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UBS stays Buy on Snowflake ahead of Sept. 2 results
UBS cites checks showing customers expect Snowflake spend to accelerate on continued adoption of its Cortex tools, while LLMs are seen as unlikely to displace data software vendors near term.
UBS reaffirmed a Buy rating on Snowflake as the company heads into its fiscal second-quarter results on September 2, arguing that AI is driving real, increasing spending on Snowflake’s data platform. In a demand check with seven enterprise partners and customers, the bank found investors’ core thesis is supported by expectations for continued growth tied to adoption of Snowflake’s Cortex Code and Coco tools.
UBS said companies are increasingly focused on their data layer as new AI applications and agents need access to corporate data. The bank also highlighted a push to operationalize data with AI models, which typically calls for an ontology layer such as a semantic layer or knowledge graph, a dynamic UBS links to potential benefits for Snowflake and peers including Databricks and Microsoft.
On competition and risk, UBS said Databricks came up most often as taking share, with Microsoft also mentioned. For the main investor worry that frontier AI models could reduce the need for data software by handling data tasks directly, UBS said its checks found little evidence that enterprises are using LLMs’ data capabilities in ways that are cutting into spending on Snowflake, Palantir, or Databricks.
UBS noted investors are pricing in revenue growth of 36 to 37% for the fiscal second quarter, with growth expected to exit fiscal 2027 in the high-30s to 40% range, and said its demand checks align with those targets. The bank also pointed to Snowflake’s valuation, noting shares were up more than 50% year to date and trade at 15 times revenue and 62 times free cash flow on calendar 2027 and fiscal 2028 estimates, adding that the valuation leaves little room for error.