to $1.035-1.040 billion (+25 percent) versus consensus $1.02 billion and nudged the FY26 product-revenue outlook to $4.325 billion (+25 percent), flowing through more than the Q1 beat while holding the full-year 8 percent operating-margin and 25 percent FCF-margin targets.
Key takeaways:
Demand remains resilient despite a cloudy macro. Management and the IR team said they see no consumption slowdown tied to tariffs or broader macro and highlighted out-performance in tech and retail, plus a sharp pickup in APAC.
Large-deal momentum and pipeline health. Two customers that slipped last quarter signed $100 million-plus multi-year renewals, helping to re-accelerate bookings growth and push cRPO higher.
New-product traction accelerating. Snowpark, Dynamic Tables and early Cortex AI features are outpacing internal plans; more than 5,200 accounts now use AI/ML features weekly (up ~30 percent q/q), and 39 percent of customers are sharing data products.
Go-to-market rebuild beginning to pay off. SNOW added 373 S&M heads in Q1 (+11 percent q/q), the biggest quarterly hire in its history, coinciding with the strongest net-new customer adds on record.
Cash-flow miss is the main blemish. Management blamed mix and seasonality, but bears argue it points to heavier incentive spend and longer payback on new products.
Bull vs. bear narrative
Bulls argue the quarter shows that Snowflake’s consumption model has stabilized in the mid-20-percent growth zone and could potentially accelerate to 30% next q, that large enterprises are recommitting with bigger, multi-year deals, and that early Snowpark and Cortex adoption is proof the platform can expand far beyond data warehousing. They also point to a clean operating-margin beat, accelerating RPO, and the lack of any macro wobble as evidence that demand is durable and execution improving under the new CEO.
Bears counter that net-revenue-retention continues to drift lower, the FCF shortfall raises questions about underlying unit economics, and guidance merely reflects the Q1 upside rather than a true acceleration. They remain concerned that competition from Databricks and hyperscaler-native services will pressure pricing and that Snowflake’s premium multiple (11x Fy27 revs) leaves little room for mis-steps and wonder why mgmt did not raise operating margin outlook despite stronger top line trends
ZM: Solid F1Q beat with Revs better and OM well ahead; FY Revs guide moves up slightly
F1Q26 revenue rose 2.9 % Y/Y to $1.175 bn, ~$8 m (0.7 %) above consensus, while non-GAAP EPS of $1.43 beat by $0.12 (9 %).
Operating margin reached 39.8 %, +130 bp vs Street
FCF was $463 m, modestly ahead despite higher AI-related capex.
Guidance nudged up: FY26 revenue midpoint lifted by $17 m to $4.805 bn (0.3 % over Street) and EPS to $5.59 (guide excludes remaining $1.2 bn buy-back).
Roughly $10–15m of the raise comes from the Online price increase; cc raise was just $5m
Key Takeaways
Management described overall demand as stable, with only isolated deal scrutiny among a few large U.S. customers; no vertical-specific weakness emerged. Churn in the Online segment has likely bottomed, helped by sticky usage and the forthcoming price lift. FX remains a mild headwind confined mainly to the Online business.
Enterprise momentum continued: enterprise revenue grew 5.9 % Y/Y (1 % above Street), DBNE held at 98 , and customers spending $100 k+ rose 8 % Y/Y to 4,192, now 32 % of total revenue. Online churn stayed at 2.8 %, showing stabilisation before a June 1 $1/month price hike for Pro SKUs.
Newer products are taking hold: Contact Center & Virtual Agent ARR is now “triple-digit millions” growing high-double digits; Workvivo customers doubled; Zoom Phone is up mid-teens.
Bull-vs-bear narrative
Bulls argue the quarter confirms Zoom’s ability to defend margins while planting credible new growth seeds. Contact Center traction, Workvivo cross-sell and AI Companion adoption (MAUs +40 % Q/Q) demonstrate upsell potential; enterprise ARPU is expanding and cash-generation (FCF ~35 % margin) funds aggressive buy-backs. They see any macro snap-back or NRR inflection above 100 % as a catalyst for multiple expansion and Online price increase signals better confidence in demand trends and easing headwinds.
Bears counter that, even with beats, topline growth is stuck around 3 % and the FY26 raise relied mainly on a small price action rather than volume. They didn’t flow through the full Q1 beat to FY. Enterprise NRR remains below 100 %, and management pushed expectations for a turn-up to FY27. Competitive pressure from Microsoft and bundled suites continues, while AI monetisation is still de minimis.
Not really exciting to us either way - growth still seems anemic, although ZM continues to execute on cost-discipline, is cheap (12x FCF), and continues to buyback a healthy amount of stock.
Gets an upgrade at Needham…
Needham analyst Joshua Reilly upgraded Zoom Communications to Buy from Hold with a $100 price target as coverage was transferred. The firm believes the company is at an "interesting inflection point" where revenue headwinds from Online are easing, dilution from stock-based compensation has peaked and the share count can decrease with buybacks moving forward, the analyst tells investors. The pricing power of the business may be returning due to new embedded AI functionality, adds the analyst, who believes Zoom is "well positioned for new products driven by AI to begin moving the needle on growth."
ADI: Biggest quarterly beat in over 15 quarters - guided above
Q2 Revs beat by 5%: $2.64B vs street at $2.51 with ““double-digit y/y growth across all end markets”
Q3 Guided above $2.65B-$2.85B vs street at $2.62B.
"Second quarter bookings accelerated across all end markets and all regions, resulting in continued sequential backlog growth. The improving demand signals we saw throughout our fiscal Q2, support our outlook for continued growth in Q3, and reinforce our view that we are in a cyclical upturn.”
Third Party Data Roundup
XYZ: Cleveland says seller momentum is accelerating…Yipit saying GPV accelerated in May (similar to mgmt comments at JPM), but still tracking 1-2 ppts below street
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