Dillon Valdez
Growth Investor, Public Portfolio Journal
Snowflake doesn't deserve to be caught in the SaaS selloff because AI is accelerating its business rather than disrupting it. CEO Sridhar Ramaswamy says Cortex Code, its data coding agent launched nine weeks ago, is already used by 50% of customers, making it the fastest-adopted product Snowflake has launched. Early adopters increased their Snowflake consumption by 11% on average. x.comÂ
Snowflake's 25% drop in late 2024 on slowing-growth fears was a buyable drop, not a collapse, because revenue was still climbing more than 20% a year. A 10-30% fall with growing revenue, an unchanged thesis and institutions buying the dip is an opportunity; a collapse means 40%+ declines that keep bleeding, decelerating revenue, management turnover or pulled guidance, and insiders dumping shares. x.comÂ
Snowflake's Q2 shows AI is supercharging data platforms rather than cannibalizing them, as Cortex and AI workloads turn into a compute flywheel. Product revenue rose 37% to $1.49B against 30% guidance, RPO grew 30% to $9.0B and enterprise consumption is clearly accelerating. x.comÂ
Snowflake is evolving from a cloud data warehouse into the default data and AI control plane for large enterprises, an inflection the market misses by treating it as a maturing former hypergrowth name. The shift shows in customer commitments, workload expansion and platform centrality, supporting a credible path to $500. @buccocapital notes a customer rebuilt Gainsight on Snowflake in five hours, suggesting it may be the assailant in the SaaSpocalypse rather than a victim. x.com x.comÂ
OpenAI and Anthropic will eat Snowflake's and Databricks' business. Both cloud data platforms are cooked. x.comÂ
Snowflake's blowout quarter shows enterprise consumption accelerating structurally, putting it back atop cloud infrastructure. Product revenue rose 36.5% to $1.49 billion, 5.1% above guidance, clearing the 36% bar and showing first-quarter acceleration was no one-off. Non-GAAP operating margin hit 15.5% versus 12.5% guided and adjusted EPS was $0.62 versus $0.45, so Cortex Code and AI workloads are scaling at high margins. The bull case needs product revenue growth near 40% by Q4. x.com x.comÂ
AI is becoming a cash-generation tailwind for SaaS companies, as Snowflake shows. Falling token prices let them add AI for minimal or controlled spending, producing packaged services with controlled margins and rising revenue, a recipe for more cash and shareholder returns, which is what the market now rewards. Hardware names like TSMC and NVIDIA already fit that profile, while Alphabet, Microsoft and Meta are slowing cash generation and planning to raise share counts. x.comÂ
Snowflake's valuation looks full after more than doubling since May on an AI inflection story, given five years of promised inflections that didn't materialize. Stock-based compensation remains heavy at $1.6B against FY2026 revenue of $4.7B, though dilution has been kept in check lately. At about 23x EV/revenue, or 19x forward, it sits near the top of its 2-3 year range. A Databricks IPO could make investors see Snowflake as old relic tech. x.com x.comÂ
Snowflake is overlooked AI infrastructure because every enterprise AI model needs clean, governed data to run on. It has 126% net revenue retention, $9.77 billion of contracted future revenue and 813 of the world's 2,000 largest companies as customers. x.comÂ
Snowflake is the AI data cloud that enterprises use as a secure, governed foundation to run AI agents and generative AI at scale on their existing data. It has strong ties to OpenAI, through a $200 million multi-year deal, plus Microsoft, Anthropic, AWS, Google Cloud, Accenture, SAP and Palantir. The chart shows a pivot flip ahead of earnings on May 27. x.comÂ
AI agents are starting to do for free what Snowflake and other cloud software companies charge subscriptions for, erasing their pricing power. The same AI is a revenue engine for chips, as infrastructure spending flows through Nvidia, AMD and TSMC hardware. The split shows in markets: SOXX is up 25% from its March low while WCLD fell 5% and Snowflake 8.4%. x.comÂ
Snowflake and Datadog can withstand more competition because it comes alongside a massively expanded market, as cloud and inference providers saw in recent years. Responding to @GrantM's view that their high pricing invites rivals, open source and pressure on net retention, high pricing is not fundamental to the model. These companies can accept lower gross margins to secure revenue growth if needed, and already do by reselling AI tokens through their AI features. x.com x.comÂ
