Snowflake Stock Up 185% From April Lows as AI Consumption Accelerates

Snowflake shares have rallied 185% from their April lows, and Jim Cramer says the reversal reflects fundamentals, not speculation.

"While we were out in San Francisco, I got a chance to catch up with Snowflake, the software company that gives customers a platform to store, use, and share their data, often with the goal of building AI applications. And compared to weakness, where the stock sold off thanks to AI displacement worries, Snowflake caught fire in recent months," Cramer said on the September 17 episode of Mad Money. "The stock's up 185% from its April lows at this point in part because they've been putting up incredible numbers."

The numbers back him up. Snowflake reported product revenue of $1.49 billion for the second quarter of fiscal 2027, a 37% year-over-year increase and an acceleration in growth. Total revenue climbed 35% to $1.55 billion. Remaining performance obligations surged 30% to $9 billion, driven by strong consumption trends across core data cloud applications.

The customer metrics point in the same direction. Net revenue retention came in at 126%, and 828 customers now generate more than $1 million in trailing twelve-month product revenue, an expanding base by Snowflake's count. The pattern suggests enterprise adoption of AI workloads is driving heavy platform consumption rather than displacing software spending — the exact fear that crushed the stock earlier this year.

The Margin Problem

Profitability remains the weak spot. Snowflake posted a GAAP net loss of $191.7 million for the quarter, weighed down by high operating expenses and stock-based compensation.

Management also cut its fiscal 2027 non-GAAP product gross margin guidance to 74%. The reason: AI workloads carry lower contribution margins than traditional data storage. Growth is accelerating, but each incremental AI dollar earns less than the storage dollars it supplements.

The Valuation Squeeze

The stock trades at a forward multiple of 166.7x. That leaves very little room for error if consumption growth slows, or if heavy competition from hyperscalers squeezes Snowflake's pricing power. Both risks are active. Cloud giants are pushing their own data platforms, and AI-era pricing pressure is already visible in the margin guidance cut.

Smart Money Moves In

Hedge funds are leaning bullish. According to Insider Monkey tracking data, 103 hedge funds held positions in Snowflake in the second quarter, up from 80 in the prior quarter. AQR Capital Management was the most prominent shareholder with 4.43 million shares. Point72 Asset Management increased its position by 2,449%.

Short sellers have not capitulated. Short interest stands at 5.25% of the float, reflecting moderate skepticism among traders watching the high valuation multiples and the ongoing GAAP net losses.

The setup is now straightforward: 37% product revenue growth and 126% net retention on one side, a 166.7x forward multiple and declining gross margins on the other. Whether Snowflake can sustain consumption growth faster than AI erodes its margins will decide which side of that trade wins.