Sign in

    Snowflake Inc (SNOW)

    Q1 2025 Summary

    Published Feb 4, 2025, 12:10 AM UTC
    Initial Price$208.64February 2, 2024
    Final Price$157.77May 2, 2024
    Price Change$-50.87
    % Change-24.38%

    What went well

    • Snowflake's Remaining Performance Obligations (RPO) grew 46% year-over-year, driven by strong large deal activity, including a $100 million deal signed in Q1 and expectations of another large deal in the current quarter, reflecting strong customer commitment and confidence in Snowflake's platform.
    • Consumption exceeded expectations and quotas, driven by broad-based strength across all verticals, particularly in financial services, technology, and healthcare, indicating robust demand for Snowflake's core services.
    • Large customers are making significant long-term commitments, viewing Snowflake as core to their business and AI initiatives, which is driving large, long-term deals, highlighting Snowflake's critical role in customers' operations and potential for future growth.

    What went wrong

    • Moderation in Usage Growth in April: The company experienced a moderation in usage growth in April, with the CFO stating that "April was more muted" compared to strong growth in February and March. This could indicate potential demand headwinds or a slowdown in customer consumption patterns.
    • Decrease in Deferred Revenue: Deferred revenue declined more sequentially than in prior years, as noted by an analyst: "This quarter was down perhaps a little bit more sequentially than we've seen in prior years". This could suggest potential weakness in new bookings or billing practices affecting future revenue.
    • Impact on Margins Due to Tiered Storage Pricing: The rollout of tiered storage pricing impacted the quarter by approximately $6 million to $8 million, which is "pure margin that, that impacted". This indicates that changes in pricing strategy are negatively affecting margins and could continue as customers renew contracts.

    Q&A Summary

    1. Usage Growth Moderation
      Q: Why did usage growth moderate in April?
      A: Usage growth in April was muted due to the Easter holidays, especially in Europe where longer breaks impact consumption. However, February and March were very strong, and our revenue guidance reflects the trends we're seeing as of this week.

    2. RPO Acceleration and Large Deals
      Q: What drove the RPO acceleration to 46% growth?
      A: RPO increased 46% year-over-year, partly due to a $100 million deal signed in Q1. We're seeing strong commitments from customers making Snowflake core to their business.

    3. AI Strategy and Investments
      Q: Can you explain your AI strategy and investments?
      A: We trained Arctic LLM efficiently in over 3 months on a small amount of GPU compute. We're investing in AI, including the acquisition of TruEra, and have over 750 customers developing on our AI platform. Our focus is making AI effective for enterprises without requiring large budgets.

    4. CEO's Priorities
      Q: What are your top priorities as the new CEO?
      A: My priorities are driving faster product innovation, especially in AI with Cortex AI and Arctic, expanding support for technologies like Iceberg and Hybrid Tables, and enhancing go-to-market strategies. I've engaged with over 100 customers in 70 days to focus on product execution and efficiency.

    5. Deferred Revenue and Storage Impact
      Q: Why was deferred revenue down more than usual?
      A: Deferred revenue was lower because Q4 is a big billing quarter and Q1 is not as big. Also, we've signed deals where customers pay monthly in arrears, so it doesn't show up in deferred revenue but is included in RPO, which is up 46% year-over-year. The tiered storage pricing impacted us by about $6 million to $8 million this quarter, affecting pure margin.

    6. Upside from Smaller Customers
      Q: What's driving upside from smaller customers?
      A: The upside is broad-based across all industries among non-G2K customers, including many large private companies. We expect this strength to continue.

    7. Increased Sales and Marketing Expenses
      Q: What's causing higher sales and marketing expenses?
      A: Expenses increased due to a change in our compensation plan, leading to more commission expenses being recognized immediately. We're also adding sales reps, particularly in the commercial space and business development, including SDRs and SEs.

    8. Iceberg and Product Expansion
      Q: How will Iceberg increase spending with Snowflake?
      A: Iceberg lets customers run workloads on vast amounts of data in their data lakes, often 100x to 200x larger than data in Snowflake. This unlocks new use cases and can increase spending as customers leverage Snowflake on more data.

    9. Investments in Observability
      Q: What's the strategy behind observability investments?
      A: Observability is important for customers to monitor data quality and code. We're partnering and investing in companies to enhance observability for data and applications running on Snowflake.

    Related Publications