Snowflake Stock Surges 20% on AI-Driven Growth, 55% Yearly Gain

Snowflake, a leader in the cloud data warehouse sector, is poised to continue its robust growth trend driven by the AI boom. The company's accelerating sales growth and AI-driven strategy have prompted analysts to raise their target prices and reaffirm bullish ratings.

Following the release of its second-quarter financial results and future outlook, Snowflake's stock surged over 20% to close at 241 dollars on Thursday. This year, amid an unprecedented global AI investment surge, Snowflake's stock has risen by 55%, outperforming both the S&P 500 and Nasdaq-100 indices.

The latest financial report shows that increased spending by global enterprises and some government agencies on AI infrastructure and software has driven a surge in demand for Snowflake's cloud data warehouse and data analytics services. This has alleviated market concerns about economic slowdowns and the potential impact of AI leaders like OpenAI on Snowflake's performance.

Snowflake's second-quarter product revenue was approximately 1.0905 billion dollars, exceeding the market's expectation of 1.04 billion dollars and growing by 32% year-over-year. Its non-GAAP adjusted earnings per share for the second quarter were 0.35 dollars, nearly double the figure from the same period last year and higher than analysts' estimates of 0.27 dollars. As of July 31, Snowflake's net revenue retention rate was approximately 125%, demonstrating strong customer retention and product stickiness, as well as robust revenue generation driven by AI. The number of high-value customers continues to rise, with 654 customers spending over 100 million dollars on Snowflake's products in the past 12 months, a 30% increase year-over-year.

Looking ahead, Snowflake expects third-quarter product revenue to be between 1.125 billion dollars and 1.13 billion dollars, surpassing market expectations of 1.12 billion dollars. This implies a potential annual growth rate of 25% to 26%. Snowflake also projects total revenue for the fiscal year 2026 to reach 4.395 billion dollars, exceeding market expectations of 4.34 billion dollars and indicating a potential year-over-year growth of 27%, up from the previous estimate of 4.33 billion dollars.

Snowflake is a company focused on cloud-native data warehousing and AI data services, offering a managed, scalable cloud data warehouse and data platform. It provides data storage, computing, governance, security, and sharing services, and is gradually integrating AI and large language model capabilities into its software platform through features like Cortex, Arctic, and Native Apps.

Snowflake is recognized as a benchmark in the cloud data warehouse market, known for its strong governance, data sharing, and ease of use. In recent years, it has expanded into AI-native data services through initiatives like Cortex, Arctic, Polaris, and Native Apps, enhancing interoperability with Spark, Iceberg, and Delta to handle more engineering and scientific workloads.

Snowflake's strategic positioning in the AI data software stack includes the "data and governance layer + AI operations layer" and the "AI execution and access layer." Features like Cortex (AISQL/Analyst) integrate AI model calls, RAG retrieval, unstructured analysis, evaluation, and observability into the cloud-native experience. The Native App Framework allows third parties to distribute and monetize AI/ML applications as native Snowflake cloud applications. Snowflake's AI data service platform aims to make data locally accessible, bring AI closer to data, and ensure governance and compliance throughout, serving as the foundation for massive enterprise data and AI workloads.

Industry experts widely view Databricks as Snowflake's main competitor. Databricks' latest private valuation is around 100 billion dollars, with a strong revenue growth rate. In comparison, despite a 20% stock surge on Thursday, Snowflake's market capitalization is approximately 80 billion dollars, indicating potential for further valuation growth.

Snowflake's strong financial performance and outlook have reinforced the bullish narrative in the AI application software sector. Companies like Applovin, Palantir, and Meta have also reported strong financial results and future outlooks this year. This indicates robust demand for AI infrastructure, represented by NVIDIA's AI GPUs, and AI software applications, particularly those that enhance operational efficiency and are rapidly penetrating various industries.

As global tech stock investment trends focus on both AI infrastructure and software applications, companies like Applovin, Trade Desk, Duolingo, and Palantir are seeing significant valuation boosts. The future is likely to see a surge in generative AI applications across various industries, as well as AI agents that could significantly boost human productivity. This is why global funds have recently flowed into software stocks.

Analysts from Piper Sandler highlighted that Snowflake's second-quarter product revenue increased by 94 million dollars sequentially, the largest single-quarter increase in history. This growth was primarily driven by the company's core business, particularly the migration of large customers to new cloud-native workloads, and was further boosted by the acquisition of Crunchy Data. Piper Sandler maintained its "overweight" rating for Snowflake and raised its target price from 215 dollars to 285 dollars.

Goldman Sachs reiterated its "buy" rating for Snowflake and raised its target price from 230 dollars to 260 dollars, emphasizing the strong growth opportunities presented by the AI application wave. The analysts noted that Snowflake has the potential to become a generative AI data service platform, enabling customers to quickly develop AI agent applications with the help of Cortex AISQL. Additionally, Snowflake Connect for Apache Spark is expected to open up new and increasingly large data science workloads, expanding the total addressable market. The analysts also pointed out that the acceleration in product revenue is driven not only by the AI wave but also by traditional growth from Snowflake's core cloud data warehouse platform. AI is becoming a new growth multiplier for the company, with strong adoption among existing customers and continued momentum in new customer acquisitions.

KeyBanc maintained its "overweight" rating for Snowflake and raised its target price from 250 dollars to 275 dollars. The analysts noted that Snowflake continues to benefit from the gravitational pull of its data warehouse, strong product innovation, and enterprise focus on integrated "data services + AI" strategies. Wedbush, a prominent investment firm, is impressed with Snowflake's data service platform path and includes the company in its "AI 30" investment list, which focuses on the biggest beneficiaries of the global AI revolution. Wedbush maintained its "outperform" rating for Snowflake and raised its target price from 230 dollars to 250 dollars. The analysts highlighted that Snowflake's operating margin of 9.0% exceeded market expectations of 8.3%, as the company focuses on investing efficiently in its innovation engine and core business growth, driving profit expansion. Snowflake, through its cloud data service platform, continues to lead in AI innovation, providing advanced cloud data processing and storage services to customers across various industries while simplifying platform architecture.