Software Was the Market's Big Laggard This Year. Snowflake's Blowout Might Be the Spark That Changes That.

Software stocks have had a brutal first five months of 2026, with many of them falling sharply even as the S&P 500 has risen. Snowflake (NYSE: SNOW) , despite management describing its artificial intelligence (AI) data cloud as a beneficiary of the AI boom, has seen its shares fall alongside other software stocks this year amid investor concern that AI would disrupt software companies overall. Indeed, at one point in April, the stock sat more than 50% below where it had traded a year earlier. But the stock is rebounding now. In fact, the stock is now up sharply year to date, helped mainly by the market's reaction to the tech company's better-than-expected earnings report last week.

But is this news about more than Snowflake? Could there be more software companies that, like Snowflake, will actually benefit more from AI than they will be hurt by it? Snowflake's latest report is the loudest evidence yet that the market may have had it backward.

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The company's fiscal first-quarter results (the period ended April 30, 2026) certainly didn't paint a picture of AI disrupting software. On the contrary, the business saw a significant acceleration.

The company's fiscal first-quarter product revenue, which accounts for the bulk of its total revenue, rose 34% year over year to $1.33 billion -- an acceleration from 30% in fiscal Q4 and 26% in the year-ago quarter. Additionally, management said this was the strongest sequential dollar growth in company history.

Further, Snowflake's acceleration is happening broadly across its business. Net revenue retention, which measures spending from existing customers against the prior year, ticked up from 125% in the prior quarter to 126%. And the company's remaining performance obligations (RPO), which represent contracted revenue not yet recognized, grew 38% year over year to $9.21 billion. Additionally, the company added 616 net new customers -- up 38% from a year ago.

Profitability is improving alongside the growth. Snowflake's non-GAAP (adjusted) operating margin expanded to 12% from 9%, and adjusted earnings per share rose to $0.39 from $0.24.

What's driving the inflection is AI, and not in the way some bears may have feared. Rather than displacing Snowflake's core platform, AI is pulling more data and more workloads onto it. The company's newer agentic products -- Snowflake Intelligence and its coding agent, Cortex Code -- are showing strong traction. And these offerings, in turn, are helping drive greater consumption.