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Snowflake Summit Investor Day 2022: Full Notes & Investment Thesis
Note: I wanted to get this out yesterday evening, but alas, work and life got in the way. Better late than never, right? This is my first earnings call/investor day write up so please let me know if you have constructive feedback about the format or content. And as always, do your own research.
Investment Thesis:
At Snowflake's recent Investor Day, management laid out a clear path to $10B of product revenue in FY29. This clear path revolves around the execution of the following three business objectives:
- Expanding Data Cloud's functionality to enable the workloads of as many verticals as possible
- Consistently rolling out new capabilities on top of the Data Cloud, specifically capabilities that enable and encourage business/mission-critical application development
- Efficiently investing in sales in order to get the right customers on the “single-product, single-engine” Snowflake Data Cloud
Even if you take Snowflake's estimated Data Cloud TAM of $248B with a grain of salt, I find it difficult to doubt the FY29 forward guidance to $10B in product revenue. Of course, as with any growth business, there is some level of execution risk; but I'm choosing to trust the best-in-class management team who repeatedly under-promised and over-delivered in what I believe to be an industry with fewer tailwinds (ServiceNow/ITSM).
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Slootman (CEO)
- Not hearing as much about cloud migrations and data migrations anymore. Talking about other company’s problems and what Snowflake’s platform can do to help.
- Health sciences highlighted w/Novartis and JNJ. Speed up time to market. Data science critical to speeding up that time.
- Supply chain management highlighted. Kraft Heinz with perfecting management of inventory levels.
- Wrapped up with emphasizing that bringing the whole software development process (hybrid tables, application framework) expands Snowflake way past just the data cloud into a “super cloud”.
Kleinerman (VP of Product)
- Snowflake = SINGLE PRODUCT, SINGLE ENGINE
- Whenever there’s a vendor that says “here’s 20 products”, Snowflake sees an opportunity to integrate and consolidate into a single product.
- Consistent product experience across all clouds, lot of engineering went into it.
- Lot of time talking about the investment in Python and how important building software on top of Snowflake is to the business (coming back to Streamlit). Emphasized the excess demand for Powered by Snowflake apps, currently in private preview.
Customer Journey Discussion (Snowflake CRO & Western Union Chief Data and Innovation Officer)
- Evaluated BigQuery (Google), Redshift, Cloudera, and Snowflake. No Databricks mention is interesting.
- Snowflake was the easy decision. Ended up migrating 34 data warehouses with 20 petabytes total to Snowflake.
- Now have lowest fraud rate in company history and over 150 applications running on Snowflake, including one to settle with Visa.
- Data sharing enabled WU to share with “partners”, ie the locations that people can send and receive money at across the world, allowing WU to settle funds significantly faster.
- Platform optimizations saved WU ~20% in cost, but ended up using those savings to build new workloads and applications.
Scarpelli (CFO)
- Emphasizing secular tailwinds. Estimates $248B TAM for Data Cloud platform.
- Classic land and expand strategy. Not classic 177% NRR - this is special and Scarpelli acknowledged that. Expected to decrease but remain world-class.
- Focus on profitable growth, not growth at all costs. Drivers include hiring, R&D, expanding geographically, and Snowflake Ventures (which drives the cultivation of an ecosystem around Snowflake).
- Estimating 5% rev headwinds per year for software/hardware performance enhancements, which are savings fully given back to the customers.
- Restating guidance for $10B in product rev for FY2029 (1400 customers spending $5.5m/year totaling 77% of total product rev)
Analyst Q&A
- Frank threw some shade at Salesforce saying that Snowflake doesn’t need to be like them, continually adding on companies with M&A to sustain growth. Snowflake just needs to continue building out it’s own platform to capture a piece of the massive TAM - growth will be easy if that’s executed.
- Mike/Frank reinforced the idea that not all accounts are created equal. IMO this goes back to their philosophy of prioritizing profitable growth.
- Mike - pricing with cloud vendors will improve. Haven’t renegotiated with AWS/Azure in 2 years, and GCP is 45% more expensive than the other major cloud vendors. Prices will come down significantly.
- Mike hinted at raising FY29 revenue guidance at the next Analyst Day
- Transactional databases - looking to develop modern applications versus looking to migrate existing applications (and stealing market share from legacy vendors like Oracle).
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