By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel is divided on Snowflake's recent performance, with some seeing it as a relief rally while others argue it signals a structural shift. The panel agrees that AI fears have not been entirely alleviated and that there are still significant headwinds for the sector.
Risk: Budget tightening and competitive pressure could compress margins and decelerate revenue growth.
Opportunity: Snowflake's acquisition of Natoma and its pivot towards agentic workflows could change the pricing dynamic and make its moat more durable.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Snowflake reported better-than-expected Q1 results, an expanded integration with AWS, and an AI acquisition.
Software stocks have plunged this year on fears of AI disruption.
Axon and Microsoft look like two other recovery candidates in the sector.
Snowflake (NYSE: SNOW) had a message for software investors last night: Don't give up on software-as-a-service (SaaS) stocks yet.
In a year when software stocks have gotten pummeled over concerns that AI-native products from start-ups like Anthropic could disrupt the leading enterprise software companies, Snowflake, a bellwether in the industry, seemed to dispel the notions of disruption in its first-quarter earnings report as the stock was up 34% on Thursday morning on the results.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Revenue at the data warehousing specialist jumped 33% to $1.39 billion, ahead of estimates at $1.32 billion, and its net revenue retention rate was 126%, showing existing customers are increasing their spending by 26%. It grew remaining performance obligations, a proxy for backlog, by 38% to $9.21 billion, showing strong forward demand. On the bottom line, adjusted earnings per share improved from $0.24 to $0.39, beating the consensus at $0.32.
Snowflake also announced an expanded $6 billion collaboration with AWS to accelerate enterprise AI adoption, and acquired Natoma, a platform for AI agents.
Overall, the results showed that Snowflake isn't slowing down in the AI era, as product revenue accelerated for the second quarter in a row.
The surge in the stock shows how bearish some investors have gotten on the SaaS sector, as Snowflake stock was down roughly 20% year-to-date before the earnings report. Snowflake's post-earnings pop could portend the same from other unfairly beaten-down software stocks. Here are two that could follow in Snowflake's footsteps.
Axon Enterprise (NASDAQ: AXON), a law enforcement technology company that makes the TASER electrical weapon, body cameras, and a suite of software for law enforcement agencies to manage their data, jumped 12% on Thursday, seemingly in response to news that the Trump administration is interested in funding drone companies. The gain also comes after Axon announced a new partnership with Echodyne to work on drone applications in law enforcement and homeland security, though there was no response to the news yesterday.
Snowflake's surge could have also caused investors to give Axon a second look, as that stock is also beaten-down after falling more than 50% from its peak and down 23% year-to-date, even after today's gains.
Like Snowflake, Axon stock has fallen in spite of continuing strong results, posting revenue growth of 34% in its first quarter, so it seems like a good candidate for a bounce-back if sentiment toward software stocks improves.
The company has a number of competitive advantages selling intergrating hardware and software to its customers, and through organic growth and a series of acquisitions, it's established itself as the clear leader in law enforcement technology.
Another stock that seemed to catch a tailwind from Snowflake's earnings report was Microsoft (Nasdaq: MSFT), which was up 3% as of 11:44 a.m. ET.
Among the news out on the stock today was that the company is planning to launch a new coding model next week, according to The Information, as it aims to catch up with AI rivals, including Anthropic and further separate itself from OpenAI.
Like Snowflake and Axon, Microsoft has delivered strong results, even as the stock has gotten snubbed by investors. It's now down more than 20% from its peak last year as investors are concerned about the AI threat to its software business, though its software business continues to grow, and it's delivering brisk growth in its Azure cloud computing division.
Microsoft's AI products like Copilot have generally disappointed investors, but the new coding models could help correct that.
With a market cap of $3 trillion, Microsoft is unlikely to deliver a 34% gain in one session like Snowflake, but there is certainly an opportunity for the company to get back to its peak share price, which would represent a 30% gain, with improving sentiment and continuing growth.
Despite its recent struggles, Microsoft still looks like an AI winner.
Before you buy stock in Axon Enterprise, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Axon Enterprise wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $471,072! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,303,352!
Now, it’s worth noting Stock Advisor’s total average return is 983% — a market-crushing outperformance compared to 210% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
**Stock Advisor returns as of May 28, 2026. *
Jeremy Bowman has positions in Axon Enterprise. The Motley Fool has positions in and recommends Axon Enterprise, Microsoft, and Snowflake. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Snowflake's relief rally is unlikely to lift Axon or Microsoft sustainably given mismatched competitive positions and customer exposures."
The article frames Snowflake's 33% revenue beat and 126% net retention as evidence that AI fears have unfairly punished other software names, positioning Axon and Microsoft for similar rebounds. Yet Snowflake's cloud data moat and AWS tie-up have few parallels at Axon, where law-enforcement hardware faces budget-cycle volatility, or at Microsoft, where Copilot adoption lags and core Office growth has already decelerated. Both stocks' prior drawdowns also reflect valuation compression from peak multiples rather than sentiment alone. A single bellwether pop does not reset sector-wide pricing of disruption risk.
Axon's 34% Q1 growth and Microsoft's Azure momentum could still spark short-covering rallies if broader risk appetite returns, even if structural AI threats remain.
"One quarter of beats in a macro downturn doesn't validate a sector recovery thesis; the article mistakes short covering for fundamental revaluation."
Snowflake's beat is real—33% revenue growth, 126% NRR, $9.2B RPO—but the article conflates a single quarter's outperformance with sector vindication. The 34% pop reflects massive short covering and sentiment whipsaw, not fundamental repricing. AXON's inclusion is particularly weak: a 12% pop on Trump drone-funding speculation and a partnership announcement with zero market reaction yesterday doesn't validate it as a Snowflake analog. MSFT's 3% move is noise. The article assumes beaten-down = undervalued, but SNOW was down 20% YTD for reasons—macro uncertainty, valuation compression, slowing growth relative to peak. One good quarter doesn't erase those headwinds.
If Snowflake's AI agent acquisition (Natoma) and AWS partnership signal genuine AI monetization momentum, and if enterprise customers are actually accelerating spend (NRR 126% is sticky), then the market may have been too pessimistic and a genuine re-rating could extend to peers with similar fundamentals.
"Snowflake's post-earnings surge is a short-term volatility event driven by oversold conditions rather than a fundamental resolution of the competitive threats posed by AI-native data architectures."
Snowflake's 34% pop is a classic relief rally, not a structural shift. While the 126% net revenue retention is impressive, the market is over-extrapolating a single quarter of backlog growth into a long-term AI moat. The article ignores that Snowflake’s consumption-based model is highly sensitive to cloud spend optimization; if AWS or Azure tighten enterprise budgets, Snowflake’s revenue will decelerate rapidly. Furthermore, grouping Axon with Snowflake is fundamentally flawed—Axon is a niche, hardware-integrated monopoly with high switching costs, whereas Snowflake operates in a brutally competitive data-warehousing space. MSFT is a different beast entirely, priced for perfection; any 'disappointment' in Copilot adoption is a major risk to its current valuation multiples.
If Snowflake’s AI-data cloud integration becomes the mandatory backbone for enterprise LLM deployment, the stock could be entering a multi-year compounding phase that makes today’s valuation look cheap.
"Snowflake's AI-driven expansion could sustain revenue growth and justify multiple expansion, but profitability and durable AI demand are the keys to it actually re-rating."
Snowflake posted solid Q1: 33% revenue growth to $1.39B, 126% net revenue retention, and a $9.21B backlog, with EPS $0.39 vs $0.32. The AWS expansion to $6B and the Natoma AI-agent addition point to durable AI-driven demand and greater lock-in. The setup for Axon and Microsoft looks like a sentiment rebound in beaten software names. But the article glosses over real caveats: AWS/Snowflake tailwinds may be lumpy, the Natoma deal is small, and competitive pressure (Databricks, BigQuery) could compress margins. AI spending cycles can stall; valuations in SaaS remain rich absent margin upside.
Against this stance: the AI-led revival may fizzle if enterprise AI budgets tighten or if AWS/Snowflake pricing pressure intensifies; the rally could prove multiple compression rather than expansion as earnings momentum fades.
"Snowflake's AWS tie-up creates AI data tailwinds that could lift MSFT more than Gemini allows."
Gemini underplays how Snowflake's AWS partnership and consumption model could accelerate rather than decelerate with AI workloads, since data volumes from LLMs expand faster than any optimization pressure. This dynamic has no parallel at Axon yet directly supports Microsoft's Azure trajectory, suggesting the relief rally might embed a narrower but real re-rating for cloud infrastructure names even if broader SaaS multiples stay compressed.
"Data volume growth ≠ revenue durability if enterprise budget discipline tightens and AWS pricing pressure accelerates."
Grok conflates two separate dynamics. Yes, AI data volumes expand faster than optimization—but that assumes enterprises *maintain* Snowflake consumption spend during budget cycles. Gemini's point about sensitivity to cloud spend optimization isn't negated by workload growth; it's amplified if CFOs tighten discretionary data spend. AWS partnership lock-in is real, but doesn't guarantee Snowflake's margin expansion if AWS itself compresses pricing to defend market share against Azure. The relief rally is real; the durability is the open question.
"Snowflake's transition to an agentic compute layer makes its consumption model less sensitive to traditional cloud budget optimization."
Claude, you’re missing the shift in Snowflake’s consumption model. The Natoma acquisition isn't just a 'small deal'; it’s a pivot toward agentic workflows that move Snowflake from a passive data repository to an active compute layer. This changes the pricing dynamic from 'storage optimization' to 'compute necessity.' While Gemini worries about budget tightening, that ignores the reality that AI agents are now a 'must-have' capital expenditure, not a discretionary cloud expense. This re-rating is structural, not just sentiment.
"Natoma could be meaningful, but without clear, durable margin upside and adoption visibility, Snowflake's re-rating will depend on earnings-driven margin expansion, not AI-driven revenue alone."
I push back on Gemini's claim that Natoma makes Snowflake's moat durable and automatically re-rateable. If Natoma delivers, it's meaningful, but adoption lags, integration costs, and data-governance hurdles could cap near-term upside; plus AWS pricing pressure could compress margins even as revenue grows. The 126% NRR is impressive, but sustainable upside requires real margin expansion, not just AI-backed revenue growth. Absent that, the current rally risks multiple compression.
The panel is divided on Snowflake's recent performance, with some seeing it as a relief rally while others argue it signals a structural shift. The panel agrees that AI fears have not been entirely alleviated and that there are still significant headwinds for the sector.
Snowflake's acquisition of Natoma and its pivot towards agentic workflows could change the pricing dynamic and make its moat more durable.
Budget tightening and competitive pressure could compress margins and decelerate revenue growth.