Snowflake Inc. (SNOW) is doubling down on AI infrastructure in a way that matters for everyone building complex systems. The company announced Thursday it plans to acquire Observe, a move designed to bake AI-powered observability directly into its Data Cloud and stake out territory in the fast-growing IT operations management space.
If you're wondering what observability actually means here, think of it as the difference between getting an alert that something broke and having a system that spots problems before they cascade, then helps you understand why they happened. That capability becomes critical when you're running AI agents and production-scale applications that generate mountains of telemetry data.
The deal had been rumored for weeks. Earlier reports suggested Snowflake was in advanced talks to buy Observe for roughly $1 billion, underscoring how strategically important observability has become to its AI ambitions. While Snowflake didn't disclose financial terms in Thursday's announcement, those prior reports suggest this could rank among the company's largest acquisitions.
Here's what Snowflake gets: Observe's platform will integrate into its core stack, letting enterprises ingest, store, and analyze full-fidelity telemetry data at lower cost. The combined offering targets a shift from old-school alert-based monitoring to automated troubleshooting, pairing Observe's AI Site Reliability Engineer with Snowflake's data infrastructure.
The technical architecture matters too. The unified platform will lean on open standards including Apache Iceberg and OpenTelemetry, positioning Snowflake to handle massive telemetry volumes from modern AI agents while improving operational visibility across the board.
CEO Sridhar Ramaswamy framed it as a business necessity rather than just an IT upgrade. "As our customers build increasingly complex AI agents and data applications, reliability is no longer just an IT metric – it's a business imperative," he said.
Observe CEO Jeremy Burton emphasized the practical benefits, saying the combination delivers "faster insights, greater reliability, and dramatically better economics."
Snowflake has the financial firepower to make this happen. The company held cash and cash equivalents of $1.94 billion as of October 31, 2025, giving it plenty of runway for strategic moves like this.
In a separate announcement that got less attention but signals where Snowflake is headed, the company revealed it's integrating Google's Gemini models into Cortex AI for enterprise use cases. That's another piece of the puzzle as Snowflake builds out its AI capabilities beyond just data storage and into practical business applications.
Snowflake shares were down 2.36% at $227.99 at the time of the announcement Thursday.