What happened
UBS raised its Snowflake price target to $425 from $370, maintaining a Buy rating after surveying seven enterprise customers and partners. The bank found strong demand for Snowflake's Cortex and Coco tools, with customers expecting accelerated spending driven by AI adoption and the need to operationalize data.
Why it matters
Enterprises are treating their data layer as critical infrastructure as new AI applications and agents need access to corporate data. UBS's checks found little evidence that frontier AI models are reducing spending on data software vendors like Snowflake, Palantir, or Databricks—addressing a key investor concern that LLMs could bypass traditional data platforms altogether.
What to watch
Snowflake reports fiscal second-quarter results on September 2. UBS's demand checks support investor expectations of 36–37% revenue growth for the quarter and high-30s to 40% growth exiting fiscal 2027. Snowflake shares are up more than 50% year to date and trade at 15 times revenue on calendar 2027 estimates, leaving limited room for disappointment.
Summaries like this, in your inbox every morning.
Snowflake's rally—up more than 50% year to date—reflects a broader market conviction that AI is reshaping enterprise infrastructure. The key insight from UBS's checks is that this reshaping is NOT cannibalizing traditional data platforms, but rather expanding their role. As companies deploy AI agents and new applications, they need robust data layers to feed these systems; Snowflake, Databricks, and similar vendors are becoming more central to that stack, not less.
The bank's framing of competition names Databricks as the primary threat, with Microsoft also mentioned, but UBS's underlying message is that the total addressable market for data platforms is growing faster than any single competitor can take share. This aligns with UBS's broader conclusion that the data investment cycle itself is durable—meaning that even if Snowflake faces competitive pressure, the overall spending trajectory remains solid.
On valuation, UBS acknowledges tension: Snowflake trades at 15 times revenue and 62 times free cash flow on calendar 2027 and fiscal 2028 estimates, which the bank describes as leaving little room for error. The downward revision in multiples (from 17.5x and 73x) suggests UBS is being cautious about downside risk. However, the bank's confidence in the durability of the data investment cycle and its endorsement of 36–37% revenue growth for the coming quarter support the current Buy rating, conditional on execution.
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