A pronounced upswing in software stocks swept through markets on Thursday as fresh evidence that artificial intelligence can drive monetizable growth in enterprise software reduced recent investor anxiety. The reversal followed a stretch in 2026 where concerns about AI-related disruption had pressured valuations across the sector.
The immediate trigger was Snowflake Inc.'s quarterly report, which contained a set of operational metrics and management commentary that investors read as confirmation that AI can be a revenue engine rather than a displacer for incumbent software platforms. That reaction coincided with broad gains across cloud infrastructure suppliers, enterprise applications vendors and software-focused indexes.
Financial and product highlights from Snowflake
- Adjusted earnings per share came in at $0.39, beating the consensus estimate of $0.32 by $0.07.
- Product revenue rose 34% year-over-year to $1.33 billion for the quarter.
- Non-GAAP operating margins expanded to 12% for the quarter.
- Remaining performance obligations increased 38% to $9.21 billion.
- Management said its Cortex Code AI agent, known as "Coco," has been adopted by more than 7,100 accounts and is already generating direct consumption revenue.
- The company raised its full-year product revenue outlook to $5.84 billion and disclosed an intended acquisition of enterprise platform Natoma.
- Snowflake announced a new five-year, $6 billion infrastructure commitment to Amazon Web Services to secure access to specialized Graviton chips to support enterprise AI workloads.
Snowflake's CEO Sridhar Ramaswamy framed the quarter as a turning point for the company's AI-driven growth, saying "AI continues to be a powerful tailwind for Snowflake, and Q1 marks a clear inflection point in that journey." CFO Brian Robins emphasized Coco's role in management's outlook revision, calling it "the largest driver" because the company models only observed behavior.
Analyst and market response
Analysts and investors reacted decisively. Morgan Stanley kept an "overweight" rating on Snowflake and lifted its price target to $300, describing the quarter as "a blockbuster, thesis-affirming quarter" for the AI monetization narrative. Wolfe Research's Alex Zukin characterized the report as settling the debate over whether AI is a net positive or negative for Snowflake, saying the results demonstrate the company is "at the bleeding heart of the Enterprise AI token wave."
Barclays analyst Raimo Lenschow said the recent debate over how agentic AI might affect data analytics software has paused in light of the results. "In recent months, there were some concerns emerging around how agentic AI advancements will ultimately impact the data analytics software space as investors balanced the opportunities from AI's ability to further democratize analytics and data engineering against the potential risks of the emerging agentic AI layer and AI-query optimization. We see this debate taking a pause," he said.
Wider market impact
Snowflake's report catalyzed a broad rotation back into technology names. The move pushed substantial gains across a spectrum of software companies and ETFs, with the following notable moves captured during the session:
- Snowflake Inc (NYSE:SNOW) - Up over 36%.
- ServiceNow Inc (NYSE:NOW) - Up nearly 6%.
- MongoDB (NASDAQ:MDB) - Up over 10%, ahead of its own earnings report due Thursday after the close.
- Figma Inc (NYSE:FIG) - Up nearly 7%, with the rally intensified by activist pressure from Findell Capital.
- Palantir Technologies Inc (NASDAQ:PLTR) - Up around 6%.
- Datadog Inc (NASDAQ:DDOG) - Up nearly 3%.
- Workday Inc (NASDAQ:WDAY) - Up over 2%.
- DocuSign Inc (NASDAQ:DOCU) - Up nearly 2%.
- SAP SE ADR (NYSE:SAP) - Up nearly 2%.
- Adobe Systems Incorporated (NASDAQ:ADBE) - Up 1%.
- Paychex Inc (NASDAQ:PAYX) - Up 1%.
- Salesforce Inc (NYSE:CRM) - Up 1%, despite mixed results reported the prior evening.
- Dow Jones Software - Up 2.9%.
- iShares Expanded Tech-Software Sector ETF (NYSE:IGV) - Up 2.6%.
The session underscored how a single company's confirmatory results on AI monetization can shift investor positioning across a whole industry, easing fears that AI would displace incumbents rather than fuel them.
Interpretation and context
The market reaction illustrates a reappraisal by investors who had spent much of 2026 discounting software shares because of theoretical risks from agentic AI developments. With Snowflake delivering both higher growth and margin expansion tied to AI-driven product consumption, market participants moved back into both fast-growth and more established software names, suggesting confidence that incumbents can capture AI-related spend.
While the immediate rally was broad-based, the session also highlighted differences within the sector - some names saw outsized gains tied to their proximity to enterprise AI consumption, while others moved more modestly despite reporting mixed or unchanged fundamentals.
What to watch next
Investors will likely monitor how sustained product adoption of AI offerings translates into recurring revenue and margin improvement across software companies. Upcoming earnings reports from other names in the space will provide additional data points to test whether Snowflake's quarter represents an isolated inflection or a wider structural trend in enterprise AI monetization.