Snowflake CEO claims strong quarterly results highlight the need for new software pricing models in the AI era

(SeaPRwire) –   Sridhar Ramaswamy believes the software industry is beginning to distinguish between those poised to thrive in the AI era and those that will struggle. Currently, Snowflake, the cloud storage firm where Ramaswamy serves as CEO, is positioned on the winning side.

Ramaswamy recently oversaw a stellar first quarter for Snowflake, with the company exceeding expectations across the board. This performance triggered a 36% jump in its share price, extending its five-day gains beyond 50%. The stock also climbed after the 14-year-old company announced a $6 billion, five-year commitment to purchase Amazon’s popular Graviton chips, a move that underscores the robust demand for Snowflake’s services.

These strong results arrived at a critical time for Snowflake, following a period of market decline that impacted many software-as-a-service (SaaS) firms amid investor concerns that AI might render traditional software providers obsolete. Snowflake is among a group of companies stabilizing their position by launching significant AI initiatives that integrate agentic technology with their existing data platforms. The impressive Q1 performance—highlighted by 33% year-over-year revenue growth, the fastest in two years—validated the company’s long-standing consumption-based pricing model and demonstrated that traditional software can successfully pivot to AI-driven compute, Ramaswamy noted.

“It is vital to recognize that not all software companies are the same,” Ramaswamy stated on Friday, just days before Snowflake’s upcoming tech summit in San Francisco.

The key differentiator for Snowflake, according to Ramaswamy, is its commitment to consumption-based pricing from the outset. “We only recognize revenue when a customer actively utilizes Snowflake’s capabilities,” he explained. “We must demonstrate value to generate earnings.”

Software pricing has become a primary challenge for vendors like Snowflake since the emergence of agentic AI, which has pressured the industry’s conventional seat-based subscription models. Ramaswamy predicted that companies relying on seat-based revenue will struggle to justify their premiums as AI enables employees to perform significantly more work.

Ramaswamy, who became CEO in 2024 as the AI boom accelerated, has bet that Snowflake’s foundational “infrastructure layer”—which supports its user-facing products—combined with its consumption model, positions the company for long-term success.

About two-and-a-half years ago, Snowflake launched a comprehensive initiative to embed AI into its platform. This led to the development of Cortex Code, a coding agent, and Snowflake Intelligence, an agentic application. In its latest earnings report, the company noted that Cortex Code is utilized by over 7,100 accounts, while usage of Snowflake Intelligence has more than doubled quarter-over-quarter.

The next phase, according to Ramaswamy, is the “control plane,” which he describes as a “cockpit of work” where users can orchestrate tasks across various applications rather than simply querying data.

“I view it as the new browser,” Ramaswamy said of the control plane.

Snowflake remains heavily dependent on Amazon, and Ramaswamy noted that the company is deepening its reliance on the cloud provider due to the high performance of its chips. Amazon is Snowflake’s primary partner, supporting over 70% of its business operations.

Snowflake and other major software vendors are working to prove their long-term viability in the AI age. Salesforce CEO Marc Benioff mentioned on Wednesday that the company has “returned record levels to our investors,” citing a $25 billion accelerated share repurchase program. While Salesforce has seen positive results from its Agentforce AI product, it continues to seek further growth to satisfy investors.

While companies like Salesforce work to overcome fears surrounding the so-called “SaaSpocalypse,” sentiment toward the most established players has gradually improved.

Like Benioff, Ramaswamy remains optimistic, even as major labs like Anthropic test highly autonomous systems such as the much-discussed Mythos model. While Ramaswamy declined to confirm if Snowflake has early access to Mythos, he argued that responsible organizations should leverage such powerful technologies to automate security scans for the software they deploy.

“You must learn how to harness the immense power of these coding agents and apply them responsibly,” he said. “I am also very cautious about ensuring I understand what these systems are doing and carefully managing the permissions I grant them.”

Ramaswamy also anticipates a shift away from the vast array of “off-the-shelf” SaaS applications toward a future characterized by fewer major platforms and a rise in bespoke, small-scale applications.

“There will still be major applications that people continue to purchase, but consolidation is inevitable,” he said.