Snowflake shares rise 23% after revenue forecast increase, software stocks rally

Snowflake shares surged 23% after raising its fiscal 2027 product revenue forecast to 6.07 billion dollars from 5.84 billion dollars, alongside a 37% year-over-year increase in second-quarter product revenue. CEO Sridhar Ramaswamy stated that AI tools are driving growth across Snowflake's core platform, creating a 'flywheel effect' for the business. The stock reached its highest level since December 2021, adding approximately 25 billion dollars in market value and climbing 39% for the year, significantly outperforming the S&P 500's 12% gain. The rally extended to peers, with ServiceNow, Salesforce, Atlassian, Adobe, and Intuit rising between 3.5% and 6%, while the iShares Expanded Tech-Software Sector ETF increased by 3%. Morgan Stanley analysts noted that recent growth patterns indicate AI is significantly enhancing usage of Snowflake's platform. Following the earnings results, at least 34 brokerages raised their price targets, with Wells Fargo setting a high target of 525 dollars. Snowflake currently trades at nearly 15 times forward revenue, compared to the software-sector ETF's 7.4 times.

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