Key Points Palantir and BigBear.ai are among the popular names in the AI software market, but there is another company that's recording impressive growth and has a relatively reasonable valuation. Snowflake's revenue pipeline is improving thanks to a smart business model that's attracting new customers and winning more business from established ones. Snowflake's AI offerings could keep providing growth tailwinds and help lift the stock. 10 stocks we like better than Snowflake › The fast-growing d ...

Core Viewpoint - Technology stocks, particularly in the AI sector, are experiencing significant growth despite broader market pressures, with Palantir Technologies and Snowflake showing impressive gains driven by their AI initiatives [1][2]. Palantir Technologies - Palantir's stock has surged 63% in 2023, attributed to its successful Artificial Intelligence Platform (AIP) launched two years ago, which enhances productivity and reduces operational costs for clients [2][4]. - The company is recognized as a leading provider of AI software platforms, with a notable acceleration in growth following the AIP release [5]. - Revenue growth increased from 18% year-over-year in Q1 2023 to 39% in Q1 2025, indicating strong market capture in AI software [6]. - Remaining deal value (RDV) rose 45% year-over-year to $6 billion, suggesting a robust pipeline of future contracts [8]. - Adjusted operating margin improved by 8 percentage points, contributing to a 62% increase in earnings, with the AI software market projected to reach $153 billion by 2028 [9]. Snowflake - Snowflake's data cloud platform has evolved to support AI model development, allowing customers to build and deploy AI applications using stored data [10]. - The company has invested in GPUs to facilitate AI model execution, providing a pay-as-you-go model that reduces infrastructure costs for clients [11]. - Approximately 45% of Snowflake's customers are utilizing its AI tools, with a 19% increase in customer count year-over-year in Q1 [12]. - Product revenue grew by 26% year-over-year, while remaining performance obligations increased by 34% to $6.7 billion, indicating strong demand from both existing and new customers [13]. - The addressable market for Snowflake's data cloud platform is estimated at $342 billion by 2028, presenting significant growth potential [13]. Comparative Analysis - Both Palantir and Snowflake are experiencing healthy growth rates, with Palantir's revenue growth outpacing Snowflake's, while Snowflake's bottom-line growth of 71% exceeds Palantir's [14]. - Valuation differences exist, with Snowflake's stock being significantly cheaper than Palantir's, which may appeal to different investor risk tolerances [15][17].

Core Insights - Snowflake's stock surged 4.5% following the release of its fiscal 2025 Q4 results, significantly exceeding Wall Street expectations [1] - The company is experiencing strong demand for its data cloud platform, driven by artificial intelligence (AI), leading to optimistic guidance for fiscal 2026 [2][10] Financial Performance - Snowflake reported product revenue growth of 30%, reaching nearly $3.5 billion for fiscal 2025, although earnings fell 15% year over year due to AI infrastructure investments [3] - The company ended fiscal Q4 with remaining performance obligations (RPO) of $6.9 billion, a 33% increase from the previous year, indicating a robust revenue pipeline [7] Customer Engagement - There is a notable increase in customer adoption of Snowflake's AI tools, with 4,000 customers using these tools weekly, reflecting a 25% increase from the previous quarter [5] - The net revenue retention rate was 126%, suggesting that existing customers are increasing their spending, which is expected to positively impact margins [8][9] Market Outlook - Snowflake anticipates an increase in operating margin to 8% in fiscal 2026, following a decline in the previous year, with analysts raising earnings growth expectations [10] - The total addressable market for Snowflake is projected to reach $342 billion by 2028, supporting the potential for sustained earnings growth [11] Investment Consideration - Despite a high forward earnings multiple of 170, Snowflake's improving RPO and customer spending patterns suggest it may justify its valuation in the long term [11][13] - The overall customer base grew by 19% year over year, indicating further potential for revenue improvement [12]