Snowflake rides AI momentum with 34% growth as Dell, Oracle compete

Snowflake's AI-driven product revenue rose 34% year over year in fiscal Q1 2027, powered by Cortex AI adoption, as the company races Dell and Oracle in enterprise AI infrastructure.

Oppenheimer's Ittai Kidron raised his price target to $400 from $295, maintaining an Outperform rating, as he sees product revenue growth accelerating to about 34.7% year over year from a prior estimate of 33.5%.

Snowflake reported total revenue of $1.39 billion in fiscal Q1, up 33% year over year, with adjusted earnings per share of $0.35. The company guided fiscal Q2 product revenue to $1.415 billion to $1.42 billion, implying roughly 30% growth, and raised its full-year product revenue growth outlook to 31%. Dell, by comparison, posted record revenue of $43.8 billion in its fiscal Q1, up 88%, with AI server revenue reaching $16.1 billion and an AI backlog of $51.3 billion.

Snowflake shares have gained roughly 50% year to date and trade at about 23 times forward sales, far above the broader software sector's multiple of about 3 times. The stock's market capitalization exceeds $116 billion. With fiscal Q2 results due Sept. 2, investors will see whether AI-driven consumption can sustain the pace that justifies the premium.

Cortex Tools Drive Consumption

Snowflake's growth is tied to two AI products: Snowflake Intelligence, which lets business users query data in natural language, and Cortex Code (CoCo), an AI coding agent that developers use to build applications on the platform. Both run on the company's cloud-native architecture, which separates it from Dell's hardware-centric AI servers and Oracle's database stack.

The company recently introduced dynamic model routing across Cortex AI Gateway, which automatically selects the most suitable AI model for each task to balance quality and cost. Snowflake also expanded access to leading open models, giving enterprises more flexibility in how they deploy AI workloads.

Customers including Holiday Inn Club Vacations and Houzz have adopted Snowflake for its built-in AI capabilities and governance controls, according to the company. The consumption-based pricing model means higher usage translates directly into higher revenue — a structural advantage over competitors that charge fixed licensing fees.

Oppenheimer expects product revenue of approximately $1.469 billion in fiscal Q2, about 3% to 4% above consensus. The firm's analysis suggests Snowflake does not need to win every AI workload to benefit — if existing accounts increase their platform usage, revenue compounds without new customer acquisition costs.

Valuation and Competitive Pressure

The key risk is valuation. Snowflake trades at roughly 23 times forward sales, a substantial premium to the software sector's average of about 3 times. Wall Street's consensus rating is Strong Buy with an average price target of roughly $342, while the street high sits at $500.

Oppenheimer's $400 target is more aggressive than the consensus, reflecting confidence that CoCo and other AI products will push customers toward higher workloads. But Databricks remains a formidable competitor in the data and AI platform space, and Snowflake's earnings remain negative on a GAAP basis.

Oracle, meanwhile, is pushing into AI-powered vertical applications. In June, the company introduced Oracle OPERA Cloud Assistant, a suite of AI capabilities built into its hospitality platform that automates guest room assignments and generates AI-driven rate descriptions across 230 countries and territories. Dell's AI server business, with $16.1 billion in quarterly revenue and a $51.3 billion backlog, shows how much enterprise spending is flowing to hardware infrastructure rather than software platforms.

The company expects a non-GAAP operating margin of 12.5% in fiscal Q2. If AI-driven consumption continues to accelerate, Snowflake could justify its premium valuation. If growth decelerates, the stock has further to fall from its current levels near the 52-week high.

This article is for informational purposes only and does not constitute investment advice.