Shares of traditional software providers have been battered this year over AI fears. Investors’ reaction to Snowflake’s and Salesforce’s quarterly results Wednesday suggests some providers are in better shape than others. Snowflake shares jumped more than 35% to their highest point since December after the database provider said its most-watched sales metric grew 34% during its April quarter from a year-ago, beating the company’s own projection by seven percentage points.
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Shares of traditional software providers have been battered this year over AI fears. Investors’ reaction to Snowflake’s and Salesforce’s quarterly results Wednesday suggests some providers are in better shape than others.
Snowflake shares jumped more than 35% to their highest point since December after the database provider said its most-watched sales metric grew 34% during its April quarter from a year-ago, beating the company’s own projection by seven percentage points.
Snowflake CEO Sridhar Ramaswamy, on a call with analysts, said customers are increasingly using its AI coding agent and a product that lets customers search for and get data on their sales or other corporate metrics, tapping information that resides in Snowflake databases or in apps they use from Microsoft, Salesforce and SAP.
Snowflake’s advantage appears to lie in not having a legacy enterprise app business like those of Salesforce, Workday and Intuit. In other words, Ramaswamy basically said that throwing AI on databases is a decent business, even if it has to rely on relatively pricey AI from providers like Anthropic and OpenAI to power Snowflake products. (Snowflake CFO Brian Robins said the company signed a deal to rent Amazon servers and access such AI at a cost that wouldn’t crimp its gross profit margins.)
Salesforce, on the other hand, must bring along a huge group of app customers into the AI age. The sales and customer-service software firm reported a 50% jump in annual recurring revenue from its suite of AI tools, namely Agentforce (which is also partly powered by models from other AI providers), to $1.2 billion in the April quarter from the previous period. That’s nothing to sneeze at, but it didn’t appear to boost its overall revenue much, nor did it change the trajectory of its revenue backlog.
Current remaining performance obligations, a metric reflecting the value of customer contracts it hasn’t yet recognized as revenue, grew 14% in the April quarter from the year-ago quarter, a slightly slower growth rate than in the January quarter. The update comes as customers begin to pressure their enterprise software providers to offer more favorable contract terms, because they are spending more on other AI tools.
But Salesforce’s vote of confidence in itself hasn’t swayed anyone. Shares had fallen more than 30% for the year as of Wednesday’s market close, and shares dipped a fraction of a percent in after-hours trading.
Salesforce was also vague about a key question regarding its AI strategy. Execs largely dodged a question from Goldman Sachs analyst Gabriela Borges about how Salesforce will charge customers for Headless 360, a new collection of tools that lets customers use AI agents such as Claude Code to access data they store in Salesforce apps.
Salesforce president and chief revenue officer Miguel Milano said the company will “work together with our customers and with our partners to find…a fair way monetize” the new tools. The company said it will reveal more about its AI strategy during a webinar Friday.
In Other News
• Meta Platforms is launching paid subscriptions for its AI chatbot across Facebook, Instagram, and WhatsApp as it looks to monetize its investments in AI.
• Federal prosecutors charged a Google employee with using confidential information to win $1.2 million betting on Polymarket, according to a Federal Court complaint unsealed on Wednesday.
• Database firm Snowflake said it has committed to spending $6 billion on Amazon Web Services over the next few years, including using Amazon’s Graviton chips and AI infrastructure.
• OpenAI’s foundation will grant $250 million in funding to promote research into the impact of artificial intelligence on the economy and jobs.
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