Q2 2024 Snowflake Inc Earnings Call
Good afternoon, and thank you for joining the Snowflake Q2 fiscal year 2024 earnings Conference call. My name is Kate and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to pass the call over to your host Jimmie.
<unk> head of Investor Relations at Snap Lake you May proceed.
Good afternoon, and thank you for joining us on Snowflakes Q2 fiscal 2024 earnings call with me and Buzz in Montana are Frank <unk>, Our chairman and Chief Executive Officer, Mike Scarpelli, Our Chief Financial Officer, and Christian Klein, Our senior Vice President of product, who will join us for the Q&A session.
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Yeah.
Good afternoon, again, and thank you for joining us on Netflix Q2 fiscal 2024 earnings call with me in both <unk> and <unk> are Frank <unk>, Our chairman and Chief Executive Officer, Mike Scarpelli, Our Chief Financial Officer, and Christian <unk>, Our senior Vice President of product, who will join us for the Q&A session. During today's call. We will review our financial results for the second quarter fiscal 2024, and discuss our guidance for the third quarter and full.
Year fiscal 2024 it 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 our stock repurchase program and overall future prospects. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results information concerning these risks is available.
Our earnings press release distributed after market closed today and in our SEC filings, including our most recently filed Form 10-Q for the fiscal quarter ended April 32023, and the Form 10-Q for the quarter ended July 31, 2023 that we will file with the SEC. We cause 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 would also like to point out that on today's call. We report both GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operational decision, making purposes net 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 a reconciliation of these.
non-GAAP financial measures. Please refer to our earnings press release distributed earlier today, and our Investor presentation, which are 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.
Thanks, Jeremy glaucoma and good afternoon, Q2 product revenue grew 37% year over year to reach $640 million.
non-GAAP product gross margin expanded to 78% and non-GAAP adjusted free cash flow was $88 million, representing 50% year over year growth.
Q2, we continued to execute an unsettled macro environment, but with incremental improvement in general sentiment and engagement.
<unk> of AI is at the forefront of customer conversations. However enterprises are also realizing that they cannot have an AI strategy without a data strategy to base at all.
We have a head start in this race as the epicenter of highly curated optimized and trusted enterprise data.
Now have a presence with 639 global 2000 customers.
Hi reaches beyond enterprise boundaries models need external data to answer challenging questions.
Data sharing makes snowflake uniquely positioned to enable AI workloads as of Q2, 26% of local customers or data sharing up from 20% in the same period last year.
<unk>, 70% of customers with more than $1 billion of trailing 12 months product revenue for our data sharing with an average of six stable edges for.
For years, we focused on the Programmability of our platform by a snow Park, we are seeing momentum in.
In Q2, we added more than 400, <unk> customers and our consumption grew approximately 70% quarter over quarter.
63% of our global 2000 customers are using small tuck on a weekly basis.
Document AI is now in private preview with document AI customers can use natural language to ask questions of unstructured data legal contractual invoices are now available for inquiry and analytics. This is an early example of how language models or expanding your opportunity.
<unk> like container services, we're bringing MLM models like record and then video Nemo into Snowflake.
In my conversation with Janssen.
Snowflake is sitting on a gold mine of data together, we can help customers joined that gold mine into intelligence, we announced notebook container service was two months ago. Since then hundreds of customers have requested access to the private preview.
With our support of iceberg tables, we are expanding our data lake scope, many customers already use Netflix as a data lake large financial services customer consolidates data and snowflake to eliminate useless extra fixed interest versus data.
This makes new use cases are deployed 80% faster iceberg tables will bring additional scope and open file formats to snowflake, we expect to unlock more data lake opportunities with these capabilities.
Volker reached an inflection point on the application front the Sonics, we launched so called native apps and public preview.
I have over 25 native application providers today.
Snowflake is a safe certified infection place to deploy applications.
<unk> supporters building.
We now have more than 145000 monthly active developers more streamlined.
This represents an increase of 160% year on year, a startup program allocates resources to developers planning to build a snowflake.
Approximately 20% of new customers landed in Q2 landed on small flex through our start up program.
General sentiment appears to be incrementally get better Snowflake summit in June was a highlight of energy and excitement about what is becoming profitable in the world with data we hosted over 20000 onsite in virtual attendance. This was up over 85% from last year.
Next up is our data cloud World tour, the retro Blink solid messaging to a wider audience, we expected double the attendance of summit visit.
This is a 26 cities worldwide with that ill turn the call over to Mike. Thank you for ink consumption came in line with our expectations for the quarter and May we saw return to growth with strength continuing into June and July from a booking standpoint, we saw promising signs of stabilization with new bookings outperforming our.
However, we believe productivity has room for further improvement Q2 remaining performance obligations grew 30% year over year totaling $3 5 billion.
Of the $3 5 billion and our P. O. We expect approximately 57% to be recognized as revenue in the next 12 months. This represents a 32% increase compared to our estimate as of the same quarter last year.
Our net revenue retention rate of 142% includes six new customers with $1 million in trailing 12 month process revenue. We now have 402 customers with trailing 12 months product revenue greater than $1 million, we continue to focus on growth and efficiency, we generated 88 million and non-GAAP adjusted.
Free cash flow are performing our Q2 target Q2 represented another quarter of continued progress on profitability. Our non-GAAP product gross margin was 77, 9% benefiting from a onetime credit from one of our cloud service providers non-GAAP operating margin was 8% benefiting from tight controls.
And head count additions and the over achievement in product gross margin our non-GAAP adjusted free cash flow margin was 13%. We continue to have a strong cash position with $4 $9 billion in cash cash equivalents and short term and long term investments, we did not repurchase any shares in the quarter.
And to Opportunistically repurchase purchase shares using our free cash flow now, let's turn to guidance our forecast assumes that our largest customers. We will continue to be a growth headwind. We are seeing encouraging signs of stabilization, but not recovery our forecast calls for these customers to more closely align their consumption with there Andy.
Contract value for the third quarter, we expect product revenues between 670 and $675 million representing year over year growth between 28, and 29% turning to margins, we expect on a non-GAAP basis, 4% operating margin and we expect 364 million diluted weighted.
Average shares outstanding for the full year fiscal 2024, we expect product revenues of approximately to $2 6 billion.
Representing year over year growth of approximately 34% turning to profitability for the full year fiscal 2024, we expect in a non-GAAP basis.
Approximately 76% product gross margin, 5% operating margin and 26% adjusted free cash flow margin and we expect 362 million diluted weighted average shares outstanding we will continue to prioritize hiring and product engineering, we still expect to add approximately 1000 employees in fiscal.
2024 inclusive of M&A with that operator, you can now open up the line for questions.
Absolutely we will now begin the question and answer session.
Like to ask a question. Please press star followed by a one on your telephone keypad as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question.
The first question will be from the line of Keith Weiss with Morgan Stanley . Your line is now open.
Excellent. Thank you for taking the question guys.
Mike I wanted to dig into the comment about kind of a large customer activity.
Talk to us about sort of consumption coming more in line with the committed contracts can you give us any visibility whats happening on the contract renewals because as you go through the contract in Europe are you seeing any change in their behavior of what the large customers are willing to commit to any impacts that we should be thinking about on how that can impact bookings in RP.
<unk> on a go forward basis.
Yeah, No we were seeing customers renew this quarter was a good renewal quarter, we had our largest customer they renewed under their existing terms. They did $100 million three year renewal, even though their revenue run rate is at a higher amount than that.
I think we did nine or 10 $10 million plus.
GCB deals this quarter and most of those were renewals.
And so customers are doing that but remember that doesn't necessarily equate to consumption and we do know some of our largest customers are trying to consume at their contract rate rather than going above that.
Yes.
Got it so the dynamic is really on consumption and did not on contracting as of yet.
No. It's on consumption as I said, the contracting actually feel the sentiment really seem to change in July with customers really re engaging with us and so and I think we'll have good bookings, but that doesn't equate to consumption.
It takes time for the consumption today.
Come in.
Got it got it and if I could sneak one in for Frank as well.
You talked about you need a good data strategy to have a good day AI strategy and Thats something we hear a lot and when were talking to your customers and people out there in the field so that really resonate.
When it comes to kind of go to market and sort of the selling motion does having to have the gen. II conversation, while a long term positive does that disrupt the sort of typical kind of data cloud discussion that you guys have been having for the past five years with these customers.
At risk or it hasnt been elongated in the gel cycles and you go away.
No I wouldn't say so.
So I think we were actually saying that having having highly organized optimized.
Trusted sanction data is incredibly important for a for deploying large.
Language models. If you think you again, just drop a model on top of the data Lake and just.
See what happens.
That's not going to end well.
And that's what people are realizing till they really got to get super serious.
Walter foundations before we if you don't have a good foundation. There is not much you can build on top of that there's tons of governance issues as golf as well, we spent literally decades as an industry.
<unk> data highly governed in other words, who can who is going to have access to what so that now needs to translate into the world of large language models as well. So there's just tons of questions that are coming up that are really important 40 enablement of of language models.
Generally so being extremely organized on your data as it's going to become.
Our premium and we're obviously that we've been on that but its become more important as a function of this.
Got it you did differently resonates with the conversation, we're having as well so thank you very much for the time guys.
Thank you.
The next question will be from the line of Mark Murphy with J P. Morgan. Your line is now open.
Thank you very much.
Frank I'm wondering if you could speak to the expanded Microsoft relationship I believe you referred to it as nearly a doubling of the commitment.
I'm wondering if you're optimistic on seeing that alignment in this deals.
Coming together and perhaps unlocking some new opportunities relating to azure or even some of the open AI workloads that you wouldn't have seen previously and then I have a quick follow up.
Yes look you know the bottom line of working with the cloud vendors.
Got you.
What gets set at the top levels.
The good intentions, what matters is what are the incentives when you get 14 later down at street level, how do you get people get paid.
That determines whether they're either going to a site you double and triple down on that or you are going to partner with you.
We see models, where we've worked out really really well.
With woods.
AWS.
But with Microsoft we were not in the place that we want it to be a street level in terms of the incentives. So we really took this opportunity while we were renegotiating our relationship with Microsoft to say, Hey, we have to tackle that Schrader and Microsoft very much want to be a bigger percentage of our business and because they're not punching.
At Derwent.
And at all the another big a percentage of our business as it should be based on our market share.
And they want to be and this is the way to do it and it's really you need to bring alignment.
Field organization that you're going to get partnerships and then you're going to get joint selling and then youre going to get your fair share.
Okay.
Okay. Thank you for that.
And Mike as a follow up in Q2 did you observe any customers adjusting their indexing or reducing data retention timeline. It looks like the quarter went went well overall, but I'm.
I'm curious if you sense any more or less of that optimization activity heading into the second half.
Okay.
And in terms of customers changing their retention policy, we really didn't notice any of that if anything we saw growth in the amount of storage in the quarter.
And I just want to color that was really one large customer that changed their retention from five to three years.
That was pretty unusual.
And in terms of optimizations.
We continually work with customers on their own optimizations, but we're continuing to optimize our software as well too because we are really dedicated to delivering price performance for our customers and I want to stress we've been talking about optimizations with investors since we went public.
We'll always continue optimizations, whether it's customer or asked during the optimizations.
Does one history has shown when we improved price performance more workloads come to us.
Thank you very much.
Okay.
Thank you.
The next question will be from the line of Kirk <unk> with Evercore ISI. Your line is now open.
Yes, thanks, very much Mike is where he is talk a little bit more of it.
Youre seeing stabilization in consumption, but not recovery I'm just kind of curious when you say that is that the pressure from the top down on practitioner.
A little bit and there is a concern.
They're starting to feel better about what they can consume.
And then there is waiting for budgets to kind of get refresh to sort of get going on the recovery side prescribed curious if it had served the top downs easing or it's more that they are taking a little while to sort of ramp back up on projects that perhaps as we have slowed down six months ago three months ago.
Actually I think it's both but I definitely think the fact that we.
Kind of sock customers more re engaging with us in July on contracts and that continues into this quarter I think it is easing a little bit at the top level in terms of approvals for customers and they are willing to commit but it takes time to convert that to consumption with that said consumption is good.
It was a really good today as an example, but it's only one data point, it's we want to see more days of that before we we think we're into a real recovery I think stay.
Stabilization is the right term, we're not seeing customers, who reduce their consumption right now.
Sure.
Okay, and then Frank just as you spoke to a lot of executives.
Do they recognize the fact that the road to AI does require perhaps a heavier level of investment in their thinking 12 months ago. How do you think that factors into sort of their thinking on budgets as we go into 'twenty four.
The reality is they don't really know yet in any real definitive terms you know what this is going to take.
Thank you and a lot of people I think is correct you have characterized their foray into language models as extra extra mental exploratory and sort of trying to get their arms around you know how big a bread box.
Is this.
So it's going to take a widely held before we get a real read.
What the level of investment is people are going to ask the stomach to do this I mean one of the.
Challenges in one of the great things about search historically has been that shorts and also had a very potent business model to go with it to pay for it.
And we cannot sort of unleash AI and have no business model to pay for it or people will get tired of that really really quick. So these are liabilities gpus from Nvidia Dr. Cheaper as powerful as they are so we all have to bring that into alignment our need to focus and have a sensible go forward strategy. So a lot of it.
Use cases, we will focus on what are we getting toward at this rate. It is not just from an games planning. Your next trip to Yellowstone when people are going to be asking very very heart heading questions yet what it is doing for us.
Thank you all.
Thank you.
The next question will be from the line of Raimo <unk> Lynch, Joe with Barclays. Your line is now open.
Thank you great.
Great to see the stabilization is really from my end congrats there.
Frank one for you more as you as we all realize that data is kind of the new fuel.
We do see more of interesting like all in all I have the data I have the data, which kind of in a way like kind of puts them.
Slightly different.
Boston It used to be compared to your partnership how do you see that competitive landscape evolving for you since you in theory or the natural kind of moving towards four data that is used in AI. How do you see this playing out for you guys. Thank you.
Well, we see it play out.
Really well done.
We agree with you I mean, we think that data is becoming infinitely valuable and that's for all kinds of reasons, because we can no longer run enterprises and institutions based on what we call anecdotal observation Neil because the world is too dynamic too disruptive.
We have this massive disintermediation happening we no longer have hold these intermediaries between us and the end customer you can only run direct to consumer businesses with data.
I mean, you see that for example in insurance like auto industry companies like Geico, and progressive and Liberty Mutual I mean, you can only run these businesses on top of data telemetry data being really important and we think every business every institutions is going to develop a complete and total dependency not just on data, but the ability to harness that data.
So this is a full on transformation really of how industry.
In English and institutions have have operate it and work at the leading edge of where the world felt very much at the beginning of it.
Okay. Thank you.
Thank you.
The next question will be from the line of Karl Keirstead with UBS. Your line is now open.
Thank you so Mike just one maybe two quick keys, you mentioned there was a onetime credit from from one of the CSP or are you able to define how material that was it sounds like it might have certainly hit gross margins, but just wanted to clarify.
That was about $4 million that hit in.
In the quarter.
Okay.
Okay got it thanks for that and then maybe just a follow up Mike what I'm hearing you describe is an effort you mentioned certainly your largest customer, but perhaps others, taking their usage a little bit closer to their HCV. So one would think that that would result in a decent amount of headwind yet your guidance for the third quarter and Mike.
You are in any way is relatively solid so whats the offset what customer segment might be ramping nicely to offset to some extent the headwinds from your large customers. Thanks, so much.
Well, we're now at 639 global 2000 that are only consuming on average on a trailing 12 months at around 151 6 million a lot of those are still doing their migrations and we don't see that stopping it's the larger customers. They just are not.
Forecast to grow as quickly there is still growing but at a slower pace.
Yes, Thanks, again and once again this is a consumption model that could turnaround tomorrow.
Yes, I get it okay. Thank you Mike.
Okay.
Thank you.
The next question will be from the line of cash Rondon with Goldman Sachs. Your line is now open.
Thank you so much Frank I think you're a fireside chat with Jensen was absolutely illuminating he was looking at the opportunity set with structured data into snowflake ecosystem almost salivating.
And yet you seemed a little moderated and that you need to have a business case.
When are we likely reached the point, where generative AI coupled with.
Snow Park could really lead to a tangible increase in consumption outside of the core date.
<unk> data cloud business and one for you Mike.
If we are to read your comments three months of stability four months is generally it looks like including August does that mean that net expansion rates reach a bottom and could potentially start to stabilize and rebound.
As we head into the later part of the year. Thank you so much.
This is Frank cash.
And they're in a really short term I'm only talking you know days weeks and months here.
Where are you going to see a language model begin to immediately impact.
The business is that.
Sequel generation I mean in other words, the analyst job, it's going to be up level. So much and I think people are going to be able to drive queries into the data much better much faster with far less skill requirement than they ever have before.
We're showing that off.
Every day.
I mean these days.
You won't even have to be literate in order to be able to have interactions with your data. So that that really is an expansion vector that is just enormously and is very close to home because that's really how you how you use data and how you use a platform.
Like Snowflake.
The other area, where you're going to see drivers of workload is that people get the search for for data related to what's your general angle of inquiry is in a much more effective manner than they have been able before in.
This is also where it's very important that you can short beyond enterprise boundaries biggest the context of data.
Limited by your enterprise boundaries we.
We can go on and on all of our use cases, there is a million of them. If you get further down you start asking you really really hard question to that.
In prior periods prior Erez, we really needed to launch whole analyst teams to go research and investigate topics where now the data we'll be able to do systems will be able to generate the queries and the type of data that.
It will immediately very very quickly begin to generate insights.
And that's just by the way that's going to become the leading edge for structure proprietary data, which is of course in the center of one of our universe.
And on your question on net revenue retention I just wanted to remind you I'm not going to guide to net revenue retention.
But I do think over time is going to continue to converge closer to our growth rate.
Do think it will stabilize but I do expect it's going to come down slightly from where it's at right now.
And what we're seeing today.
Thank you.
The next question will be from the line of Brad Zelnick with Deutsche Bank. Your line is now open.
Great. Thank you so much I've got one for Frank and one for Mike Frank stable edges continue to tick up which is great to see and I know, it's an important metric for the company and its strategic vision anything else, perhaps qualitative that you can share in terms of of how data sharing is progressing in for you Mike great to see the margin upside everybody is happy about it but.
With such a huge opportunity how can you be sure you're striking the right balance of investment, especially when you're up against such well capitalized competitors. Thanks guys.
On the topic of data sharing.
We instrument.
That whole side of the business very very carefully and we drive it on that.
On a quarterly basis, but sometimes in the data that just are very enterprise specific and other worst ADT is have things the use cases.
That just pertain to their business.
These are bilateral relationships between snowflake counts in different institutions that work gets really interesting where you get real network effect kicking in is when you have industries or sub industries, where our data sharing just just just makes sense and obviously nonfinancial institutions because financial institutions inherently have been pumping.
Around massive massive volume short literally four generations. This is an absolute no brainer and we do the vast majority historically data actually is happening in the financial services sector has become almost sustain or does. This is this is how we move data from a to b to C asset management, particularly.
As a really big need for that but the other area and again this is an industry in supply chain management.
In the supply chain there are multiple entities to the degree that they all that snowflake accounts is very easy to get visibility in our supply chain across entities, and then being able to flag supply chain events much earlier and get visibility to that so once you're in the supply chain to meet to be on smells like can share data with your supply chain.
<unk> partners is going to become very very compelling.
We announced at.
Summit and even earlier our relationship with Blue Yonder for example, which is really the largest software company in the world of supply chain management.
They are re platforming on snowflake. So we think that's another sort of industry slash up industry, where every manufacturer every retailer.
Just going to become an opportunity for us so there's a little bit of color on how these things develop from our perspective.
On your question on investments in the business, Brad given the opportunity we are investing as fast as we think we need to invest you did see the guided margins two 4% for operating margin, where we just did five this quarter and that's because we're investing as an example, we have 1008.
100, Gpus reserve, that's an extra million Bucks a month as we're working on AI I'm not getting requests that people need more head count and the engineering organization and the sales and marketing until we see an increase in productivity, we're going to be very methodical about how we add resources into those areas. So.
We're definitely not under investing in the business.
I'm not getting the feedback from any of the executive team with regards to that.
Thanks for the additional color.
Thank you.
Your next question will be from the line of Tyler Radke with Citi. Your line is now open.
Yeah. Thanks for.
The question.
First question just on the commentary around some of the projects starting to see better momentum there, particularly in July I was wondering if you could just comment on the nature of those projects are they are they larger deals than you typically see or maybe they include.
More more generative AI or data science, given all the new products that you've released if you could just kind of contrast.
Pickup in kind of where that's coming from.
Do you want me to go ahead Joe.
Okay.
You shouldnt be equate.
Projects with deals, okay, because there's there's tons and tons of projects.
We relate to use cases and workloads.
And applications.
We said in the prepared remarks is we've really seen as sort of a sentiment change from year earlier quarters, where people were sort of trying to cut off their lipstick due to fit within budgetary constraints and all this kind of stuff and you were to win that's where you see unnatural acts to say that that has really subsided considerably and the conversation is really.
Going back to where it historically has been as you know we wanted to these applications. These workloads these migrations.
And of course, we're pushing the boundaries on a much more sophisticated use cases in machine learning and obviously you know people want to understand how do I deploy large language models.
On the smoked like platform and we have.
We have outlined that in excruciating detail and demonstrated showcased how we are doing lined up and we're super excited about how that's unfolding for us and our customers.
Yes.
Great and then.
Follow up just in terms of the Snow Park.
Revenue any update on kind of where you're expecting that to.
To track as you exit this year and then.
These related services.
Whether it's the native App store or container services will that all fall under Snow Park theoretically when that goes GAA next year. Thank you.
In terms of Snow Park, as we said, whereas Frank talked about seeing 70% growth in.
<unk> Park.
Consumption silver.
Still relatively small but meaningful.
We have a number of customers that are in the process of doing their migrations are few quite large ones I do think next year, it will be more meaningful to them.
Revenue by $2 6 billion in revenue, it's a couple percent of ever revenue this year lumps container services.
I'm, John and that is part of Snow Park.
Obviously that means any workload becomes fair game to be deployed on.
And small flight is obviously running close to the data inside our governance perimeter.
It's especially virtualization of neo for the cloud. So we think there is enormous upside.
For us once those services become generally available across all of our cloud platform, which will be next year.
Thank you.
Thank you.
The next question will be from the line of Brent Thill with Jefferies. Your line is now open.
Sure.
Mike You mentioned at the Analyst day, you were idling back quota carrying sales capacity on the new hire front have you seen any different to lead back into hiring quota reps in 'twenty three.
You know it really depends upon the territory and the opportunity there are some territories, where kind of regions, where shrinking where it's overcapacity and we're re shifting those heads to other more productive territories.
As.
I'm not planning on adding net a lot of new ones for the balance of this year, but as we are starting to plan for next year. There are there is.
<unk> head count going into the quota carrying rep area.
Great and then for Frank on the vertical side or any verticals that are showing more excitement that perhaps weren't born online network werent firing up.
Are you seeing any anything change here.
Naturally yes, that's a great question because we.
We had massive outperformance by our health care vertical this quarter in health care, usually runs fourth or fifth.
The lineup of verticals on the massive width.
Really excited about it it feels like that health care is really.
Getting a move on if you will they have not traditionally been ever been on an aggressive adopter of technology, but you're under.
We'll have the data there is they are moving their move in order to initiate on the provider side you see it on the payer side you see it on the pharma side.
So I think that's going to become a great contributing segment for us healthcare and life Sciences grew 61% year over year in revenue for us.
Yes, thanks for the color very good too.
Thank you.
The next question will be from the line of Michael <unk> with Wells Fargo. Your line is now open.
Hey, great. Thanks, I appreciate you taking the questions I think one of the comments mentioned new bookings outperformed expectations I appreciate you're still seeing room for improvement, but anything you can add around what drove the improvement versus last quarter. It sounded like health care from the prior commentary, but wondering if some of that or certain product releases maybe.
Also contributed there.
Yeah hard to say, whether its I don't think it was a product release I would say we saw some nice.
The renewals from customers with growth. We also saw two very large cap ones. One large one in Europe , which was a cap. One is an initial deal was at 22 million T. CVD on insurance industry, and we said.
Large gaming company in Korea commit to $9 5 million as a cap one so.
Clearly our message is getting across to these customers and they see what we're doing and a lot of these wanted to do more in the area of AI, but first they need to get their data into snowflake and it's going to be a journey for these people second happen overnight AI.
For our customers.
Okay.
Like light can appreciate these large deal stats, maybe just quickly on the on the back half.
If you can just help level set what's embedded in the rest of the year outlook with each.
<unk> seen multiple comments around stabilization is that fairly consistent with what informs the outlook and maybe just any refresh on second half seasonality.
As expected thank you.
While Q4 is usually one of our largest bookings quarter that shaping up but that's not necessarily consumption.
But the sentiment within our sales team has definitely shifted from where it was in the first half of the year.
Thank you.
Sure.
Thank you.
The next question will be from the line of Patrick Colville with Scotiabank. Your line is now open.
Alright. Thank you so much for taking my question.
I just want to double click on your comment I think you said customers are re engaging in July you said that in the prepared remarks, I mean, I guess would you mean by that is like new customers existing customers consumption contract negotiations and then any color you can give us on thus far in August would be helpful.
All three of the above.
We have new customers that just pointed out those two large cap ones, we usually don't do cap ones that big in.
It was a very good quarter with some large new customers.
We're seeing our existing customers.
We saw some nice early renewals with customers, where they were consuming faster.
And.
Where we're seeing customers willing to do larger deals rather than just do a co term to bridge them through to another period. So that's what I mean by the sentiment is changing with our customers.
Yes.
Alright.
I guess my follow up is on <unk>.
We don't report our results Tonight.
Looking at our numbers I think that data data center revenue rose.
Over 50% sequentially.
The cleaning like AI spend is hitting the silicon layer.
And then a question I get from investors is when will AI spend more clearly software layout I mean is there any.
Any thoughts on that.
I think it's going to be next year as I said, it's going to take some time for AI and people are still struggling to get Gpus and there is a time lag between when a chip manufacturer sells their chips to it gets built into the hardware that actually gets deployed in a rack in a data center and it gets deployed.
<unk> customers.
I think youll see the leading edge of it happening.
Months to come.
Cereal impact.
Most analysts out there are seeing the 2024.
Thanks.
We tend to agree with that and I would say in my prior life when we were buying.
Racks of servers Theres, a six month delay between when we bought them and when they were actually going into production.
Okay.
And I don't see that any different with Gpus.
Okay.
Thank you.
The next question will be from the line of Alex Zukin with Wolfe Research. Your line is now open.
Hey, guys. This is Ethan broke on for Alex Zukin.
A quick numbers question. So if we calculate the product revenue CRP of booking growth decelerate the 13% grew by 30% last quarter. So just curious how should we think about this indicator of the future consumption for a future product growth.
So and guided to full year revenue of $2 6 billion.
And we'll guide next year next year.
Okay, and then I guess just to ask the AGA.
August trends question a different way.
Stability, you called out trended into August and the first one for the quarter and then just on the seasonality is there any kind of month to note as you think about the rest of the year that same 30 days excuse me chevron seasonally weak.
Sure.
Well as I said August is shaping up very good I'd called out yesterday was actually very good consumption, but one day doesn't make a trend Q.
Q4 is definitely seasonality with the holidays with Thanksgiving in the U S. In the Christmas holidays, It does impact daily consumption.
From a bookings perspective, Q4, though is clearly our largest bookings.
Got it got it makes sense, okay. Thank you and congrats on the quarter.
Thank you.
The next question will be from the line of Brent <unk> with Piper Sandler Your line is now open.
Thank you I wanted to go back to the discussion around the increase we're seeing in model training capacity clearly billions of incremental dollars going into Jeep Nvidia Gpus here Guinea data to train the models.
I appreciate there's going to be a lag relative to when the spend hits the data layer, but are there any technical hurdles that need to be overcome or do you. Do you think this cycle is different and that there are other considerations as well just thinking through that that the investment we're seeing right now in infrastructure.
And thank you through what are the other factors, we need to think about before it starts to impact the data layer. Thanks.
Thank you.
Yes.
I'll start John and maybe Christian.
Kind of following to thinking about your question Bob.
Yes.
You can't just drives this AI is one thing because.
You see the things that people are doing with unstructured data and the whole notion of cone Pilar cheaper system tutors.
More of that.
Very much focused on.
Textual data.
We see no action.
With support call records contact centers and so on.
But then you look at Snowflake, who sets.
Each of structure proprietary enterprise data.
That's that's a different way.
Or for AI then.
That's a very <unk> model oriented.
Jakob.
Type of inquiry.
And I have to say that just from from all my conversation with customers. When people are are behind us.
The textual side with the outlook.
With proprietary data out there we're going to approach us we view that as our business.
We're driving that very hard and Brent the emphasis on getting your data Atlas in order because you just cannot unleash barge language modeling and hopes were divested.
With all the issues that we've mentioned before around governance and just just understanding.
Yes.
The data we are generating now in the process Thats why I said, the early going youre going to see a lot of upside.
All right.
Analysts are going to be able to generate data.
<unk> quicker far better than they ever have been before and then we really massive when you're reducing the skill sophistication of requirements to be able to do that in and of itself.
To be a big driver for us.
So great question here I would've maybe two areas in addition to what Frank.
<unk> mentioned.
The first one is around having the right data can be fed into these models ranked started the call with <unk>.
I just had to do with updated strategy and it is very good and that the result of traditional email or Gen. AI is a function of having the right data the right data quantity the right metrics.
This technology will be as good as the data that has fed into all of the investments that we make on data quality and commencing in pipelines on all that is very important the IOP that I think will be up.
Nichol.
Imperative for everyone doing AI engine.
Is around the measurement and feedback how good are the solutions, how do I know if there are potential buyers into the data oriented gas injection and extending our performance with the model. Those two are inherent part of the cycle and interestingly they all run.
Having a great leader foundation enabled profits.
Helpful Color and then lastly for Mike on consumption, one follow up the implied Q4 product growth is I think 26% at the midpoint I know, there's a delta between signing growth in consumption.
Exiting this year or do you think product gross stabilizes in the mid 20% range maybe starts to Reaccelerate next year or is it just too early to tell.
Yes.
Let us finish Q3, and then we will guide to Q4.
And let's see how next year is looking but I do anticipate there's a lot of new things coming out next year that we think are going to have a.
Very positive impact on our consumption from remember we have streamline it goes into a store towards this year.
Preview, we have containerized services next year.
There's a number of things that are happening that are all going to have a positive impact on our <unk>.
Revenue growth rate next year, so stay tuned for that.
Helpful color. Thanks.
Thank you.
The next question will be from the line of Brad Reback with Stifel. Your line is now open.
Great. Thanks, very much gentlemen, you talked about changing sentiment a couple of times during the call. How much of that is your sales team being better able to engage with the with the customers selling value just looking at the problem from a different perspective, given the macro trends versus.
Customers, just feeling better about their businesses and the macro unleashing the demand. Thanks.
Strike.
Mark.
It's not the sales team.
Really the change in <unk>.
Our customers engaged in a couple of quarters ago, and like I said earlier people were doing unnatural acts to force that themselves into the spending envelope and they were doing it.
Almost regardless of consequence.
Fixation on that reset.
We obviously felt that the change in sentiment is that.
That has passed we are now sort of okay. We're comfortable.
What's the path that we're on now we're talking again about projects in migrations of use cases with triangle.
Basically get a get a grip on deploying large language models, whether we have to do with the data with the infrastructure.
Answering governance questions and so on so in other words, the sentiment is very constructive and engaging on core data strategy. That's a big change from where we were a couple of quarters ago.
We slowed the salespeople are preseason data is very positive for us when you wanted to.
That's great thanks very much.
Thank you.
The next question will be from the line of Derrick Wood with TD Cowen. Your line is now open.
Thanks, Mike This was the strongest sequential growth quarter, you've had three quarters I think you were at 6% and 6% and this was eight 5%.
Your guidance for Q3 is kind of five 5% sequential I'm sure. There is some level of conservatism in there, but just in terms of the Q2 are there any kind of one time.
Assumption dynamics to call out or does that just really kind of inform us that the optimization headwinds that you saw in Q4, and Q1 kind of dissipated in Q2.
Yes, Q2 has more days in November where consumption model that was actually a 5%.
Quarter over quarter.
Work working days adjusted.
Was the growth rate and actually Q3. It goes up when you look at the working days in Q3 remember on a consumption model where.
Really kind of 70% is the scheduled work there is a big piece of it is tied to work days that does have an impact.
So if there is growth next quarter in that guide.
On a days adjusted basis working days.
Okay. Okay.
Frank or question I, just I was hoping to double click on the new container services. It seems like it enables you to deploy different types of third party and James apps code basis directly in the platform you can streamline a lot more workflows.
Which I think when it comes to building AI models seems pretty interesting. So im just curious what are you. Most excited about in terms of this new capability and opening up new consumption, especially when it comes to AI.
Yes.
Container services.
Absolute hit.
The former as Arsenal quite summer.
Call from domain customers were just mesmerized by the possibilities.
On our platform.
Capability house, because we really have essentially eliminated any limitation.
On deployment on Snowflake and.
Why do you care I mean, the thing is first of all you wanted to deploy close to the data for <unk> for all the reasons that we that we that we talk about this enable this you get a fully <unk>.
Adjusted sanction platform, where you can deploy applications without any further questions and one of the one of the challenge that you have in cloud computing.
Who's managing this right I mean, what is.
What is the safe space to deploy into and who is who is really guaranteeing the high trust enterprise grade capabilities of that platform.
We are bringing that industrial work, we're going to see a lot of services a lot of them could be on premise legacy engines that are going to be containerized and resurface as a cloud service right.
So a lot of things that were old who will be new again.
So there's it's virtualization for cloud.
And having secure safe high performance very very efficient spaces to Duran services and applications.
So.
The sky's the limit on this capability.
We and our customers and our partners could not be more excited about the.
Potentials in the possibilities here, but specific to AI.
This this matters a whole lot because the containers are our vehicle our vessel. If you will to deploy large language models. There is no limit on which models and how many models.
Which segments of the business.
We can deploy and we can shift gears very very quickly and we have incredible flexibility and choice of deploying these capabilities, but because you're going to see a lot of change and a lot of movement. We've already seen an enormous amount that's going to continue so we're very very well positioned architecturally platform wise to enable the AI Revolution.
With container services.
Awesome. Thank you.
Thank you.
And the final question will be from the line of Sterling Auty with Moffett Nathanson. Your line is now open.
Yeah. Thanks, Hi, guys. Just one question from my side, you mentioned sales productivity a couple of times I'm curious how would you grade your.
Net sales execution.
Quarter and are there any specific changes that youre, making to further optimize given the environment for the back half.
I think in general our execution in Q2 on the sales side was actually quite good.
It improved but there is still pockets, so where there is room for improvement when you look in certain.
Territories or Geos, we have a new leader in EMEA.
EMEA certain markets in EMEA are doing good others, there's a lot of room for improvement we have a new leader in EMEA. There are certain pockets in Asia that are doing good but.
There's others that have a lot of room for improvement so.
But in general overall as I talked about you can see through our bookings it was a good execution from a bookings perspective, and the aggregate last quarter.
Understood. Thank you.
Thank you.
That will conclude today's Q&A session and today's conference call. Thank you all for your participation and you may now disconnect your lines.
Sure.
Sure.