Artificial intelligence (AI) has started moving the needle for many companies that have been integrating this technology into their businesses or are offering AI-focused solutions to their customers, and that's not surprising as AI is expected to drive productivity gains in the industries where it is being deployed.
Meta Platforms(NASDAQ: META) and Snowflake(NYSE: SNOW) are two companies that have embraced AI and are witnessing an increase in spending by customers on their offerings. While Meta is offering AI-focused advertising tools to its customers to help them automate and optimize ad campaigns, Snowflake is providing data center infrastructure to its customers so that they can build generative AI applications using their proprietary data.
What's worth noting is that both stocks have started 2025 on a solid note, clocking 20%-plus gains already as of this writing. The good part is that the growing demand for their AI-based solutions could help them sustain their bull run in the future as well. Let's look at the reasons why.
1. Meta Platforms
Meta Platforms has been gaining a bigger share of the digital advertising market thanks to AI. This is evident from the 22% increase in the company's revenue in 2024, which was double the growth in the global digital ad market last year. Japanese advertising and public relations company Dentsu is projecting $513 billion in digital ad revenue in 2027, and it won't be surprising to see Meta capturing a major share of this lucrative opportunity.
That's because Meta's AI-specific ad solutions, such as automated audience targeting, creative enhancements to make ads more appealing, and generative AI tools that help create images and text for ad campaigns, are resonating with customers. That's not surprising as Meta estimated that advertisers using generative AI features are likely to save five or more hours a week on creative tasks, which they can direct toward strategy tasks.
The tech giant claimed last year that the integration of AI tools discussed above led to an impressive jump of 32% in returns on investment (ROI) for advertisers and brands using the technology to launch and manage ad campaigns. What's more, Meta points out that AI has reportedly enabled advertisers to reduce the cost of customer acquisition by an impressive 17%.
All this explains why Meta has seen a significant jump in the number of advertisers using its AI tools. CFO Susan Li pointed out on the company's January earnings conference call that it has seen a 4 times jump in the number of advertisers using generative AI tools in just six months. More importantly, Meta is launching more AI tools, such as a video generator, suggesting that it could attract more advertisers to its platform.
Moreover, advertisers are willing to pay more to advertise on Meta's platform. It witnessed a 14% year-over-year increase in the average price per ad in the fourth quarter, indicating that the stronger returns that it is delivering to advertisers thanks to AI have improved its pricing power. So, it is easy to see why analysts have increased their growth expectations from Meta.
META Revenue Estimates for Current Fiscal Year Chart
But then, the company could deliver stronger growth than analysts' expectations if it continues to grow at a faster pace than the digital ad market and encourages advertisers to spend more money across its properties thanks to higher ROI and a huge user base. As such, there is a solid chance that this "Magnificent Seven" stock could deliver more upside and continue its bull run.
2. Snowflake
Snowflake's cloud-based data platform was originally meant to help customers securely consolidate and analyze data to help them build applications and generate relevant insights from their data, but now the company has started offering AI tools to its customers so that they can do more with their data.
The company is offering multiple services such as Cortex AI and Snowpark Container which allow customers to build generative AI applications using their unstructured data. Snowflake's platform now gives customers access to popular large language models (LLMs), along with compute infrastructure powered by graphics processing units (GPUs) so that they can process AI workloads in the cloud without having to invest in expensive hardware.
And now, Snowflake has launched a new service called Cortex Agents. This service is going to help customers retrieve data insights from their structured and unstructured datasets, which can be used by AI agents to make decisions autonomously. These AI-related offerings have helped Snowflake land more customer contracts.
This is evident from the 55% year-over-year jump in the company's remaining performance obligations (RPO) in fiscal 2025's Q3 to $5.7 billion. That was nearly double the company's revenue growth rate during the quarter, and the sharp jump in this metric means that Snowflake is setting itself up for impressive long-term growth. That's because RPO is the contracted future revenue that has not been recognized yet.
Given that the company is bringing in more AI-related services, there is a solid chance that it could witness higher spending by existing customers while also bringing new customers on board. The size of the huge cross-selling opportunity that Snowflake is sitting on thanks to AI can be judged from the fact that 3,200 of its 10,600-plus customers are currently using its AI features.
As more of these customers expand their adoption of Snowflake's AI services, the company's revenue pipeline could continue to improve along with a stronger bottom-line performance from fiscal 2025's estimated earnings of $0.70 per share.
Snowflake could be rewarded handsomely in the market thanks to its improving earnings power, which is why investors can consider buying this AI stock before its bull run gathers more momentum.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Snowflake. The Motley Fool has a disclosure policy.
