Snowflake at Citi's 2024 Global TMT Conference
Transition year, focused management, locking in large and long-term customers
Snowflake SNOW 0.00%↑ CFO, Mike Scarpelli, presented in a fire-side chat at the recent Citi brokerage conference on September 5. I listened to the audio and read through the transcript and have summarized the details below.
I’m hoping to do more of these types of posts with first party data from my portfolio companies.
The high-level overview is that this is a transition year for Snowflake in both management and product, but leadership is hyper-focused on performance and innovation, and the company continues to secure substantial, long-term contracts.
Notes From the Conference
Snowflake's Evolution:
Started as a cloud data warehousing company 12 years ago.
Evolved into a comprehensive cloud platform with a strong focus on data sharing.
Scarpelli emphasized Snowflake's cross-cloud capabilities and ease of use across AWS, Microsoft, and Google platforms.
CEO Transition:
Frank Slootman handed over the reins to Sridhar Ramaswamy in early 2023.
Ramaswamy has a deep engineering background, contrasting with Slootman's go-to-market focus.
Scarpelli highlighted Ramaswamy’s leadership style: “Sridhar is much more of a hard charger.”
Leadership & Engineering Focus:
Ramaswamy has driven better alignment between engineering, product management, and sales teams.
He has been pivotal in accelerating product feature releases and improving accountability within teams.
"He’s really deriving a lot of that, and it’s very positive what I’m seeing coming out of that."
Revenue & Consumption Model:
Investors are concerned about slowing revenue growth due to the consumption-based model.
Scarpelli reassured that Snowflake has stable consumption trends: "We gave a good guide for the full year with the raise” and this was based on the most up-to-date consumption trends post Q2.
AI & Product Roadmap:
Generative AI is a growing focus, with customer use cases such as AI-powered chatbots and data insight tools.
Snowflake’s Cortex platform simplifies data interaction, allowing non-technical users to query data in plain English.
“The biggest thing that we see happening with AI and Snowflake is allowing an average person to ask questions in plain English.”
Challenges with GPUs and Iceberg Tables:
GPU capacity is managed carefully, with a focus on cost efficiency.
Snowflake’s Iceberg table format offers flexibility for customers, though adoption is still in the early stages.
Adoption of Cortex and Snowpark:
2,500 customers using Cortex, though many are still trialing it, not in full production yet.
1,600 customers already using Snowpark notebooks, with positive feedback: “There’s still some feature gaps, but our version 1 of notebooks, we’re very pleased with that.”
Snowpark estimated to only contribute roughly 3% of revenue this year.
Product Potential:
Snowflake aims to close feature gaps and enhance Snowpark to drive further consumption: “People want to have a notebook available for free, and that will drive more Snowpark consumption.”
Databricks recognized as a strong competitor, particularly for the data science persona.
Competitive Landscape:
Biggest competitors: Google (BigQuery), Microsoft, followed by Databricks and AWS.
Microsoft’s potential with Fabric is seen as a larger threat: “If they can get Fabric right… that will ultimately be a bigger competitive threat.”
Good relationships with Microsoft and AWS, but competition remains fierce.
Customer Relationships and Long-Term Commitments:
Long sales cycles due to replacing long-standing legacy systems. Multiyear contracts are common.
Example: A large bank grew 401% year-over-year and is considering a 5-year contract with Snowflake.
Legacy System Migrations:
Significant opportunity in migrating from SQL Server, Teradata, Oracle, and Hadoop.
Snowflake offers SnowConvert tools and partners to help with migrations: “We’re letting partners use [SnowConvert]… it’s been very good at doing the Teradata migrations.”
Sales Strategy and Focus on New Logos:
Shifted to focusing more on new logos, with 35% of sales reps now only paid for new customer acquisitions. Found that sales reps were only selling more to already existing customers as that was easier than bringing on a new logos. This adjustment to compensation is to address this.
Reps also incentivized to identify new workload opportunities.
International Expansion:
Snowflake is expanding well in APAC regions like Japan, Korea, Australia, and Indonesia, with significant wins, such as a $9M 5-year deal with an Indonesian telco.
Data Sharing Opportunities:
Data sharing remains a strong growth driver, particularly in financial services and healthcare: “One of our 9-figure deals last quarter was with a healthcare provider.”
Financial services has been very strong historically and their is significant opportunity with healthcare going forward.
Profitability and Margins:
AI contributions are not expected to be high-margin: “I don’t think AI is ever going to be high-margin… but it will be margin positive.”
Snowflake is focused on stabilizing and reaccelerating revenue growth while improving margins in the coming year.