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Moments like this don't come often — and understanding what's unfolding now could make all the difference in 2026.
Snowflake's $200M Bet: Can The OpenAI Deal Fix the Slump?
Author: Jeffrey Neal Johnson. First Published: 2/3/2026.
Key Points
- Snowflake's strategic alliance with OpenAI is part of its strategy to integrate top artificial intelligence models directly into the data cloud, streamlining customer access and boosting consumption.
- Enterprise customers are rapidly adopting the new intelligence features, which serve as an early indicator that the consumption-based model is gaining traction.
- Management maintains a strong focus on profitability and cash flow generation while simultaneously investing heavily in cutting-edge artificial intelligence.
On the first trading day of February, Snowflake Inc. (NYSE: SNOW) announced a strategic move many investors have been waiting for. The data cloud company signed a multi-year $200 million partnership with OpenAI, integrating some of the world's most advanced artificial intelligence models — including GPT-5.2 — directly into Snowflake's platform. For a technology company aiming to assert dominance, that's the kind of headline that would normally send a stock price higher.
But the market's reaction was muted. Snowflake's stock traded relatively flat following the announcement, hovering around $192 per share.
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See his three recommended moves before it's too lateThat price is down roughly 12% since the start of the year and sits well below the 52-week high of about $280.
Why the disconnect? Investors are increasingly AI-weary. After several hype cycles, the market no longer responds to press releases alone; it wants proof of profit.
Broader worries about cloud spending — underscored by recent volatility in Microsoft (NASDAQ: MSFT) Azure revenue — have also made traders cautious.
Still, dismissing the partnership as just another headline would be a mistake. This deal marks an important evolution in Snowflake's strategy. It strengthens the company's position as the essential data foundation for the AI era and could set the stage for a longer-term recovery in the stock.
Building a Fortress Around Data
To see why Snowflake is investing $200 million in this partnership, consider the competitive landscape. Snowflake is fighting on two fronts:
- The Private Rival: Databricks, a key competitor, is reportedly generating nearly $4.8 billion in annualized revenue and is preparing for a major initial public offering. It's growing quickly and vying for market share.
- The Cloud Giants: Hyperscalers want to lock customers into their own walled gardens, encouraging use of proprietary AI tools.
Snowflake's response is often described as the "Switzerland of AI." By partnering with OpenAI and having signed a similar $200 million deal with Anthropic in December 2025, Snowflake is declaring neutrality. It's not trying to build a massive in-house AI model to take on the giants; instead, it's becoming a neutral platform where multiple models can run. That lets a Snowflake customer use OpenAI's GPT-5.2 for one task and Anthropic's Claude for another without moving their data.
This approach leans on the concept of Data Gravity. Snowflake currently holds $7.88 billion in Remaining Performance Obligations (RPO), a measure of future revenue locked into contracts and an indicator of the vast corporate data stored on its platform. Moving that data to a competitor is costly and risky. By bringing AI models directly to the data, Snowflake reduces customers' incentive to leave, creating a defensive moat and making its ecosystem stickier.
The Mechanics of Monetization
For investors, the key question is how this partnership becomes profit. Snowflake uses a consumption-based model: instead of flat subscriptions, customers pay for compute credits — the processing power used to analyze data.
AI is extremely compute-intensive. Running complex models like GPT-5.2 on large corporate datasets requires substantial processing resources. Before this partnership, customers who wanted to use OpenAI's models with Snowflake data had to build custom integrations and move data back and forth — technical friction that often stalled projects.
With OpenAI integrated natively into Snowflake Cortex, customers can run advanced AI queries with minimal code. By removing these barriers, Snowflake aims to unlock much higher consumption. Early signs are promising:
- AI Revenue Run Rate: In its third-quarter report for fiscal 2026, Snowflake said it reached a $100 million AI revenue run rate one quarter ahead of schedule.
- Customer Adoption: More than 1,200 customers are already using Snowflake Intelligence.
Those figures suggest enterprise customers are moving beyond pilots and paying for these capabilities. The $200 million investment in OpenAI is essentially seeding a new, potentially high-volume stream of consumption revenue that didn't exist a year ago.
The Risk and Reward Equation
Despite the strategic logic, the stock remains under pressure. At roughly $192 per share, Snowflake trades at a discount to its historical valuation. That decline reflects market concerns that AI could compress profit margins: running powerful models is expensive, and investors fear costs might outpace revenue gains.
Yet Snowflake's financial discipline provides a counterpoint. The company has maintained solid fundamentals:
- Product Gross Margin: About 76%, high for the infrastructure software space.
- Free Cash Flow: Management is targeting a 25% free cash flow margin for the fiscal year.
- Revenue Growth: Product revenue grew 29% year over year in Q3.
Those metrics indicate Snowflake is balancing aggressive AI investment with a focus on profitability, suggesting it can fund a $200 million partnership without wrecking the bottom line. Wall Street appears to see upside: the average analyst price target for Snowflake is roughly $275, implying about 40% upside from current levels. If Snowflake can demonstrate that the OpenAI integration drives consumption without crushing margins, the valuation gap could narrow quickly.
The Show-Me Moment: All Eyes on Earnings
The OpenAI partnership is an important milestone, but the real test is ahead. Investors shouldn't expect this news alone to instantly reverse the stock's recent trend. Instead, attention should turn to the upcoming fourth-quarter earnings report on Feb. 25, 2026.
Success will be measured by guidance, not press releases. Watch for upward revisions to the fiscal 2027 outlook. If management signals that the OpenAI integration is accelerating consumption growth, it will be the market's green light. Until then, the partnership remains a logical, defensive, and potentially lucrative step that strengthens Snowflake's fundamental case — even if investors need more time to be convinced.
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