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Snowflake's $200M Bet: Can The OpenAI Deal Fix the Slump?

Author: Jeffrey Neal Johnson. Published: 2/3/2026.

Article Highlights

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 that 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 (AI) models, such as GPT-5.2, directly into Snowflake's platform.

For a technology company aiming to assert dominance, this is the sort of headline that would normally send a stock price higher. Instead, the market's reaction was surprisingly muted: Snowflake's stock traded relatively flat following the announcement, hovering around $191 per share.

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That 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 cycles of hype, the market demands proof of profit, not just press releases. Broader worries about cloud spending—amplified by recent volatility in Microsoft (NASDAQ: MSFT) Azure revenue—have also made traders cautious.

Still, dismissing the OpenAI deal as mere headline-grabbing would be a mistake. The partnership marks a meaningful evolution in Snowflake's strategy. It shores up Snowflake's position as a foundational data layer for the AI era and could help set the stage for a longer-term recovery in the stock.

Building a Fortress Around Data

To understand why Snowflake is committing $200 million to this partnership, investors must consider the competitive landscape. Snowflake is competing on two fronts:

The private rival: Databricks, a major competitor, is reportedly generating nearly $4.8 billion in annualized revenue and is preparing for a sizable IPO. They are growing quickly and pressuring Snowflake for market share.
The cloud giants: Hyperscalers are trying to lock customers into their own ecosystems, encouraging the use of proprietary AI tools.

Snowflake's approach 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 positioning itself as a neutral platform. Rather than building a massive in-house AI model to compete with the giants, Snowflake is becoming a place where multiple models can operate side-by-side. That allows a customer to use OpenAI's GPT-5.2 for one task and Anthropic's Claude for another without moving their data.

This strategy leverages the concept of data gravity. Snowflake currently reports $7.88 billion in Remaining Performance Obligations (RPO), a measure of contracted future revenue that also signals how much corporate data is stored on its platform. Moving that data is difficult, costly, and risky. By bringing AI models to the data, Snowflake reduces the incentive for customers to leave, creating a defensive moat and making its ecosystem stickier versus rivals like Databricks.

The Mechanics of Monetization

For investors, the pivotal question is how this partnership turns into profit. Snowflake operates a consumption-based model: customers pay for compute credits—the processing power needed to analyze their data—rather than a flat subscription.

AI workloads are compute-intensive. Running large models like GPT-5.2 over millions of records requires substantial processing resources. Previously, customers who wanted to use OpenAI models on Snowflake data needed complex integrations to move data back and forth, a friction point that often stalled projects.

With OpenAI integrated natively into Snowflake Cortex, customers can run advanced AI queries with far less engineering effort. By removing the technical barriers, Snowflake aims to open the floodgates for usage-based consumption. There is early evidence this is working:

AI revenue run rate: In its third-quarter report for fiscal year 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 data points suggest enterprise customers are not only experimenting with these tools but paying for them. The $200 million partnership with OpenAI is effectively seeding a new, potentially high-volume consumption stream that did not exist a year ago.

The Risk and Reward Equation

Despite the strategic rationale, the stock remains under pressure. At about $191 per share, Snowflake is trading below its historical valuations, reflecting worries that AI workloads could compress margins. Running powerful models is expensive, and investors fear costs might rise faster than revenue.

Snowflake's financial profile, however, offers counterbalance. The company has maintained solid fundamentals:

Product gross margin: Roughly 76%, which is high for infrastructure software.
Free cash flow: Management is targeting a 25% free cash flow margin for the full fiscal year.
Revenue growth: Product revenue grew about 29% year over year in Q3.

These metrics indicate Snowflake is investing in AI while still focusing on profitability. It appears capable of funding a $200 million partnership without destroying its bottom line. Wall Street analysts seem to think the sell-off may be overdone: the average analyst price target for Snowflake is roughly $275, implying potential upside of about 40% from current levels. If management can demonstrate the OpenAI integration drives consumption growth without crushing margins, that valuation gap could narrow quickly.

The Show-Me Moment: All Eyes on Earnings

While the OpenAI partnership is an important milestone, the real test is execution. Investors should not expect this announcement alone to reverse the stock's recent trend. Instead, focus should shift to Snowflake's upcoming fourth-quarter earnings report on Feb. 25, 2026.

The market will be watching guidance, not headlines. Look for upward revisions to the fiscal year 2027 outlook and any commentary that the OpenAI integration is accelerating consumption. If management signals faster consumption growth driven by the partnership, that will be the green light the market wants. Until then, the deal stands as a sensible, defensive, and potentially lucrative step that strengthens Snowflake's fundamental case—even if investors need time to be convinced.

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