Snowflake $SNOW Surges 20% as AI Flywheel Hits Full Speed
37% revenue growth, 2,000 new AI customers, and a software sector that just crawled out of its grave
Ticker Ratings
$SNOW just reminded the market that the 'SaaS is dead' narrative was always a bit dramatic. Snowflake surged 20-22% after reporting $1.49 billion in product revenue, up 37% year-over-year, while raising its full-year guidance to $6.07 billion, well above Wall Street's $5.86 billion consensus. The stock hit its highest level since December 2021 and is now up 60-72% year-to-date. Go ahead and say it: the SaaS apocalypse has been cancelled.
The real story here is the AI flywheel Snowflake's CEO has been telegraphing for quarters. Its coding agent Coco (also called Cortex) attracted roughly 2,000 new customers this quarter, bringing the total to over 9,000 agentic workflow users inside the platform. More AI customers mean more data on the platform, which makes the AI tools better, which attracts more customers. As the CEO told CNBC, 'AI is indeed a flywheel for us.' He's not wrong, and the numbers aren't lying either, with operating margin expanding 400 basis points to 15%.
The bull case is straightforward: net revenue retention of 126% means existing customers keep spending more, and UBS already slapped a $500 price target on the stock post-earnings. The broader software sector, which had been in short-seller heaven all year, is now positive year-to-date, with the iShares software ETF finally turning green. Salesforce, Twilio, and other names are catching the updraft.
The bear case, if you want to find one, centers on RPO coming in below Wall Street consensus. Management waved it off as timing shifts on larger renewals, but a few analysts flagged it as a watch item. Customer concentration and the pace of AI monetization converting into durable margin expansion are the other question marks worth tracking into Q3.
Meanwhile, $AVGO had a rougher week. Broadcom posted strong AI chip expectations, with Anthropic and OpenAI projected to surpass Google as its top customers, but near-term Q4 guidance underwhelmed and the stock slid. The contrast with Snowflake's reception is instructive: the market right now rewards companies that are already monetizing AI, not just promising to do so.
Snowflake just proved that data infrastructure is where the AI capex wave eventually lands. Every hyperscaler spending billions on GPUs still needs somewhere to put the data those models generate, govern it, and make it useful. That's Snowflake's lane, and right now they're driving it alone at 100 miles per hour.