Snowflake in Talks to Buy App Monitoring Startup Observe Inc. For Around $1 Billion
The Takeaway
- Snowflake is buying an observability startup that helps businesses monitor new AI applications they’re developing.
Snowflake is in talks to buy app monitoring startup Observe Inc. for around $1 billion, which would likely be the biggest deal in Snowflake’s history, according to people with knowledge of the discussions.
Observe, based in San Mateo, Calif., sells so-called observability tools that help developers to understand how their applications are performing and allows them to spot disruptions and outages. The deal would bring Snowflake into closer competition with software firms Datadog and Cisco’s Splunk.
Numerous observability startups have popped up in recent years, and businesses could use such software tools to monitor new AI applications they’re developing. In November, Palo Alto Networks agreed to buy Chronosphere, which sells observability software companies use to track performance of cloud servers and applications, for $3.35 billion.
Last year, Snowflake acquired TruEra AI, an observability startup focused on monitoring the performance of applications powered by large language models, for an undisclosed sum.
Observe already has close ties with Snowflake. The startup uses Snowflake’s database technology, which allows companies to pool large amounts of data into a central place to store raw data, known as a data lake. Snowflake’s venture arm invested in Observe in 2024 and Observe CEO Jeremy Burton is a director on Snowflake’s board.
Founded in 2018, Observe has raised more than $470 million from investors including Sutter Hill Ventures and Madrona Ventures, most recently at a valuation of $848 million including the money, according to PitchBook. Sutter Hill’s Mike Speiser sits on the boards of both Snowflake and Observe.
Snowflake recently started selling AI it says can automate customers’ workplace tasks ranging from resolving IT tickets and producing dashboards to handling customer service, joining a crowded field of software providers offering similar AI products. CEO Sridhar Ramaswamy said earlier this month that Snowflake has surpassed $100 million in annualized revenue from its AI products, fulfilling a goal that he set internally earlier this year.
Snowflake shares are up 43% this year, giving it a roughly $77 billion market capitalization.
The company earlier this month said revenue rose 29% to $1.21 billion in the quarter that ended Oct. 31, beating its growth forecast for the quarter by 3 percentage points. It also slightly raised its growth projections for product revenue in the fiscal year that ends at the end of January to 27% from 25%, though the company’s overall revenue growth this year has been several percentage points slower compared to last year.