Software firm Snowflake (SNOW) is in talks to buy application-monitoring startup Observe for about $1 billion, according to The Information. If the deal goes through, it would be the largest acquisition in Snowflake’s history. Observe, which is based in San Mateo, California, sells observability software that helps developers track how applications are performing and quickly identify outages or disruptions. The acquisition would move Snowflake more directly into competition with companies like Datadog (DDOG) and Cisco’s (CSCO) Splunk, which already operate in this space.
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This potential deal comes as observability tools become increasingly important, especially as businesses build more AI-driven applications. In addition, Snowflake acquired TruEra AI last year to help monitor applications powered by large language models. Interestingly, Observe already works closely with Snowflake, as it uses Snowflake’s database technology and has received investment from Snowflake’s venture arm.
There are also strong governance links between the two firms since they share some board members. Separately, Snowflake is expanding its AI offerings and recently said that it has surpassed $100 million in annualized revenue from AI products. As a result, the company’s shares are up 43% this year, with a total market value of around $77 billion, and revenue grew by 29% last quarter.
Is SNOW a Good Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on SNOW stock based on 32 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SNOW price target of $286.42 per share implies 29.6% upside potential.
