What we think about Snowflake (SNOW)
Snowflake in Three Words: Usage-Based, Retention
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Background
Snowflake’s mission is to create a data connected world where organizations have seamless access to explore, share, and unlock the value of data. As a cloud-based data warehouse as a service, it wants to help customers access their information and then find ways to make the most of it. It believes this ‘Data Cloud’ opportunity will become a $90 billion addressable market.
The company’s incredible operating metrics make its competitors look like they’re stuck frozen in ice. More than 90% of Snowflake’s revenue is usage-based, meaning its 34% annual product revenue growth is directly indicative of its 8,907 customers increasing their engagement.
Its 135% net revenue retention rate and $3.7 billion of remaining performance obligations are best-in-class among Software-as-a-service platforms and great indicators that customers are happy and are sticking around.
Snowflake is guiding for 37% product revenue growth in fiscal 2024 to $2.6 billion and a 27% free cash flow margin. That margin excludes its generous stock-based compensation, which has diluted shareholders in recent years and remains one of the larger risks to investors.
Snowflake’s multi-cluster computing and unified data record are innovative technologies that are enabling companies to pursue multi-cloud strategies.
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