Software program shares have had a brutal first 5 months of 2026, with a lot of them falling sharply even because the S&P 500 has risen. Snowflake(NYSE: SNOW), regardless of administration describing its synthetic intelligence (AI) knowledge cloud as a beneficiary of the AI growth, has seen its shares fall alongside different software program shares this 12 months amid investor concern that AI would disrupt software program firms total. Certainly, at one level in April, the inventory sat greater than 50% beneath the place it had traded a 12 months earlier. However the inventory is rebounding now. The truth is, the inventory is now up sharply 12 months up to now, helped primarily by the market’s response to the tech firm’s better-than-expected earnings report final week.
However is that this information about greater than Snowflake? Might there be extra software program firms that, like Snowflake, will truly profit extra from AI than they are going to be harm by it? Snowflake’s newest report is the loudest proof but that the market could have had it backward.
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Snowflake reaccelerates
The corporate’s fiscal first-quarter outcomes (the interval ended April 30, 2026) definitely did not paint an image of AI disrupting software program. Quite the opposite, the enterprise noticed a big acceleration.
The corporate’s fiscal first-quarter product income, which accounts for the majority of its complete income, rose 34% 12 months over 12 months to $1.33 billion — an acceleration from 30% in fiscal This fall and 26% within the year-ago quarter. Moreover, administration stated this was the strongest sequential greenback development in firm historical past.
Additional, Snowflake’s acceleration is going on broadly throughout its enterprise. Web income retention, which measures spending from present clients in opposition to the prior 12 months, ticked up from 125% within the prior quarter to 126%. And the corporate’s remaining efficiency obligations (RPO), which symbolize contracted income not but acknowledged, grew 38% 12 months over 12 months to $9.21 billion. Moreover, the corporate added 616 web new clients — up 38% from a 12 months in the past.
Profitability is enhancing alongside the expansion. Snowflake’s non-GAAP (adjusted) working margin expanded to 12% from 9%, and adjusted earnings per share rose to $0.39 from $0.24.
What’s driving the inflection is AI, and never in the way in which some bears could have feared. Somewhat than displacing Snowflake’s core platform, AI is pulling extra knowledge and extra workloads onto it. The corporate’s newer agentic merchandise — Snowflake Intelligence and its coding agent, Cortex Code — are displaying sturdy traction. And these choices, in flip, are serving to drive larger consumption.
“AI is accelerating the worth that folks can get from the info that they’ve put into Snowflake or that they will put into Snowflake,” stated CEO Sridhar Ramaswamy within the firm’s fiscal first-quarter earnings name.
Assured sufficient within the demand, administration lifted its full-year product income steering to $5.84 billion, or 31% development, up from prior steering of $5.66 billion and 27% development. The corporate additionally signed a brand new $6 billion five-year settlement with Amazon‘s Amazon Internet Providers and expanded its partnership with OpenAI.
The group is popping — however tread fastidiously
Snowflake is not alone.
Observability specialist Datadog(NASDAQ: DDOG) obtained there first. Its first-quarter 2026 income rose 32% 12 months over 12 months to only over $1 billion — the corporate’s first billion-dollar quarter — accelerating from 29% within the prior quarter and 25% a 12 months earlier. Datadog raised its full-year outlook, too, and its inventory has climbed greater than 80% in 2026, buying and selling close to a 52-week excessive. The thesis is much like Snowflake’s: AI makes software program techniques extra complicated, and extra complexity means extra to watch.
Database firm MongoDB(NASDAQ: MDB) rounds out the image. Its fiscal first-quarter income (the interval ended April 30, 2026) rose 25% to $687.6 million, with its cloud database, Atlas, up 29% and now roughly three-quarters of complete income. MongoDB raised its full-year income steering as effectively, and shares continued increased the day after the report — a pointy flip for a inventory that was down greater than 20% earlier within the 12 months.
So, a number of the laggards are now not lagging — and others within the software program area could not have absolutely recovered the 12 months’s losses however have rebounded sharply from their lowest factors.
The catch is that the rebound is effectively alongside, and the simple beneficial properties could already be behind.
For example, Snowflake’s inventory surged about 35% in a single session after the report, its greatest day ever, and trades close to $255 as of this writing — again inside attain of its 52-week excessive after a brutal stretch. Up about 16.5% in 2026, it’s now considerably outperforming the S&P 500 12 months up to now.
However the development inventory’s valuation now leaves little slack. Snowflake stays unprofitable on a usually accepted accounting rules (GAAP) foundation, with the underside line nonetheless deep within the pink. Additional, the inventory’s price-to-sales ratio now sits at 17 — a steep valuation a number of that assumes the reacceleration holds for years, and that the corporate is ready to start reporting substantial income — income that develop at sturdy charges for years.
Moreover, traders ought to remember the fact that Snowflake’s consumption mannequin can swing each methods: income tracks how a lot clients truly use the platform, so if enterprise AI spending cools later this 12 months, development may rapidly fade with none change in buyer depend.
General, Snowflake’s enterprise seems to be more healthy than it has shortly, and the read-through for software program generally is beginning to look encouraging. However after a run-up like this, shares of Snowflake (and shares of different software program shares which have sharply rebounded over the previous few weeks) merely could now not be the bargains they have been.
Relating to Snowflake inventory particularly, I believe the current rebound has already greater than priced within the change in sentiment for the corporate’s future.
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Daniel Sparks and his purchasers haven’t any place in any of the shares talked about. The Motley Idiot has positions in and recommends Amazon, Datadog, MongoDB, and Snowflake. The Motley Idiot has a disclosure coverage.
Software program Was the Market’s Huge Laggard This Yr. Snowflake’s Blowout Would possibly Be the Spark That Modifications That. was initially revealed by The Motley Idiot
