Snowflake's Smart $250 Million Acquisition

Yahoo

04-06-2025

Snowflake is acquiring Postgres provider Crunchy Data for $250 million.
The deal will bring the popular database software directly to Snowflake's platform.
This follows a deal from competitor Databricks to acquire Neon, another Postgres provider.
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Snowflake's (NYSE: SNOW) data cloud enables enterprises to run analytics and artificial intelligence (AI) workloads across data that's been ingested from a variety of sources. While Snowflake customers have been able to ingest data from relational databases like Postgres via connectors, the platform lacks a native Postgres option.
That changes with Snowflake's $250 million acquisition of Crunchy Data. Crunchy Data is an enterprise-focused Postgres provider, layering performance metrics, connection pooling, logging, and security features on top of the open-source database software. While anyone can spin up an instance of Postgres, enterprises have security, compliance, performance, and reliability requirements that must be met.
There are likely two reasons why Snowflake is interested in an enterprise Postgres provider. First, Postgres is extremely popular and widely used. According to a Stack Overflow survey, Postgres is used by more than 50% of responding professional developers, beating out other open-source and proprietary database software by wide margins.
An enterprise that's already a Snowflake customer will now have the option to migrate Postgres databases to Snowflake's platform and consolidate their data. For enterprises that aren't Snowflake customers, the platform could be more appealing now that Postgres is natively supported. Snowflake will leverage the Crunchy Data acquisition, which is expected to close imminently, to deliver Snowflake Postgres to its customers.
The second likely reason for this acquisition is to keep up with a major competitor. Privately held Databricks, which offers a platform similar to Snowflake, acquired Postgres start-up Neon in May. Neon is a bit different from Crunchy Data. While Crunchy Data is a more traditional database provider, with managed and self-hosted deployments, Neon offers a serverless platform that decouples computing resources and storage.
The rationales behind the two acquisitions are quite different. For Snowflake, the focus will be on enabling customers to consolidate data and applications, making it easier to run workloads on its platform, including AI workloads. For Databricks, the focus is on removing bottlenecks for AI agentic workloads. According to the press release announcing Neon acquisition, 80% of Neon databases are created automatically by AI agents rather than by developers.
While Snowflake and Databricks are taking different paths to bringing Postgres into their respective platforms, both companies see the importance of offering the popular database software directly to their customers.
Crunchy Data reportedly generates around $30 million in annualized revenue. That's a drop in the bucket for Snowflake, which generated more than $3.6 billion in revenue during fiscal 2025. This deal isn't going to move the needle right away. However, the launch of Snowflake Postgres could boost the company's growth rate as customers commit further to the platform.
Snowflake is already growing rapidly, with product revenue up 26% year over year in the first quarter of fiscal 2026. The company's net revenue retention rate, which measures the growth of spending from existing customers, was also at a healthy 124%. The Crunchy Data deal could add to this momentum and help the company sustain its high growth rate during a time of economic uncertainty.
Snowflake stock is expensive, trading for nearly 190 times the average analyst estimate for fiscal 2026 adjusted earnings per share. That's a reason to be cautious, but for investors with a long time horizon and the ability to handle some volatility, Snowflake's strong growth and smart acquisition strategy are hard to pass up.
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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Snowflake. The Motley Fool has a disclosure policy.
Snowflake's Smart $250 Million Acquisition was originally published by The Motley Fool