Updates share movement; adds analyst quote

By Kanishka Ajmera and Deborah Mary Sophia

May 28 - Snowflake shares surged more than 33% on Thursday after the company raised its annual revenue forecast and a $6 billion deal with Amazon bolstered investor confidence that the data platform is emerging as a major beneficiary of the AI boom.

The five-year deal with Amazon Web Services provides Snowflake SNOW.N with a crucial supply of AWS's Graviton chips at a time when compute capacity has been constrained due to a massive surge in AI usage.

It also deepens the integration of Snowflake's data storage, processing and analytics products across AI workloads on AWS cloud, helping Snowflake capture more demand as enterprises scale AI adoption rapidly. The majority of Snowflake's customers run on AWS.

At least 30 analysts raised their price targets on Snowflake following the announcements, putting its median price target at $280, up from $230 before the earnings report on Wednesday. The stock was last trading at $233.50 in early trade.

If current gains hold, Snowflake is set to add about $20 billion to its market cap of $60.75 billion.

The massive jump in Snowflake shares, which had fallen 20% this year through last close, "tells you just how much scepticism had built up as data names were caught in the broader AI software sell-off," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

"But it also shows how quickly sentiment can turn when a company shows AI is already helping the top line, rather than simply decorating the slide deck."

Snowflake currently trades at 85.21 times its estimated earnings for the next 12 months, compared with 85.19 for Datadog DDOG.O and 47.17 times for MongoDB MDB.O. A higher price-to-earnings ratio indicates that investors are betting on stronger growth in the future.

After being battered by fears that AI would disrupt enterprise software, Snowflake is now embedding the technology across its platform that lets businesses unify data from multiple sources, run analytics and build AI tools.

"We think this result will place Snowflake squarely in the 'AI winner' category and deserving of a premium multiple," said Scotiabank equity research analyst Patrick Colville, adding that this is clear evidence Snowflake is benefiting from enterprise AI adoption.

Snowflake - which helps businesses store, manage, and analyze all their data in one place - has seen strong adoption of its AI tools such as Cortex Code and Snowpark, which let companies build generative AI applications and deploy machine learning models on their data.

The deal also comes as yet another vote of confidence for Amazon's custom chip business, which has signed on major customers, including Anthropic, OpenAI, Facebook-parent Meta and Uber in recent months.