Snowflake Inc. saw its shares decline by approximately 5.5% on Friday, closing at $138.42, as the cloud-data firm navigates a challenging environment for software stocks and faces renewed legal scrutiny. The drop, which at one point pushed the stock as low as $134.31, trimmed the company's market capitalization to around $47 billion.
Broader Software Selloff Weighs on Snowflake
The decline comes amid a broader downturn in software shares, triggered by disappointing results from industry peers. IBM's software unit reported slowing revenue, while ServiceNow flagged deal delays, fueling concerns that AI investments are squeezing traditional software budgets. UBS Global Wealth Management's Kiran Ganesh noted to Reuters that there is now a "lot bigger range of outcomes" for tech and AI names.
AI Push Amidst Skepticism
Snowflake is actively promoting its artificial intelligence capabilities, rolling out expanded features for Snowflake Intelligence, its work agent for business users, and Cortex Code, an AI coding agent for technical teams. These updates include integrations with Gmail, Google Calendar, Jira, Salesforce, Slack, AWS Glue, Databricks, and Postgres. Baris Gultekin, Snowflake's vice president of AI, emphasized that successful enterprise AI requires "the right data and guardrails," positioning Snowflake as a unified platform where data, systems, and workflows converge.
Investor Concerns Over Revenue Generation
Despite these efforts, investors remain skeptical about when AI projects will translate into consistent revenue. Denise Persson, Snowflake's chief marketing officer, described the current period as "one of the most transformative" in tech, with customers moving AI from test runs to regular operations. However, the company's usage-based model means revenue only materializes as customers increase platform activity.
Legal Overhang: Class-Action Deadline Approaches
Adding to the pressure, The Gross Law Firm reminded shareholders that the lead-plaintiff deadline for a securities class-action lawsuit is April 27. The suit, covering purchases from June 27, 2023, through February 28, 2024, alleges Snowflake failed to disclose factors that could negatively impact usage and revenue. These remain allegations at this stage.
Competitive Landscape and Strategic Moves
Snowflake faces stiff competition from Databricks in the enterprise data and AI space. To bolster its platform, Snowflake has secured multi-year agreements worth $200 million each with OpenAI and Anthropic. In February, Reuters reported that Snowflake acquired Observe, an app-monitoring firm, for $600 million in cash and stock. The company also landed its largest-ever deal, exceeding $400 million, though the client remains undisclosed.
Financial Performance and Outlook
Snowflake reported $1.28 billion in revenue for the fourth quarter, a 30% year-over-year increase, with product revenue reaching $1.23 billion. The company set a fiscal 2027 product revenue target of $5.66 billion, surpassing analyst expectations. D.A. Davidson's Gil Luria noted that while investor sentiment toward software firms is shaky, faster revenue growth could position Snowflake well as AI demand increases.
Upcoming Summit 26
Snowflake is preparing for its Summit 26 conference in San Francisco, scheduled for June 1-4. The event will feature over 500 sessions and more than 200 partners attending in person. Anthropic's co-founder and President Daniela Amodei will join Snowflake CEO Sridhar Ramaswamy on stage.
