Q3 2022 Snowflake Inc. Earnings Call

December 1, 2021

Ladies and gentlemen, thank you for standing by and welcome to the third quarter fiscal year 2022 Snowflake earnings conference call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session and if you would like to ask a question during that time, simply press star one on your telephone keypad. If and once you do require assistance during the conference, please press star zero. I would now like to turn to contracts over to your speaker today [inaudible] head of Investor Relations. Please go ahead.

We will conduct a question and answer session and if he would like to ask a question during that time simply press star one on your telephone keypad.

And once you do require assistance during the conference. Please press Star zero.

I would now like to turn to contracts over to your speaker today genius excellent head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us on Snowflakes Q3 fiscal 2022 earnings call. With me in Bozeman, Montana are Frank Slootman, our chairman and Chief Executive Officer, Mike Scarpelli, our Chief Financial Officer, and Christian Kleinerman, Our senior Vice President of product will join us for the Q&A session.

During today's call, we will review our financial results for third-quarter fiscal 2022, and discuss our guidance for the fourth quarter and full-year fiscal 2022.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, products and features, long term growth and overall future prospects. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results information concerning those risks is available in our earnings press release distributed after market close today and in our SEC filings, including our most recently filed Form 10-Q for the fiscal quarter ended July 31st, 2021 and the Form 10-Q for the quarter ended October 31st, 2021 that we will file with the SEC. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations.

after market close today and in our SEC filings, including our most recently filed Form 10-Q for the fiscal quarter ended July 31st, 2021 and the Form 10-Q for the quarter ended October 31st, 2021 that we will file with the SEC. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future

events or changes in our expectations.

We'd also like to point out that on today's call we will report, both GAAP and non-GAAP results, we use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period to period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures. Please refer to our earnings press release distributed earlier today in our Investor presentation, which are both posted at investors.snowflake.com. A replay of today's call will also be posted on the website. With that, I would now like to turn the call over to Frank.

Report, both GAAP and non-GAAP results, we use these non-GAAP financial measures internally for financial and operational decision, making purposes and as a means to evaluate period to period comparisons non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.

Reconciliations of these non-GAAP financial measures. Please refer to our earnings press release distributed earlier today, and our Investor presentation, which are both posted at investors that snowflake Dot com a replay of today's call will also be posted on the website with that I would now like to turn the call over to Frank.

Thanks, Jimmy and good afternoon, everybody. We saw momentum accelerated in Q3 with product revenues growing 110% year on year to $312 million and remaining performance obligations growing to $1.8 billion.

We saw momentum accelerated in Q3 with product revenues growing 110% year on year to $312 million and remaining performance obligations growing to $1 8 billion.

Net revenue retention rate expanded to 173% and we recorded our first positive non-GAAP operating income in the company's history. Our Q3 Fortune 500 customer count totaled 223, increasing by 8 in the quarter and we now have 148 customers with trailing 12 months product revenue greater than $1 million.

Our Q3 Fortune 500 customer count totaled 223, increasing by eight in the quarter and we now have 148 customers with trailing 12 months product revenue greater than $1 million.

Our growth is driven by a diverse mix of customers. The 10 largest consumers in Q3 include four Fortune 500 companies for companies less than 10 years old and they powered by Snowflake program partner.

We continued our international expansion with product revenue from EMEA and Asia Pacific outstripping the company's year on year growth up 174, and 219% respectively. We have recently launched operations in three new countries, Israel, Korea, and the United Arab Emirates.

We have recently launched operations in three new countries, Israel Korea, and the United Arab Emirates.

Vertical industry focus is an important evolution of our selling motion, especially in global enterprise accounts. During the quarter, we announced two industry data clubs. The financial services data cloud brings together the snowflake platform, partner solutions and industry data to help financial services organizations mobilized a data.

The financial services data cloud brings together the snowflake platform.

Partner solutions and industry data to help financial services organizations mobilized a data cut.

Customers can lunch box, build fintech platforms and accelerate their compliance on top with Snowflake. Industry-leading customers all the arms Blackrock Capital One New York Stock Exchange, square State Street, and the Western Union all part of the financial services data club. We also launched a media data clock, which enables media and advertising companies to share data for audience insights and measurements.

We also launched a media data clock, which enables media and advertising companies to share data for audience insights and measurement.

The data clean rooms enabled by Snowflake advertisers, agencies and publishers can design their own collaborative environments. The media data cloud includes industry leaders like Disney advertising sales Xperia, Horizon Media and the trade desk. We're teaming up with Disney advertising sales to provide the infrastructure underlying their new data cleanroom solution. Together, Snowflake and Disney advertising sales enabled data collaboration for compliant and secure advertising.

Dia data cloud includes industry leaders like Disney advertising sales experience.

The media and the trade desk, we're teaming up with Disney advertising sales to provide the infrastructure underlying their new data clean room solution.

Together Snowflake and Disney advertising sales enabled data collaboration for compliant and secure advertising.

We launched our powered by Snowflake program in June to help companies build and promote applications in the data cloud. Powered by Snowflake is designed to accelerate the delivery of cloud applications on Snowflake.

To date, there are over 175 powered by Snowflake companies, who have access to technical resources to design their applications. Most recently, we announced [Securonix, UIPath] video App Zoom info is powered by Snowflake partners.

In October we helped the Snowflake built summit, which focuses on software developers data scientists and data engineers. The event received over 20,000 registrations, which was three times last year's build events. Attendees got a closer look at new applications, leveraging Snowpark, which brings broke around ability to Snowflake and issue public preview. Developers explored how new Java and user-defined functions are expanding what is possible with Snowflake.

<unk> received over 20000 registrations, which was three times last year's build events attendees got a closer look at new applications, leveraging no park, which brings broke around ability to snowflake and issue public preview developers explored how new Java and user defined functions are expanding what is possible with snowflake.

Updates due to Snowpark accelerated program were also announced at built. Snowpark accelerators provide partners with access to technical experts and market exposure to Snowflake customers. Snowpark provides programming language choice to Snowflakes data cloud. Customers can access prebuilt partner capabilities and integrations. It is leveraged by companies such as Data IQ, Data Robot and H2O.AI.

Integrations. It is leveraged by companies such as data IQ data robot and H two O dot AI.

At our recent snow day event with more than 23000 registrations, we announced that our customers can now use Python natively within Snowflake. With Snow Park for Python developers will be able to easily program with a widely popular language.

They can also leverage the security governance performance with Snowflake. Snowpark for Python is currently in private preview. During the quarter Snowflake invested in Anaconda to bring enterprise-grade Python capabilities due to data cloud. Together, we enabled a Python community to build secure data pipelines and machine learning capability.

Anaconda partnership will enhance the Snowpark experience to extensive program ability with Snowflake. Last year, we issued our first startup challenge. 700 companies from 56 countries competed to build a data application with Snowflake. We announced our second Snowflake startup challenge are built with enough up with an opportunity for up to $1 billion in total investment. Snowflake's data marketplace grew 41% this quarter now with more than 900 datasets from over 200 providers.

Last year, we issued our first startup challenge 700 companies from 56 countries competed to build a data application with snowflake.

We announced our second Snowflake startup challenge are built with enough up with an opportunity for up to $1 billion in total investment.

Hoeflich data marketplace grew 41% this quarter now with more than 900 datasets from over 200 providers.

We also saw a more than 130% annual increase in Socal stable edges. Stable edges are ongoing snowflake data networking relationships between providers and consumers. One other feature datasets as such assets to history data feed. It provides asset managers real-time data from over 200 exchanges. Zoom and vote is another feature dataset. It provides company and contact data with no additional integration or ETL required. The overarching backdrop for Snowflake is the inexorable march towards direct to consumer operations in full-blown digital transformation. Enterprises and institutions have grown acutely aware how much they will end up relying on data operations, data analytics and data science. Data is becoming the beating heart of the modern enterprise. So the race is on to lay the foundation for a digital data-driven infrastructure. Snowflake is and it will be a critical enabler of this journey. With that, I will now turn the call over to Mike. Thank you, Frank. Q3 was a breakout consumption in bookings quarter for us. Our Q3 product revenues were $312 million representing one 110% year over year growth.

Stable edges are ongoing snowflake data networking relationships between providers and consumers.

One other feature datasets as such assets to history data feed it provides asset managers realtime data from over 200 exchanges zoom and vote is another feature dataset. It provides company and contact data with no additional integration or E. T L required.

The overarching backdrop for Snowflake is the inexorable March towards direct to consumer operations in full blown digital transformation enterprises and institutions have grown acutely aware how much they will end up relying on data operations data analytics and data science data is becoming the beating heart of the modern enterprise So the race.

lay the foundation for a digital data-driven infrastructure. Snowflake is and it will be a critical enabler of this journey. With that, I will now turn the call over to Mike. Thank you, Frank. Q3 was a breakout consumption in bookings quarter for us. Our Q3 product revenues were $312 million representing one 110%

year over year growth.

Consumption continues to be led by our financial services media retail and technology customers. Our performance is fueled by our existing customer base, which is demonstrated by our net revenue retention rate of 173%. Net revenue retention expansion is driven by rapid growth among our largest customers and the addition of six customers to the measurement cohort that have gained greater than $1 million of revenue in the past year.

Net revenue retention expansion is driven by rapid growth among our largest customers and the addition of six customers to the measurement cohort that have gained greater than $1 million of revenue in the past year.

In Q3, 5 of our top 10 customers grew at or above the company's product revenue growth rate of 110% year on year. Q3 benefited from record quarter on quarter incremental growth and we are pleased to see our largest customers continuing to expand their use of Snowflake.

Q3 was also an impressive quarter of sales execution remaining performance obligations grew to $1.8 billion with their key industries leading net new bookings. We are also pleased with our progress to mature the sales motion to sell large multi-year deals. In the quarter, we signed a three year 100 million dollar deal to an existing customer as well as five additional eight-figure multi-year deals.

For an existing customer as well as five additional eight figure multiyear deals.

These commitments signal the organization's intent to expand their use of Snowflake and we look forward to seeing their consumption fall off. Of the $1.8 billion and RPO, we expect approximately 55% to be recognized as revenue in the next 12 months.

We remain focused on penetrating the largest enterprises globally as we believe these organizations provide the largest opportunity for account expansion. In Q3, the number of customers with greater than $1 million in trailing 12 months product revenue increased to 148 up from 116 last quarter, including eight consuming more than $10 million.

In Q3, the number of customers with greater than $1 million in trailing 12 months product revenue increased to 148 up from 116 last quarter, including eight consuming more than $10 million.

Q3 was also highlighted by meaningful strides in our partner ecosystem. First, our relationships with our cloud service providers in the field continue to strengthen. This fiscal year to date, we have co sold over half a billion dollars in total contract value with their cloud service providers.

First our relationships with our cloud service providers in the field continue to strengthen this fiscal year to date, we have co sold over a half a billion dollars in total contract value with their cloud service providers.

Second, we are seeing significant growth from our powered by Snowflake program with the number of registered powered by partners growing 137% quarter on quarter. And the product revenue from those partners growing 173% year on year.

Lastly, we are seeing growing engagement within the data cloud ecosystem, and we will continue to evaluate strategic opportunities to invest through snowflake ventures in the quarter, we announced strategic investments in Anaconda overlay analytics and roadway.

The third quarter also saw meaningful gains in approximately the debility and efficiency. On a non-GAAP basis, our product gross margin was 74.6% scale larger mix of compute consumption and increased price per credit related to greater consumption of higher price product additions drove the outperformance. The operating margin was 2.5% benefiting from revenue outperformance and a portion of planned Q3 headcount now starting in Q4.

Non-GAAP basis, our product gross margin was 74, 6%.

Kale larger mix of compute consumption and increased price per credit related to greater consumption of higher price product additions drove the outperformance operating margin was two 5% benefiting from revenue outperformance and a portion of planned Q3 head count now starting in Q4.

Our adjusted free cash flow margin was 6.4% positively impacted by operating margin outperformance. As a reminder, adjusted free cash flow excludes the impact of net cash paid or received on both employee and employer payroll tax-related items and employee stock transactions. This quarter, we saw a 12 million dollars positive impact from those items. We maintained our strong cash position with approximately $5.1 billion in cash, cash equivalents and short term and long term investments. Now, let's turn to our guidance and outlook. For the fourth quarter of fiscal 2022, we expect product revenue between 345 and $350 million representing year over year growth between 94 and 96%.

<unk> million dollars positive impact from those items, we maintained our strong cash position with approximately $5 $1 billion in cash cash equivalents and short term and long term investments now, let's turn to our guidance and outlook for the fourth quarter of fiscal 2022, we expect product revenue.

Between 345, and $350 million representing year over year growth between 94 and 96%.

Our forecast calls for our top customers to continue growing from Q3 to Q4, but not at the same record rate we saw from Q2 to Q3. Daily customer consumption patterns determined our revenue forecast. In many cases consumption is driven by our customers' own business cycles and growth patterns. In Q4 of last year, some of our largest customers experienced tremendous business growth. With holiday travel returning to a more normal cadence, we also expect a greater impact on consumption in Q4 this year than last year.

Customer consumption patterns determined our revenue forecast in many cases consumption is driven by our customers' own business cycles and growth patterns in Q4 of last year. Some of our largest customers experienced tremendous business growth with holiday travel returning to a more normal cadence. We also expect a greater.

Impact on consumption in Q4, this year than last year.

Turning to margins, we expect on a non-GAAP basis, 1% operating margin and we expect 358 million diluted weighted average shares outstanding. As mentioned earlier, we pushed some hiring into Q4, but still expect to hear more than 200 employees in fiscal year 2022.

For the full-year fiscal 2022, we expect product revenues between 1.126, and 1.131 billion representing year over year growth between 103 and 104%. Turning to profitability for the full year, we expect on a non-GAAP basis, 74% product gross margin, negative 4% operating margin and 8% adjusted free cash flow margin. And we expect 357 million diluted weighted average shares outstanding. For the remainder of the calendar year, we expect to remain in a predominantly remote work environment with limited travel.

74% product gross margin, negative 4% operating margin and 8% adjusted free cash flow margin. And we expect 357 million diluted weighted average shares outstanding. For the remainder of the calendar year, we expect to remain in a predominantly remote work environment with limited travel.

Our forecast reflects this plan. We will assume an uptick of returned to office expenses in the fourth quarter. We anticipate an eventual return to the office, we do not have a specific timeline for that goal. With the Snowflake ventures portfolio growing and strategic investments in privately held and publicly traded securities. Please keep in mind that we may see quarter to quarter fluctuations in our mark to market unrealized gains or losses going forward. We expect to recognize noncash gains of approximately $20 million. In the aggregate on prior strategic investments based on transactions that have closed so far in Q4.

With the Snowflake ventures portfolio growing and strategic investments in privately held in publicly traded securities. Please keep in mind that we may see quarter to quarter fluctuations in our mark to market unrealized gains or losses going forward, we expect to recognize noncash gains of approximately $20 million.

In the aggregate on prior strategic investments based on transactions that have closed so far in Q4.

And lastly, we will host our Investor day in person the week of June 13th in conjunction with Snowflake summit in Las Vegas. If you would like to attend, please email ire at Snowflake.com. With that, operator, you can now open up the line for questions and as a reminder, Christian, our SVP of products will be joining us for Q&A.

<unk> will be joining us for Q&A.

Thank you. At this time I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Please limit your questions to one and one follow up, thank you. We have your first question from Raimo [inaudible] with Barclays. Your line is open. Excuse me, your line is open.

We have your first question from Raimo <unk> with Barclays. Your line is open.

Excuse me Rhino your line is open.

I should unmute myself. Thank you. Congrats from me here. On this really strong quarter. A question for Frank, if I look at the data sharing. Which you guys are making and I'm also looking at some of the industry conferences that are happening this week with data showing starts kind of to play a more bigger role, where do you see we are on that journey in terms of industry discovering the new world we are living in terms of sharing data in the cloud. And what's possible and how different business models different monetization models are possible because it feels almost like if you're only seeing the tip of the iceberg here.

Thank you congrats.

Congrats from me here.

On this really strong quarter a question for Frank if I look at the data sharing.

Which you guys are making and I'm also looking at some of the industry conferences that are happening this week with data showing starts kind of too.

More bigger rule, where do you see.

We are on that journey in terms of industry discovering the new world. We are living in terms of sharing data in the cloud and what's possible and how different business models different monetization models.

because it feels almost like if you're only seeing the tip of the iceberg here.

And then the question for Mike. The gross margins that you're talking about now. Is that kind of the way to think about it? Because you've done a lot of the negotiations or is there more room to look for in the coming years. Thank you. It's Frank. We generally agree with your assessment that we are just seeing the tip of the iceberg. Snowflake was built from the ground up as a data-sharing platform.

Mike.

The gross margins that youre talking about now.

Is that kind of the way to think about it because you've done a lot of the negotiations or is there more room to look.

We look for in the coming years. Thank you.

Ramos shrank.

Generally agree with.

What's your assessment that we are just seeing the tip of the iceberg.

Snowflake was built from the ground up as a data sharing platform.

And we've been at itout of from the beginning. You see a lot of other players following our lead and in this regard, but we are in the beginning. What happens a lot in our field and our business as people look at modernizing legacy workloads. Those kinds of things often have priority over getting two data sharing because we cannot even consider data sharing and unless we get our data to the cloud we start moving workloads.

You see a lot of other players.

Following our lead and in this regard, but we are in the beginning what happens a lot in.

In our field and our business as people look at modernizing legacy workloads.

Kinds of things often have priority over getting two data sharing because we cannot even consider data sharing and unless we get our data to the cloud we start moving workloads.

My greater databases and so on. So yes, we are in the very early stages, but as you said from the metrics that we report on. There is a very very steady aggressive growth happening quarter on quarter, but we sort of haven't reached that tipping point yet what are sort of the floodgates are open and things are just expanding it. I think you're quite right. We're anticipating that that will happen at some point. It's very non-linear in the way the adoption is going to develop.

There is a very very steady aggressive growth happening quarter on quarter, but we sort of haven't reached that tipping point, yet what are sort of the floodgates are open and things are just expanding it meteoric rate but.

We're anticipating that that will happen at some point very non linear in the way of the adoption is going to develop.

On your question on gross margins. I'm not giving guidance for next year or the longer term, we'll update that in June. All I will say is we still have a number of deployments around the world that are not at scale, which there is upside in our margins from that. Coupled with as we get into these larger customer relationships that are going with our higher edition product. They do attract higher margin. Consistent with what we said when we were going public, I don't think this is ever going to get into the mid-80s like some of the other SaaS companies, but clearly our longer-term guidance was 75 and there's upside to that. Perfect. Thanks, and congrats again.

Customer relationships that are going with our.

Our higher edition product they do attract higher margin.

Consistent with what we said when we were going public I don't think this is ever going to get into the.

Mid <unk> like some of the other SaaS companies, but clearly.

Our longer term guidance was 75 and there's upside to that.

Perfect, Thanks, and congrats again.

We have your next question from Kirk [inaudible]with Evercore ISI. Your line is open. Yes, thanks, very much and congrats on the quarter. Frank, I was wondering you are actually under a thoughtful of it on Ramius question. Are there any industries where you're starting to see network effects take hold in terms of data sharing? I know you guys have taken a little bit faster posture in terms of going more verticalizing sort of your go-to market. I was just kind of curious in areas like financial services. Are you starting to see certain network effects are billed based on sort of getting some of that is really key core accounts? And then just for Mike, can you just give us an update on where you are from a hiring perspective as we head into next year, especially around sales capacity things like that? Thanks.

Yes, thanks, very much and congrats on the quarter. Frank I was wondering you actually under a thoughtful of it on Ramius question are there any industries, where you're starting to see network effects take hold in terms of data sharing I know you guys have taken a little bit faster posture in terms of going more verticalizing sort of your go to market I was just kind of curious in areas like financial services are you.

starting to see certain network effects are billed based on sort of getting some of that is really key core accounts? And then just for Mike, can you just give us an update on where you are from a hiring perspective as we head into next year, especially around sales capacity things like that? Thanks.

Yes, it's Frank. You definitely see network effects, not so much by buying enterprise by institution, but really by industry, because the industry and sub-industries day to day really induce an invoked network effect. Because the entities have relationships and do business together, so some of the data clauses that we announced during the quarter like definition service data cloud and media and advertising. There is a huge amount of network effect in that area of advertising for a lot of reasons that people know is under enormous pressure. So there was this whole movement of foot to enrich data for advertising yield and effectiveness in affluent and when we're trying to enrich data then it triggers data sharing and data attribution neotype of strategy. So it is very strong there.

You definitely see network effects, not so much by buying enterprise by institution.

By industry, because the industry and sub industries day to day really induce an invoked network effect.

Because the the entities have relationships.

And do business together, so some of the data clause that we that we announced during the quarter like definition service data cloud and media and advertising. There is there is a huge amount of.

Off network effect and that area of advertising for a lot of reasons that people know is under enormous pressure. So there was this whole movement of foot to enrich data for advertising yield and effectiveness in affluent and when we're trying to enrich data.

Then.

Triggers data sharing and data attribution neotype of strategy. So it is very strong there.

But there is a difference between industry. Some industries are very leading edge. They are leaning in very very hard. Now others just take longer and you also see by geography, it's different as well Europe. In Asia. Are running whatever 18, 24 months behind or so, but everybody is going to get Joe just some are just more upfront than others. Kirk, on your question on the hiring.

Leaning in very very hard now others, just take longer and you also see by geography, it's different as well Europe.

In Asia.

Our running whatever 18, 24 months behind or so, but everybody is going to get Joe just some are just.

More upfront than others.

Kirk on your question on the hiring.

I want to start by saying we're all about quality rather than quantity of people and so we're very selective. We are slightly behind but we're more than making that up this quarter and as I said in my prepared remarks, we do expect to hire net 200 people this year. And we're happy with the people we're hiring but we will not sacrifice quality over quantity. Okay. Thank you all.

Slightly behind but we're more than making that up this quarter and as I said in my prepared remarks, we do expect to hire net 200 people this year.

And we're happy with the people, we're hiring but we will not sacrifice quality over quantity.

Okay. Thank you all.

We have your next question from Diavik Wood with Cowen. Your line is open. Great. Thanks. Amazing quarter, I guess. First one for Mike, I mean this kind of revenue outperformance is kind of above the parameters we've thought about certainly a barbell what we've seen in the past few quarters. What are the biggest outside drivers in month developments really led to this particular quarter, having such a strong upside?

Great. Thanks.

Amazing quarter, I guess first one for Mike I mean, this kind of revenue outperformance is kind of above the parameters. We've thought about certainly a barbell what we've seen in the past few quarters.

The biggest outside drivers in month developments really led to this particularly particular quarter, having such strong upside.

What I would say is it was really driven by some of our largest mature customers with some things that was unique to their business that kind of surprised us on the upside. I don't think you're going to see that same repeat of a beat. At least I'm not expecting that. I'm sure you guys with love it but I just don't see that happening in this quarter. As I said before, a 5% to 7% beat is a big beat for us with our model. It was an exceptional performance last quarter. I'm actually disappointed we outperform that much to be honest with you.

Surprised us on the upside.

I don't think youre going to see that same repeat of a beat at least I'm not expecting that I'm sure you guys with love it but I just don't see that happening in this quarter as I said before.

5% to 7% beat is a big beat for us with our model so.

It was an exceptional performance last quarter. I'm actually disappointed we outperform that much to be honest with you.

Okay. Well, it's a good problem. Yes. Well, that's good color, maybe Frank, you called out this media data cloud. And how you're helping advertisers and marketers harness more first-party data is what I've read in that release. And I guess given all the developments going around high DFA and cracking down on third party. And really the push to try to monetize first party. What kind of opportunity do you see and collecting and powering that first-party data in the media and entertainment and other BDC industries?

Well, it's a good problem.

Yes.

Well that's good color, maybe Frank you called out this media data cloud.

And how you're helping advertisers and marketers.

Harness more first party data is what ive read in that release and I guess given all.

All the developments going around high DFA and cracking down on third party.

The push to try to monetize first party, what kind of opportunity do you see and collecting and powering that first party data.

In the media and entertainment and other BDC industries.

It's really rippling through the entire economy right I mean, you really got a sort of viewed as in the context. The whole world going direct to consumer every industry is to even people that have historically not been direct to consumer are moving towards direct to consumer. Now that will obviously triggers enormous investments and people trying to get up to speed on data operations, data science, and being able to run real data-driven enterprise. In order to do that, we need to have very very very refined data enrichment strategies to really tune and optimize and make these relationships work. That's what's fueling this enormous focus on data sharing and being able, people being able to enrich their data with attributes that come from other sources. So the ability to own your own data as an institution, as an enterprise to fully operationalized mobilized is going to become incredibly important. I mean, even industries that historically have not been direct to consumer, think of retail and things of that short retail obviously, the brick and mortar type neural changing now under the influence of the likes of instant Garten door dash. So it's all changing so the interaction method becoming digital, it's a real tailwind for companies like Snowflake.

Really rippling through the entire economy right I mean, you really.

Got a sort of viewed as in the context of the whole world going direct to consumer every industry is to even people that have historically not been direct to consumer.

Are moving towards direct to consumer now that will obviously triggers enormous investments in people trying to get up to speed on <unk>.

The operation data science, and being able to run real data driven enterprise.

Enterprise.

In order to do that.

We need to have very very very refined data enrichment strategies too to really tune and optimize and make these relationships work and.

That's what's what's fueling this enormous.

Focus on data sharing and being able people being able to enrich their data with attributes that come from other sources. So the ability to own your own data as an institution as an enterprise to fully operationalized mobilized is going to become incredibly important I mean, even industries that historically have not been direct to consumer.

and things of that short retail obviously, the brick and mortar type neural changing now under the influence of the likes of instant Garten door dash. So it's all changing so the interaction method becoming digital, it's a real

tailwind for companies like Snowflake.

Yes, very exciting, okay. Thanks. We have your next question from Kash Rangan with Goldman Sachs. Your line is open. Alright. Thank you very much what a spectacular quarter. Curious to get your thoughts on the Fortune 500, count base that you haven't yet turned 23 customers. We also have at the same time about 148 customers that are doing over a million dollars in product revenue. What is the overlap here how much more of a potential do you have in the fortune 500 space? Because I'm surprised that you look at the overall revenue of the company divided by the number of customers.

We have your next question from Kash Rangan with Goldman Sachs. Your line is open.

Alright, Thank you very much what a spectacular quarter.

Curious to get your thoughts on the Fortune 500, count base that you Havent yet turned 23 customers. We also have at the same time about 148 customers that are doing over a million dollars in product revenue what is the overlap here how much more of a potential do you have in the fortune 500 space because I'm surprised that you look at the overall revenue of the company divided by the.

Number of customers.

It's a relatively smaller number of relative to where the company can gain in terms of market share versus broader enterprise software companies that generally could sell up to $1 million per account. It seems to me that the penetration wallet share is quite low which leaves a lot of opportunity. Can you just address that overlap between the main dollar customers in the Fortune 500 based on how much more potential there with large accounts? Thank you so much.

It seems to me that the penetration wallet share is quite low which leaves a lot of opportunity. Can you just address that overlap between the main dollar customers in the Fortune 500 based on how much more potential there with large accounts? Thank you so much.

The address that overlap between the main dollar customers in the Fortune 500 based on how much more potential there with large accounts. Thank you so much.

Yes. I agree with your statement. I mean we have footprint, but we're very marginally penetrated. Which is great. That's exactly what we are what we look for. We typically, when we started out with customers letters fortune 500 or otherwise, it's a whole process depth that spans over a long period of time, it's a journey, it's a relationship that you're gone. There are legacy workloads or new projects. It's something that grows and grows and grows and you'll very clearly see that in our net revenue retention rates. People are literally evolving and learning and expanding as they go along. They may not have a very clear view of what they will be doing when but literally learning and exploring.

I agree with your statement I mean, we are we have footprint, but we're very marginally penetrated which is.

Which is great.

Exactly what we are what we look for.

We typically.

When we started out with customers letters fortune 500 or otherwise.

It's Paul process depth that spans over a long period of time, it's a journey it's relationship that you're gone.

There are legacy workloads or new projects.

Something that grows and grows and grows and you'll be very clearly see that in our net revenue retention rates.

People are literally evolving and learning and expanding.

As they go along they may not have a very clear view of what they will be doing when but literally learning and exploring.

As they go along the other thing that I would say is that we shouldn't sort of view things in the historical way that all the money is going to come from Fortune 500 companies. That is absolutely not the case. I mean, you'll be stunned. If you look at the number of customers that we have who are not fortune 500, and how high the revenue contribution is and that's because these are newer enterprises. They are born in the cloud digital, direct to consumer-oriented than they have a very different culture towards data and a very different orientation. They'll definitely feature very very prominently in our business mix. It doesn't mean, a fortune 500 isn't important. Obviously as but their adoption is traditional enterprises is often not as fast as the newer entities that we're dealing with.

We shouldn't sort of view things in the historical way that all the money is going to come from Fortune 500 company that is absolutely not the case I mean, you'll be stunned.

If you look at the number of customers that we have who are not fortune 500, and how high the revenue contribution is and that's because these are newer enterprises. They are born in the cloud digital direct to consumer oriented than they have a very different culture towards data on a very different orientation.

They'll definitely feature very very prominently in our business mix. It doesn't mean, a fortune 500 isn't important. Obviously as but their adoption is traditional enterprises is often not as fast as the newer entities that we're dealing with.

Obviously as but their adoption is traditional enterprises is often not as fast as the newer entities that we're dealing with.

Thank you so much and one follow up for you Mike, quickly. As a result of the profitability inflection we're seeing in the business, does it make you more confident and maybe potentially think about raising the long term cash flow margin build that you outlined a few months back? Thank you so much. We will be updating our longer-term guidance at our Investor day. I clearly do think there is upside to both our operating margin and free cash flow margin. And we will update it at that time. Splendid, thank you so much. We have your next question from DJ Hynes with Canaccord Genuity. Your line is open. Hey. Thanks, guys. Congrats on the results, really really impressive.

A few months back thank you so much.

We will be updating our longer term guidance at our Investor day.

I clearly do think there is upside to both our operating margin and free cash flow margin and we will update it at that time.

Splendid thank you so much.

We have your next question from DJ Hynes with Canaccord Genuity. Your line is open.

Hey, Thanks, guys yeah.

And the results really really impressive.

Again like the stand out to me is the net revenue retention. Frank, I guess the question is as you think about driving growth in the base, where does the discovery of new use cases typically come from? Is it is it mostly customer-led? How much can sales influence that expansion process and I guess like longer-term do you think you have to build out a customer success layer over time? But would love to just get your thoughts as you think about how this evolves over time. First off, the entire company has a customer success layer, okay. That is not a department or a function in our world. There are some you know predictable ways in which things happened, but it depends on the type of enterprises that we deal with. Historically, we've worked on legacy workloads on-premise workloads and we have a very predictable pattern moving data to the cloud and migrating databases. That is a tried and true part of our business others and this is the reason why verticalization is such an important trend.

Frank I guess the question is as you think about driving growth in the base, where does the discovery of new use cases typically come from it is it is it mostly customer led.

How much can sales influence that expansion process and I guess like longer term do you think you have to build out our customer success layer over time, but would love to just get your thoughts as you think about how this evolves over time.

First off you entered.

Every company has a customer success later okay.

That department or were a function.

In our world.

There are some you know predictable ways in which things happened, but it depends on the type of enterprises that we deal with historically, we've worked on legacy workloads on premise workloads and we have a very predictable pattern moving data to the cloud.

Growing databases.

That is a tried and true part.

Our business others and this is the reason why vertical position is such an important trend.

That has very little to do with legacy workloads. That has everything to do with was preparing companies for their digital direct to consumer futures. What they are trying to really mobilized data, monetize data and make data really the core of what they're doing. And that is not just, those are not just in enterprises that typically don't go but even in enterprises like in retail the traditionally brick and mortar. They become very very focused on the data on the data that they have the value that it has and how they monetize that. So these are very very big things that are having. Everybody's realizing they're sitting on something extraordinarily low eligible if they can and Richard and mobilize it. The right way. So demand come from many different places. The sales organizations are over the last year are being redirected to really understand the customers' context, whether their challenges, what are people doing what are people not doing how are they approaching it. So that we can bring that value to our customers. So it's no longer here is our architecture versus the next guy, let's benchmark Poct's workloads see how they do. That was historically, what Snowflake did. Now we're completely leaned into the customers' context, what are their issues, their challenges and we are becoming expert at their business and that is a big evolution is very exciting. Because it also elevates us inside the enterprise you know, we're no longer talking exclusively to IT types and CIOs and so on but we're not talking to the business side of IT. Very different conversation.

Not just in those are not just in enterprises that typically don't go but even in enterprises like in retail the traditionally brick and mortar to become very very focused on the data on the data that they have the value that it has and how they monetize that so these are these are very very big things that are having everybody's realizing they're sitting on something extraordinarily low.

Eligible if they if they can and Richard and mobilize it.

The right way.

So demand come from many different places.

The sales organizations are.

Over the last year are being redirected to really understand the customers context, whether their challenges what are people doing what are people not doing how are they approaching it so that we can bring that value to our customers. So it's no longer.

He is our architecture versus the next Guy NOLA benchmark Poct's workloads see how they do that that was historically, what's most like that now we're completely leaned into the customers' context, what are there issues challenges and we are becoming expert at their business and that is a big evolution is very exciting.

Because it also elevates us inside the enterprise you know, we're no longer talking exclusively to IT types and CIOs and so on but we're not talking to the business side of IT. Very different conversation.

Very different conversation.

Yes. Makes sense, that's helpful color. And then Mike as a follow up so you made some comments with respect to how you're thinking about Q4 consumption patterns. And it made me think about the complexities in forecasting our business like that. So I guess the question really is like. Do you find that it's getting easier or harder to model the business as it scales? I mean I feel like on the one hand, you probably benefit from customer diversity and additional data points around usage patterns, but on the other, you are constantly trying to figure out kind of the patterns of new customers. So clearly some puts and takes there would just love to get your thoughts.

Makes sense that's helpful color and then Mike as a follow up so you made some comments with respect to how youre thinking about Q4 consumption patterns and it made me think about the complexities in forecasting our business like that so I guess the question really is like.

Do you find that it's getting easier or harder to model the business as it scales I mean, I feel like on the one hand, you probably benefit from.

Customer diversity.

Additional data points around usage patterns, but on the other you are constantly trying to figure out kind of the <unk>.

Patterns of new customers. So clearly some puts and takes there would just love to get your thoughts.

I think it's getting better and I've been very happy. And I think the Q3 performance relative to our internal forecast is specific to some very large customers. Other than that, we've been pretty accurate with what we gave the field at the beginning of the year consumption by customer forecasts. So I'm pretty pleased with that and it does get easier as we have a larger and larger customer base. And the beautiful thing is we use Snowflake to open our modeling. Proof is in the pudding. Thank you, guys.

Our forecast, so I'm pretty pleased with that and it does get easier as we have a larger and larger customer base. So.

And the beautiful thing is we use snowflake to open our modeling.

Yes.

Proof of the pudding. Thank you guys.

We have your next question from Mark Murphy with JPMorgan. Your line is open. Thank you very much and I'll add my congrats on a trailing quarter. Frank, I recall that when the pandemic hit about a year and a half ago, you actually saw pretty healthy consumption trends because companies had to analyze data just to try to respond to the environment. I'm wondering Mike, you referenced some activity specific to larger customers. Are there any similar developments that are driving extra consumption today or in Q3 for instance? Maybe frozen global supply chains. Or are driving activity for retailers there may be maybe this new variant in pharma or inflation and interest rate volatility kind of driving some activity in financial services.

Thank you very much and I'll add my congrats on a on a trailing quarter.

Frank.

Recall that when the pandemic hit about a year and a half ago, you actually saw pretty healthy consumption trends because.

Companies had to analyze data just to try to respond to the environment.

Wondering Mike you referenced some activity specific to larger customers are there any similar developments that are driving extra consumption today or in Q3 for instance, maybe.

May be frozen global supply chains.

Or are driving activity for retailers there may be maybe this new variant in pharma or.

Inflation and interest rate volatility kind of driving some activity in financial services.

When I look at the outperformance across our company. The outperformance is really being driven by a number of large customers, whose businesses are growing dramatically plus a couple of our fortune 500 customers that are doing some specific things. It's really what's driving it. So I can't say it has anything to do with the pandemic supply chain. Looking at things based upon the customers that I see that have really large outperformance. That doesn't mean there's not any of that in our customer base, but I just don't see that as the biggest drivers of our performance.

It's really what's driving it so I can't say it has anything to do with the pandemic supply chain.

Looking at things based upon the customers that I see that have really large outperformance that doesn't mean, there's not any of that in our customer base, but I just don't see that as the biggest drivers MRO performance.

Yeah. Okay, and then Mike, as a quick follow up. When we look at the sequential change in RVO. It's quite a bit larger in Q3 than in Q2. And I was wondering if you could shed any light on that. To what extent is it driven by duration versus the bookings health, which I think you very clearly mentioned. Well, if you recall at the end of last quarter, a lot of people picked on our RPO and I said don't worry it's timing in Q3 was going to have a big quarter for RPO, which we pretty much hit our target internally. As to where we thought it would be. There is timing on as an example, our first $100 million deal we did in 2020, clearly that customer is not renewing every year because it's an RPO. We will do some big deals this quarter too. I expect Q4 is going to be a big addition, but at the end of the day, it's not RPO and isolation, its revenue and its more current RPO that is more meaningful. That 55%, we estimate will be recognized over the next 12 months. Got it, thank you.

It's quite a bit larger in Q3 than in Q2, and I was wondering if you could shed any light on that.

To what extent is it driven by duration versus the bookings health, which I think you very clearly mentioned.

Well if you recall at the end of last quarter, a lot of people picked on our RP O and I said don't worry it's timing in Q3 was going to have a big quarter for <unk>, which we pretty much hit our target internally.

As to where we thought it would be.

There is timing on as an example, our first $100 million deal. We did in 2020, clearly that customer is not renewing every year because it's in our Po.

We will do some big deals this quarter too. I expect Q4 is going to be a big addition, but at the end of the day, it's not RPO and isolation, its revenue and its more current RPO that is more meaningful. That 55%, we estimate will be recognized over the next 12 months. Got it, thank you.

Our <unk> isolation, its revenue and its more current RP O that is more meaningful.

And is that correct.

That 55%, we estimate will be recognized over the next 12 months.

Got it thank you.

We have your next question from Gregg Moskowitz with Mizuho. Your line is open. Alright, Thank you and congrats on a terrific quarter. So we've been hearing more customer anecdotes to the tune of, as these companies are growing, they're becoming less confident that other solutions they may be using for data warehousing et cetera can handle their future data volumes and performance needs. And that in turn is driving more business to the Snowflake platform. Is that consistent with what you're seeing? Yes, generally, we say yes.

Alright, Thank you and congrats on a terrific quarter. So we've been hearing more customer anecdotes to the tune of as these companies are growing they're becoming less confident that other solutions. They may be using for data warehousing et cetera can can handle their future data volumes and performance needs and that in turn is driving more business to the snowflake platform is that consistent.

Bank with what with what Youre, saying.

Yes, generally say, we say yes.

Alright. That's short and sweet. And then just as a follow-up. So I wanted to ask about international because the revenue growth that you reported this quarter was pretty stunning. Clearly, that was a primary driver of the product revenue acceleration you showed this quarter. So the question here is are you seeing signs of an inflection in consumption overseas or was this more driven by consumption from a few of those larger customers that surprised you this quarter?

Driven by consumption from a few of those larger customers that surprised you this quarter.

What I would say first of all is we saw real outperformance relative to plan in bookings in Asia and EMEA. We also had a very very strong North America, but of a much higher plan. Yes, in our top 10, we have one European customer that is our largest and is growing very very fast. But still, the majority of our growth in revenue is coming from our North American customers, but we do see next year and beyond EMEA in particular in Asia starting to drive some of that as well too. That's helpful. Thank you.

What I would say first of all is we saw real outperformance relative to plan in bookings in Asia and EMEA. We also had a very very strong North America, but off a much higher plan.

Yes in our top 10, we have one European customer that is our largest and is growing very very fast, but still the majority of our growth in revenue is coming from our north American customers, but we do see next year and beyond.

EMEA in particular in Asia, starting to drive some of that as well too.

That's helpful. Thank you.

We have your next question from Brad Zelnick with Deutsche Bank. Your line is open. Great. Thanks, so much, guys and just phenomenal quarter unbelievable results, even though I know, Mike you're disappointed in how good they are. Maybe a question for you, Mike. I think you called out if I got it right a half a billion booked in partnership with CSP partners. I just wanted to ask. How has, obviously, good but how is the evolution of the go-to-market been with those partners? And specifically, customers when they consume pre-purchased cloud credits by way of the CSPs. Does that ever hit your RPO and is that a factor we should be thinking about?

Great. Thanks, so much guys and just phenomenal quarter unbelievable results, even though I know, Mike you're disappointed in how good they are.

Maybe a question for you Mike I think you called out if I got it right a half a billion booked in partnership with CSP partners I just wanted to ask.

<unk> has obviously good but how is the evolution of the go to market been with those partners and specifically.

Customers when they consume pre purchased cloud credits by way of the Csp's does that ever hit your RP O and is that a factor we should be thinking about.

So first of all, I think it is going well with some of the CSPs. And of that and as I said it was over half a billion to date that we co sold with them. I would say AWS is the majority of that followed by Microsoft. Google is pretty much zero in that cross-sell. But we still are adding more and more our number of customers and GCB continues to increase. And sorry, Brad, what was the other part of your question? If customers consumed pre-purchase cloud credits. Yeah. So some customers choose to go through marketplace. Others choose to go direct. They generally choose to go to marketplace. So they can draw down their commitment with the cloud provider. That would still show up in RPO because we still get the contract from the customer we just do the invoicing and everything through marketplace for them.

I would say AWS is the majority of that followed by Microsoft.

<unk> is pretty much zero and that cross sell but we still are adding more and more our number of customers in GCB continues to increase.

And sorry, Brad what was the other part of your question.

If customers consumed pre purchase cloud credits.

Credits, so we have.

Yeah. So.

Some customers choose to go through marketplace.

Others choose to go direct they generally choose to go to marketplace. So they can draw down their commit with the cloud provider that would still show up in our Apio, because we still get the contract from the customer we just do the invoicing and everything through marketplace for them.

Got it, that's helpful. And maybe just a quick follow up perhaps for Christian. I just look back historically and price-performance has always been a key purchasing criterion in the database market. And I feel like Snowflake has done a phenomenal job elevating the discussion to a much higher plane, but I noticed of late there've been some competitive claims regarding performance. And I'm just curious if A, how much of a priority or criteria is this across your typical sales cycle? And B, what if anything should we know about TPC benchmarks and Snowflake's competitiveness from a performance perspective?

I just look back historically and price performance has always been a key purchasing criteria in the database market and I feel like Snowflake has done a phenomenal job elevating the discussion to a much higher plane, but I noticed of late there've been some competitive claims regarding performance and I'm just curious if a how much of a priority or.

Criteria is this across your typical sales cycle and B, what if anything should we know about TPC benchmarks and snowflakes competitiveness from a performance perspective.

Yes. Hi, Brad. Christian here. I think that at all points in time and Snowflake, we're investing in performance. Every part of the system is getting faster and lower latency, but we're always looking at is that the price performance of customer workloads. Many of us at Snowflake have been in the industry long enough to know that the TBC benchmarks ended up being a game with synthetic evaluations that very quickly get the awards from customer benefits. And at Snowflake, we are 100% focused on price performance for our customers, but it's not just price performance, it is everything else. It's the collaboration and the data sharing that was mentioned as well as the data governance. That's how we think about the broader data cloud.

I think that at all points in time and Snowflake, we're investing in performance.

Every part of the system is getting faster and lower latency, but we're always looking at is that the price performance of customer workloads.

Many of US at Snow Lake have been in the industry long enough to know that the TBC benchmarks ended up being.

Our game with synthetic evaluations that very quickly get the awards from customer benefits and it sounds like we are.

100% focus on price performance for for our customers, but it's not just price performance is everything else is.

The collaboration and the data sharing that was mentioned as well as the data governance, that's how we think about the broader data cloud.

Excellent. Thanks so much, guys and congrats. We have your next question from Kamil Mielczarek with William Blair. Your line is open. Hi, everyone. Congrats on another incredible quarter and thanks for taking my question. So I have a follow up on some of the comments you made on the Fortune 500 customers. So now close to half of them, well you have close to half of the Fortune 500 customers today, but only about 15% of them are generating $1 million or more revenue. So is it a fair expectation that most of them can reach and exceed that $1 million level in the next few years? And secondly, you said that it takes about nine months from your customers to reach that contractually targeted revenue. For your $1 million customers, how long does it take on average for them to move from contract signing to that $1 million? And given your landing larger customers now, do you expect that duration to come down over time?

We have your next question from Neil <unk> with William Blair. Your line is open.

Hi, everyone. Congrats on another incredible quarter and thanks for taking my question. So I have a follow up on some of the comments you made on the fortune 500 customers. So now close to half of them well you have close to half of the fortune 500 customers today, but only about 15% of them are generating $1 million or more.

Revenue. So is it fair is it a fair expectation that most of them can reach and exceed that $1 million level in the next few years and secondly, you said that it takes about nine months from your customers to reach that contractually targeted revenue for $1 million customers. How long does it take on average for them to move from contract signing to that.

$1 million and given your landing larger customers now or do you expect that duration to come down overtime.

Well, it depends on the customer. Most customers don't sign a million-dollar capacity one deal. They typically will sign, I think if you look at it our average deal size is somewhere around $50,000 initially signing a customer. And so clearly it takes some time. Yes, we signed some large customers and cap ones, but on average it's not. We think on average when we laid out our model at our analyst day last year that we think we can get to our customers paying us over $1 million a year on average that will be $5.5 million. Right now that 148 customers on average is $3.5. Clearly, the fact that we have 223 Fortune 500, those are only on average right now doing $1.250 million. There's a lot of upside in those numbers because it takes time to ramp these guys. And those have been added in the last couple of years and it will take time.

I think if you look at it our average deal size is somewhere around $50000 initially signing a customer.

And so clearly it takes some time, yes, we signed some large customers and cap ones, but on average it's not.

We think on average when we laid out our model.

At our analyst day last year that we think we can get to our customers paying us over $1 million a year on average that will be $5 5 million right now that 48 customers on average is three five clearly the fact that we have 223 fortune.

500, those are only on average right now doing 1 million $2 50, Theres a lot of upside in those numbers because it takes time to ramp these guys and those have been added in the last.

Couple of years and it will take time.

That's great color. Thank you. And just as a quick follow up. It's nice to see the positive operating income. You've talked in the past about Snowflake being in growth mode. So given now you're broken even, can you update us on how you're thinking about balancing margin expansion versus reinvesting in the business and specifically your headcount growth is roughly in line with last year. Can we see that accelerate if your margins start to expand faster than expected? So we laid out our long term model at our analyst day last year. We will update that again in June. But I will reiterate again, we are a growth company, but it's not growth at all cost. We will only spend money if we think it makes sense. And as I said before, we are hiring what we think is the right pace to get quality people in the door. Great. Thanks again.

A quick follow up it's nice to see the positive operating income.

You've talked in the past about snowflake being in growth mode. So.

Given now your broken even can you update us on how youre thinking about balancing margin expansion versus reinvesting in the business and specifically your head count growth is roughly in line with last year.

Can we see that accelerate if your margins start to expand faster than expected.

So we laid out our long term model at our analyst day last year, we will update that again in June but I will reiterate again, we are a growth company, but it's not growth at all cost we will only spend money. If we think it makes sense.

And as I said before we are hiring what we think is the right pace to get quality people in the door.

Great. Thanks again.

We have your next question from Brent Bracelin with Piper Sandler. Your line is open. Good afternoon. I guess I'm going to stick with the threat of accelerating product growth. Where do we see companies at this scale delivering accelerating growth? I know you called out large customers called out a couple of special projects within the Fortune 500. But as you just think about the composition of consumption in the quarter and the acceleration outside of those things, do you think the business could have accelerated even at and maintained triple-digit growth even without those anomalies this quarter? Just trying to double click around the acceleration you saw on the product side.

Good afternoon, I guess I'm going to stick with the threat of accelerating product growth, where do we see companies at this scale.

Delivering accelerating growth I know you called out large customers called out a couple of special.

Projects within the Fortune 500, but as you just think about the composition of consumption in the quarter and the acceleration outside of those things do you think that business critical accelerated.

Even app and maintained triple digit growth, even without those anomalies. This quarter, just trying to double click around the acceleration you saw on the product side.

Well, our overachievement is partially driven by these large customers. We did see generally across the board in most of our customers have been exceeding their targets. Yes. There are some that are down. That happen every quarter, but there is a lot more of that were above their forecast. So it's hard to say, but yes, I do think we still would've. If I pulled out a couple of those big customers with their growth, we still would've been over 100% growth.

Yeah.

It's hard to say, but yes, I do think we still would've if I pulled out a couple of those big customers with their growth, we still would've been over 100% growth.

Perfect. Very clear. And then just you mentioned product add-ons as one of the contributing factors to improving product gross margins this quarter. Could you maybe give a little color on what one or two of the more popular product add ons that are [inaudible]? No. It was. We really don't have. We have one product, Brent. I said product addition, so we have if you recall, we have standard enterprise business-critical and yes, we have virtual private Snowflake too, but not as many customers use that because they're comfortable from a security growing with business-critical. And it's more of our larger customers using enterprise are business-critical that drive margin. And those additions have more features associated with them. Got it, very clear. Thank you.

Richard.

We really don't have we have one product Brent I said product addition, so we have if you recall, we have standard enterprise business critical and yes, we have virtual private snowflake too, but not as many customers use that because they're comfortable from a security growing with business critical and it's more of our larger customers using <unk>.

Enterprise are business critical that drive margin and those additions have more features associated with them.

Got it very clear thank you.

We have your next question from Tyler Radke with Citi. Your line is open. Yeah, hi, Thanks for taking my question. Just wanted to go back to the outperformance that you saw these two customers. Just wanted to clarify was it something that was kind of one-time in nature? Was this just projects that happened a lot faster and so kind of a new run rate as faster and you're just not expecting that type of dynamic to play out going forward? One of the customers I know does a big project every year at that time of the year and it seemed to have consumed more. The others, I just don't expect them to grow. They're still going to grow their consumption, but I don't think they're going to grow their consumption at the same rate. And a lot of that is because we are seeing and we did see over the Thanksgiving holiday more people take vacation and at our customers, which does have an impact on their business and how they use Snowflake. And we do expect over Christmas and New Year's, there's going to be more people as well taking more vacation. And we do recognize revenue on a daily basis. And we do see dips in our customer consumption on those days. This is the highest holiday quarter of any quarter.

Yeah, Hi, Thanks for taking my question just wanted to go back to the outperformance that you saw this.

Those two customers just wanted to clarify was it something that was kind of onetime in nature or was this just projects that it happened a lot faster and so kind of a new run rate as faster and you're just not expecting that type of dynamic to play out going forward.

One of the customers I know does a big project every year at that time of the year and it seemed to have consume more.

Others, I, just don't expect them to grow there's still going to grow their consumption, but I don't think theyre going to grow their consumption at the same rate and a lot of that is because we are seeing and we did see over the Thanksgiving holiday more people take vacation and at our customers, which does have an impact on there.

And we do expect over Christmas and New Year's, there's going to be more people as well taking more vacation. And we

do recognize revenue on a daily basis. And we do see dips in our customer consumption on those days. This is the highest holiday quarter of any quarter.

Holiday quarter of any quarter.

Yeah, helpful. And maybe this one's for Frank. I mean clearly, the results are really strong, nothing to really pick at. I think when you talked about some of the verticals you called out media, tech, retail that were particularly strong. If you think about maybe the verticals that were less strong, like what's the biggest thing holding folks back? Is it budget? Is it just kind of internal process change? You know the hiring environment? Just give us a sense on the customer constraints in verticals that are maybe not as strong.

The results are really strong that nothing to really pick out I think when you talked about some of the verticals you called out media Tech retail that were particularly strong if you think about maybe the verticals.

There were less strong like what's the biggest thing holding.

Looks back is it budget is it just kind of internal process change hiring.

Tiring environment, just give us a sense on that.

The customer constraints.

In verticals that are maybe not as strong.

Well I mean, there are verticals like for example, I mean, we've talked about this on previous calls the contribution we're getting from public sector is not, you know, where we think it will eventually be under some real structural reasons. You know, why that is so and we're solving for those issues. And that business will come along but there is a lot of friction I mean, we're dealing with infrastructure that has existed for a very long period of time. It is completely grafted into operational processes, you don't just unplug that stuff and plug something new and then you're off to the races. These are generational shifts and transitions that enterprises are taking. So it's not like throwing the switch. So these are very very carefully orchestrated transitions over a long period of time. It takes a lot of resources. It takes a lot of people.

You know, where we think it will.

Actually be under some real structural reasons why that is so we're solving for.

Those issues.

And that business will come along but.

There is a lot of friction I mean, we're dealing with infrastructure does exist for <unk>.

We're a long period of time is completely grafted into operational processes, you don't just unplug that stuff in flux, something new and then you're off to the races right.

These are these are generational shifts and transitions that enterprises are taking.

So.

It's not like throwing the switch to these are very very carefully orchestrated.

Transitions over a long period of time it takes a lot of resources takes a lot of people.

And then once they sort of get to the other side. Yes, then you see the acceleration happening. We see that over and over again that once they are re-platformed, then all of a sudden because of the nature of the Snowflake platform itself, sky's the limit because they're just the platform is so accommodating of so many different workloads and it just works. So then the friction is, we've gone from a lot of friction to almost no friction, which sometimes to our customer should rim because things are running. We're running away from that maybe a little bit too quickly and we help them with that but that's really what's Snowflake does. Once you get on the platform, the friction is very very low to spinning up new workloads, and new projects and new programs. And that's what you see as benefiting from.

All of a sudden because of the nature of the snowflake platform itself.

Sky's the limit because they're just the platform is so accommodating of so many different workloads and it just works.

So then the friction is we've gone from a lot of friction to almost no friction, which sometimes too.

Customer chagrin, because things are running.

We're running away from that maybe a little bit too quickly and we help them with that but that's really what's snowflake does once you get on the platform.

The friction is very very low to spinning up new workloads, and new projects and new programs.

What you see is benefiting from.

Thank you. We have your next question from Keith Weiss with Morgan Stanley. Your line is open. Excellent. Thank you, guys, for taking the question. I think this one is for Mike, but when I'm looking at your guys' results. I mean, you guys have been doing really well for an extended period of time. And this quarter was pretty remarkable. But it seems like in the last two quarters, you've seen, if anything, like an upward inflection in terms of the dollar-based net expansion rate improving. And Mike, your willingness to kind of bring up the sort of out-quarter guide and sort of like it's more of a beat and big raise cadence now than it was in the initial quarters out of the gate. Is there something that changed two quarters ago that does it give you guys more visibility or more confidence in the business? Or that inflected in the business that explains what we're kind of seeing in the numbers here?

We have your next question from Keith Weiss with Morgan Stanley. Your line is open.

Excellent. Thank you guys for taking the question.

Just wanted to ask for.

Mike, but when I'm looking at your guys results. I mean, you guys have been doing really well for an extended period of time and this quarter was pretty remarkable briefly something like in the last two quarters <unk> seen if anything like an upward inflection in terms of the dollar based net expansion rate improving and Mike your willingness to kind of bring up the E.

Sort of our quarter guide and sort of like it's more of a beat and big raise cadence now than it was in the initial quarters out of the gate is there something that changed two quarters ago that does it give you guys more visibility or more confidence in the business or that inflected in the business that that explains what we're kind of seeing in the numbers here.

It's a couple of things. One, we talked about that when Frank came onboard pre going public, we really shifted to going after some of the largest companies in the world. Not that we weren't going after them before but I would say, we more aggressively the way we lined up our sales force. And it takes a number of years to ramp those customers and we're seeing a lot of these companies starting to mature right now to a lot of the things we've been doing with new product features like Snowpark and the Powered By, we're seeing the benefits of that taking place. And not to mention the network effect with data sharing and other things that we're starting to see them in the stable edges. It's starting to come to fruition. Verticalization. Sorry? Verticalizion. Verticalization is the other one, too.

One we talked about that when Frank came onboard pre going public we really shifted to going after some of the largest <unk> companies in the world not that we weren't going after them before but I would say, we more aggressively the way we lined up our sales force.

And it takes a number of years to ramp those customers and we're seeing a lot of these companies starting to mature right now to a lot of the things we've been doing with new product features like Snow Park and the powered by we're seeing the benefits of that taking place and not to mention the <unk>.

At work effect with data sharing and other things that we're starting with that you see that in the stable edges, it's starting to come to fruition musician.

Vertical wise I circle Verticalizing <unk> is the other one too.

That whole media cloud, that is a huge thing for us, not to mention financial services cloud. I think we're getting much better, our salespeople at selling the business value into those verticals. Got it. And then maybe one follow up. If there are investor concerns around Snowflake, and there's not too many investor concerns, but it's within consumption models. The [bills] could build up pretty quickly. And you guys see that in terms of your customers get pretty, some of your customers get pretty big pretty fast. But we have seen in examples of where customers get sticker shocked over time, and it becomes kind of bad marketing and difficult for companies to deal with. How do you guys avoid that? How do you sort of ensure that your customers are seeing value from the solution, but don't get that sticker shock that the consumption model could bring up hey, listen we're using more of this than what we had expected?

Got it and then maybe one follow up.

If there are investor concerns around snowflake, and there's not too many investor concerns, but its within consumption models. The deals could build up pretty quickly and you guys see that in terms of your customers get get pretty.

Some of your customers you get pretty big pretty fast, but we have seen an example of where customers get sticker shock over time, and it becomes kind of bad marketing and <unk>.

Difficult for companies to deal with how do you guys avoid how do you sort of ensure that your customers.

Are seeing value from them.

The solution, but don't get that sticker shock that the consumption model could bring up hey, listen we're using more of it than what we had expected.

This is Frank. One of the great things about running a consumption model is that we charge back who is spending the compute, you know which business units hold. Business units can decide whether they want to run those workloads, how often they want to run it, how they want to provision. So they're really in charge. It's not sort of a runaway utility model. People can selectively decide which workloads they want to run and what is the business case for it. And that's the way it's supposed to work. That really mitigates the sticker shock because people can make investment positions as they go along and as it warrants it. We've seen with some of our large banking customers. They went from recomputing loan rates on a monthly basis to doing it every night, while they had a business case for those it. Does it cost money? Yes, it costs money. So in other words, what's really happening is in the beginning people have sticker shock, yes, because their build goes from x to 2x to 10x or whatever it is. That we're really resetting what is normal and what is appropriate spent for this class of computing. It is very different than what it historically has been. Because of A, what we are now capable of, but B, also the necessity. Given the comments that we made earlier about the trend of direct to consumer will full-on digital transformation you can choose to sit on your heels and wait it out but I wouldn't recommend that.

Who is spending the compute.

Each business unit, so business units can decide whether they want to run those workloads, how often day one around how they want to provision. So there really in charge, it's not sort of a runaway utility model people can selectively decide.

Which workloads they want to run and what is the business case for it and that's the way it's supposed to work.

Really mitigates the sticker shock rigs people can make investment positions.

They go along and as it warrants it.

We've seen with some of our large banking customers.

As I went from re computing loan rates on a monthly basis to doing it every night, while they had a business case for those it costs money, yes, it costs money.

So in other words we.

Really happening in the beginning people have sticker shock, yes, because goodwill goes from <unk> to <unk>.

10 extra whatever it is that we're really resetting what is normal and what is appropriate.

And for this class of computing it is very different than what it historically has been at Joseph a.

We are now capable of he also the necessity given the comments that we made earlier about directed the trend of direct to consumer will full on digital transformation you can choose to sit on your heels and wait it out but I wouldn't recommend that yes.

I'll also add too, is we really stress with customers to take training on how to best practices around how to use Snowflake, how to optimize your queries and we go into our largest customers. And I will tell you, last quarter, one of our Top 10 customers, we saw a big decrease in their consumption more than what we were forecasting. Why? Because our RSA went in there and helped to optimize that customer. But you know what? When we do that, that customer then moves more workloads and we're seeing this quarter already they are tracking ahead of our forecast because they are using it in a more optimized way and the customer sees the value they're getting out of Snowflake. Let me add a quick comment also on the topic of performance. We are very intentional about it each time that we make the system faster. We're improving also the economics of Snowflake. And we hear very consistently from our customers that those are very welcome surprises, where the economics of the platform getting better without them having to do any upgrades or changes to their platform. Got it. That's super helpful, guys. Congratulations on an awesome quarter. Thanks.

Take training on how to best practices around how to use still Craig how to optimize your queries and we go into our largest customers and I will tell you last quarter one of our top 10 customers. We saw a big decrease in their consumption more than what we were forecasting why because our RSA as went in there and helped to optimize that customer, but you wanted to what when.

We do that that customer then moves more workloads and we're seeing this quarter already they are tracking ahead of our forecast because they are using it in a more optimized way and the customer sees the value they're getting out of snowflake.

Let me add a quick comment also on the topic of performance. We are very intentional about it each time that we make the system faster. We're improving also the economics of Snowflake. And we hear very consistently from our customers that those are very welcome surprises, where the economics of the platform getting better without them having to do any upgrades or changes to their platform.

Any upgrades or changes to their platform.

Got it. That's super helpful, guys. Congratulations on an awesome quarter. Thanks.

Thanks.

We have your next question from Gray Powell with BTIG. Your line is open. Hi. This is Janet Zhang on for Gray Powell. Congrats on the quarter and thanks for taking my question. So I was wondering what do you think is the best forward-looking predictor of revenue? I know last quarter there was a focus on RPO, which can move around. So how much weight do you think we should put on things like RPO or customer adds versus just the pace of net new product revenue in a given quarter? I would say the first thing is that the guidance we give. The second thing is historical revenue. Growth patterns, coupled with the current portion of RPO to build your models. Got it. That makes sense. Thank you so much.

Hi, This is Janet Zhang on for Greg Powell, Congrats on the quarter and thanks for taking my question. So I was wondering what do you think is the best.

Lucky and predictor of revenue I know last quarter.

With a focus on IPR, which can move around so how much weight do you think we should put on things like RPM or customer.

Hey, so net new product.

<unk>.

I would say the first thing is that the guidance we give. The second thing is historical revenue. Growth patterns, coupled with the current portion of RPO to build your models. Got it. That makes sense. Thank you so much.

Growth patterns, coupled with the current portion of our Apio to build your models.

Yeah.

Got it that makes sense. Thank you so much.

We have your next question from Karl Keirstead with UBS. Your line is open. Great. Maybe I'll direct this one to Christian. The data science ML workload opportunity seems to be huge and I think everybody on this call took notice of your data science-related announcements at your recent Snowday. I just wanted to ask you how ambitious Snowflake is about going after those workloads and how willing are you to go up against the likes of data bricks, data robot, data IQ and others or do you view them more as partners? Thank you.

The data science ml workload opportunity seems to be huge and I think everybody on this call.

It took notice of your data science related announcements at your recent Snow day I just wanted to ask you how ambitious snowflake is about going after those workloads and how willing are you to go up against the likes of data bricks data robot data IQ and others or do you view them more as.

Partners. Thank you.

Yes. Hi, Karl. The way we think about it is we want to help our customers bring the computation to do data science and machine learning onto Snowflake so that they don't have the copy of the data out and miss out on the benefits of data governance et cetera. As such the big investments we've done have been all around extensibility. That's why you see Snowpark. That's where you see Python. And we're partnering with all of the companies that you mentioned for them to drive consumption and compete on Snowflake. So what we want is to have those solutions come and run natively on Snowflake. Okay. Got it, good luck chasing that opportunity. It seems material. It's very large, yes.

The way, we think about it is we want to help our customers.

The computation to do data science and machine learning onto Snowflake, so that they don't have the copy of the data out and Miss out on the benefits of data governance et cetera.

As such the Big investments, we've done have been all around extensibility. That's why you see snow part of us for easy Python and we're partnering with all of the companies that you mentioned for them to drive consumption and compete on snowflake. So what we wanted to have those solutions come and run natively on the company.

Okay got it good luck, Jason that opportunity it seems material.

It's very large yes.

We have your last question from Brent Thill with Jefferies. Your line is open. Frank look forward to the book. When you think about unstructured data I know you made an announcement to push harder here. Can you talk to us about what you're seeing from customers the interest level and are you starting to see customers go on production? Or is that a '22 event? Thanks. Thanks for the plug on the book there, Brent. I'm going to ask Christian to address this question. Yes. So unstructured data went into public preview at our Snowday. We are seeing quite a bit of adoption. We're seeing images, documents, even speech recordings getting stored into Snowflake. And we're seeing our customers start to leverage Snowpart to do programming in Java to get value out of those files. So it's looking pretty good from the early adoption. The few weeks that is it has been in public preview.

Frank look forward to the book when you think about unstructured data I know you made an announcement to push harder here can you talk to us about.

What youre seeing from customers the interest level and are you starting to see customers go on production or is that a 'twenty two of that thanks.

Thanks for the plug on the book there rent I'm going to ask Christian to address this question yes.

So on structured data went into followed preview at our snow date, we are seeing quite a bit of adoption. We're seeing images documents, even speech recordings getting any starting to snowflake and were seeing our customers start to leverage snow part to do programming in Java to get value out of those files.

So it's looking pretty good from from the early adoption. The few weeks that is it has been in public review.

And, Mike, you mentioned media in financial services as it relates to verticals. If you had kind of the next two verticals on ready reserved, ready to take off, what would you say those are sitting on the tarmac ready to roll into '22 if you had up in commerce? I think health care is going to be a big one. I think in the longer term, I do think public sector will be a big vertical we're working on. And retail is a very very big vertical force that will take off. Listen, we're doing well across the board. We're just really highlighting we're doing exceptionally well in media and financial services. Got it, thank you.

In financial services as it relates to verticals. If you had kind of the next two verticals on ready reserved ready, it's ready to take off what would you say those are sidney on the tarmac ready to roll.

Into 'twenty two if you had up in commerce.

I think health care is going to be a big one.

I think longer term I do think public sector will be a big vertical we're working on.

And retail is a very very big vertical for us that will take a listen we're doing well across the board. We're just really highlighting we're doing exceptionally well in media and financial services.

Got it thank you.

Thanks, everyone. There are no further questions at this time. Presenters, please continue. Thanks, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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Yes.

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Great.

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