Software stocks soared Thursday. snowflake revealed plans to spend $6 billion on Amazon’s computing, beating revenue expectations on the strength of artificial intelligence.
The software maker’s stock rose 37%, marking its best day ever. The company is expanding its efforts to use Amazon’s own chips for AI.
With the announcement, Snowflake beat Wall Street’s fiscal first-quarter adjusted earnings per share and revenue estimates.
Finance chief Brian Robbins told analysts Wednesday that AI tools such as Cortex Code are driving a “step function change” in the company’s AI revenue potential.
“AI is simply transforming the way companies operate, enabling productivity gains through a combination of slower adoption and increased cloud spending,” he said.
Snowflake also strengthened its guidance regarding the growing momentum for AI-powered tools such as Snowflake Intelligence and Cortex Code.
Snowflake expects adjusted operating margin for the fiscal second quarter to be 12.5% on product revenue of $1.415 billion to $1.42 billion. Analysts surveyed by StreetAccount expected a profit margin of 11.9% and product revenue of $1.37 billion.
Snowflake’s results helped alleviate concerns that new AI tools will replace software-as-a-service, leading to what many are calling a “SaaSpocalypse.” Those concerns have led to massive stock declines across the sector this year, and have spilled over into cybersecurity as well.
Some popular software stocks rose on the results. ServiceNow and Palantir While it rose more than 5%, oracle It soared more than 6%. microsoft, palo alto networks and atlassian each increased by at least 3%. sales force bucked the trend and issued a lackluster outlook, leaving the stock nearly flat.
Wall Street analysts see Snowflake’s performance as a sign that the company’s AI monetization strategy is reaching a tipping point.
The company announced that it added 616 net new customers during the quarter, reflecting year-over-year growth of 38%. Snowflake says it currently has 779 customers who have spent more than $1 million over the past 12 months. The company had 46 products that exceeded the $1 million benchmark in the first quarter, compared to 26 a year ago.
Building on its AI strategy, Snowflake announced the acquisition of AI startup Natoma. The company did not disclose the financial details of the transaction.
“Over the course of the economic cycle and over the long term, Snowflake’s combination of healthy growth profile and cash flow behavior should demonstrate the benefits of Snowflake’s business model, in our view,” JPMorgan analysts said.
After Thursday’s rally, Snowflake stock is up about 6% since the beginning of the year.
Snowflake’s stock price chart from the beginning of the year to the present.
