Snowflake Inc. is in talks to acquire San Mateo‑based observability startup Observe for roughly $1 billion, a deal announced on December 24, 2025. Observe, which raised $478 million in funding and was last valued at about $850 million, has been a strategic partner for Snowflake since 2024, when the data‑cloud company’s venture arm invested and Observe’s CEO joined Snowflake’s board.
The acquisition would give Snowflake real‑time monitoring for AI and other software workloads, a capability that complements its recent purchase of TruEra and its broader AI‑Data Cloud strategy. By embedding Observe’s agentless telemetry and AI‑powered assistant into Snowflake’s platform, the company can offer end‑to‑end observability for AI models, from data ingestion to inference, helping customers track performance, security, and reliability directly within the Snowflake environment.
Observability is a growing battleground for AI operations, with incumbents such as Datadog and Splunk vying for market share. Adding Observe would position Snowflake against those rivals, giving it a differentiated, consumption‑based observability offering that could attract AI‑centric customers who already use Snowflake for data warehousing. The move also signals Snowflake’s intent to become a one‑stop shop for AI lifecycle management, potentially accelerating adoption of its AI services.
Snowflake’s recent financials underscore its capacity to pursue the deal. Product revenue rose to $900.3 million in fiscal 2025 Q3 and $943.3 million in Q4, up 29% and 28% year‑over‑year respectively, reflecting strong demand for its cloud data platform. The company’s growth trajectory and cash flow position it to fund a $1 billion acquisition while continuing to invest in AI and data‑sharing capabilities.
Observe’s platform delivers real‑time, agentless monitoring of distributed AI workloads, providing metrics, alerts, and root‑cause analysis that integrate with Snowflake’s data warehouse. The technology’s AI‑powered assistant can automatically surface anomalies and suggest remediation steps, giving Snowflake customers a proactive observability layer that is tightly coupled to their data and model pipelines.
Integrating Observe’s observability stack into Snowflake’s consumption‑based model presents cost and pricing challenges, but Snowflake’s prior investment and board representation may ease the transition. The company will need to align its pricing strategy to ensure that the added monitoring services complement rather than cannibalize its existing data‑cloud revenue streams.
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