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Snowflake Faces High But 'Achievable' Sales Growth Expectations, UBS Says

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Snowflake Faces High But 'Achievable' Sales Growth Expectations, UBS Says

Snowflake (SNOW) faces high revenue growth expectations heading into its fiscal second-quarter results, though accelerating enterprise demand for artificial intelligence tools makes those targets "achievable," UBS Securities said in a note e-mailed Tuesday.

The cloud-based data platform's investors are eyeing sales growth of 36% to 37% for the quarter and see the company exiting fiscal 2027 at a high-30% to 40% rate, according to UBS.

"In our view, the demand trends are strong enough such that we conclude these bogeys are achievable," UBS analyst Karl Keirstead said in a note to clients.

Partner and customer checks show enterprise adoption of AI tools is directly driving increased usage on the platform. "Net, the AI pull-through to Snowflake spend is real and picking up momentum," Keirstead wrote.

The company is scheduled to report second-quarter results Sept. 2.

"One lingering investor concern is that the frontier models are getting so good at data tasks that customers can use them directly in lieu of spending on data software firms," Keirstead said. "We vetted this potential and conclude that very few enterprises are directly harnessing the data capabilities of (large language models) in a way that is curtailing spend on Snowflake, Palantir (PLTR) or Databricks."

UBS raised its price target on the Snowflake stock to $425 from $370 and reiterated its buy rating.

The company's shares were down 1.7% in Tuesday afternoon trade. The stock has jumped 48% so far this year.

Earlier in the month, Palantir lifted its full-year revenue guidance after a surge in US commercial sales drove stronger-than-expected second-quarter results.

Last week, RBC Capital Markets said several major software companies are likely to top expectations for their upcoming quarterly financial results amid an "incrementally more optimistic" feedback from resellers and other factors. The firm raised price targets for 12 of the 14 software providers in its sector coverage, including CrowdStrike (CRWD) and Snowflake, which it tagged as its "favorite growth idea."

Price: $323.43, Change: $-6.68, Percent Change: -2.02%

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