Q3 2024 Snowflake Inc Earnings Call
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Speaker 2: Good afternoon. Thank you for attending today's Q3 FY 2024 snowflake earnings conference call. My name is Hannah and I will be your moderator for today.
Good afternoon. Thank you for attending today's Q3, FY 'twenty 'twenty four Snowflake earnings Conference call. My name is and I will 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.
Speaker 2: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1.
I would like to ask a question. Please press star one.
Speaker 2: I would now like to pass the conference over to our host, Sydney Sexton, Head of Investor Relations at Snowflake. You may go ahead.
I would now like to pass the conference over to our host Jimmie Buxton head of Investor Relations at Snowflake you May go ahead.
Speaker 3: Good afternoon and thanks for joining us on Snowflake's Q3 fiscal 2024 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, who will join us for the Q&A session.
Good afternoon, and thanks for joining us I'm Snowflakes Q3 fiscal 2024 earnings call with me in Bozeman, 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.
Speaker 3: During today's call, we will review our financial results for the third quarter, fiscal 2024, and discuss our guidance for the fourth quarter in full year fiscal 2024. 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 from actual results.
During today's call, we will review our financial results for the third quarter fiscal 2024, and discuss our guidance for the fourth quarter and full year fiscal 2024. 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 over.
All 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 31, 2023, and the Form 10-Q for the quarter ended.
Speaker 3: Information concerning those risks is available in our earnings press release distributed after market closed today and in our SEC filings, including our most recently filed Form 10Q for the fiscal quarter ended July 31, 2023 and the Form 10Q for the quarter ended October 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.
October 31, 2023 that we will file with the SEC.
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.
Speaker 3: 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 comparison.
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. Please see the reconciliations of these non.
Speaker 3: non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. To see the reconciliations 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.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. Thanks, Jimmy. Welcome.
GAAP financial measures. Please refer to our earnings press release distributed earlier today, and our Investor presentation, which are posted at investors Dot 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.
Jamie welcome and good afternoon.
Speaker 4: Q3 product revenue grew 34% year over year to reach $698 million. non-GAAP adjusted free cash flow was $111 million, representing 70% year over year growth.
Q3 product revenue grew 34% year over year to reach $698 million non-GAAP adjusted free cash flow was $111 million, representing 70% year over year growth.
Speaker 4: Results reflect strong execution in a broadly stabilizing macro environment. While Snowflake's global revenue mix is highly diverse in terms of industries and geographies.
Results reflect strong execution in a broadly stabilizing macro environment, while snowflakes global revenue mix is highly diverse in terms of industries and geographies. The company derives an ever larger revenue share from mainstream enterprises and institutions. This is compared to a newer crowd of digital natives who have.
Speaker 4: who've made up many of Snowflake's early adopters. We added 35 $1 million plus customers during the quarter. Nine of our top 10 customers grew sequentially.
Made up many of snowflakes early adopters, we added $35 1 million plus customers during the quarter nine of our top 10 customers grew sequentially.
Speaker 4: Generative AI is at the forefront of customer conversations, which in turn drives renewed emphasis on data strategy in preparation of these new technologies. We said it many times, there's no AI strategy without a data strategy. The intelligence we're all aiming for resides in the data, hence the quality of that underpinning is critical.
Generally generally.
It is at the forefront of customer conversations, which in turn drives renewed emphasis on data strategy in preparation of these new technologies, we said it many times Theres no AI strategy without a data strategy.
Intelligence, where all aiming for resides in the data and the quality of that underpinning this critical need.
Speaker 4: Meanwhile, Snowflake has announced and showcased a plethora of new technologies that let customers mobilize AI. We've introduced Snowflake Cortex to leverage AI and machine learning on Snowflake.
Meanwhile, Snowflake has announced and showcased the plethora of new technologies that lets customers mobilize AI, we've introduced snowflake cortex to leverage AI and machine learning on Snowflake.
Speaker 4: Cortex is a managed service for inferencing large language models. This opens up direct access to models and specialized operations like translation, sentiment, and vector functions. Business analysts and data engineers can now use AI functionality without the fractured highly technical challenges of the AI landscape.
Cortex is a managed service for inferencing large language models. This opens up direct access to models and specialized operations.
Translation supplement and vector functions.
<unk> analysts some data engineers can now use AI functionality without the fractured highly technical challenges of the Atlanta market.
Speaker 4: Last summer, we introduced Snow Park Container Services, which also serves as the second pillar of our AI enablement strategy. Developers can access any language, any library, and flexible hardware inside the governance boundary of Snowflake. More than 70 customers are already using Container Services in preview, with many more waiting in line.
Last summer, we introduced snow Snow Park container services, which also serves as the second pillar of our AI enablement strategy developed.
Developers can access any language any library and flexible hardware inside the governance bound the boundary of snowflake.
70 customers are already using container services in preview with many more waiting in line.
Speaker 4: Snowflake makes the common AI use cases easy and the advanced use cases possible. We are well positioned for AI based on the scale and scope of our data cloud programmability and governance framework.
So it makes the common use cases easy in the advanced use cases as possible, we are well positioned for AI based on the scale and scope of our data cloud Programmability and governance framework.
Speaker 4: There are hurdles challenging enterprise adoption of AI and ML. The first is broad access to quality data. Snowflake addresses this challenge through its data sharing architecture. 28% of all our customers share data up from 22% a year ago, and 73% of our $1 million plus customers are data sharing up from 67% a year ago. AI models can only be a smart data they are trained on.
There are hurdles challenging enterprise adoption of AI and ml. The first is broad access to quality data.
Snowflake addresses this challenge through its data sharing architecture.
8% of all of our customer share data up from 22% a year ago, and 73% over a $1 million plus customers our data sharing up from 67% a year ago.
AI models can only be a smart beta theyre trained on <unk>.
Speaker 4: Security and governance present another challenge for enterprise adoption of AI in the now snowflake horizon offers a unified security and governance solution built for AI Horizon strictly and consistently enforces user privileges on data across use cases including large language model applications traditional ML models and ad hoc queries
Security and governance presented another challenge for enterprise adoption of AI in the mouth Snowflake horizon, obviously, a unified security and governance solution built for AI horizon, strictly and consistently enforces user privileges on data across use cases, including large language model applications traditional ml models.
How queries.
Speaker 4: As part of Horizon, we introduced Universal Search, which enables customers to search the data cloud. Customers can now discover data and metadata that exists across their accounts and in the Snowflake Marketplace.
Part of Horizon will introduce universal search, which enables customers to search the data cloud customers can now discover data and metadata that exists across their accounts and then the snowflake marketplace.
Speaker 4: Snowflake continues to win new workloads outside of its traditional scope. Snow park consumption grew 47% quarter over quarter.
Snowflake continues to win new workloads outside of its traditional scope snow park consumption grew 47% quarter over quarter.
Speaker 4: Consumption in October was up over 500% since last year. Over 30% of customers used Snowflake to process unstructured data in October .
Consumption in October it was up over 500% since last year over 30% of customers do snowflake processed unstructured data in October.
Speaker 4: Consumption of unstructured data was up 17x year over year.
Consumption of unstructured data was up 17 X year over year.
Speaker 4: Our newest streaming capability, Dynamic Cables, entered public preview earlier this year. Approximately 1,500 customers are using the feature and initial adoption is outpacing expectations.
And our newest streaming capability dynamic cables entered public preview earlier this year.
Approximately 500 customers are using to feature an additional initial adoption is outpacing expectations.
Speaker 4: We have a number of major new capabilities becoming broadly available in Q4. Our native apps framework will go GA, Unistore for transaction processing, Snowpark Container Services, and Apache Iceberg tables will all enter public preview. These products unlock substantial new workload expansion opportunities.
We have a number of major new capabilities, becoming broadly available in Q4, our native App framework will go <unk> you.
Union storage for transaction processing Snow Park container services, and Apache Iceberg tables will all enter public preview these products unlocked substantial new workload expansion opportunities.
Speaker 4: We are campaigning globally to expand our audience. This fall, our Data Cloud World Tour traveled to 26 cities worldwide. In-person attendance at these events reached 23,000, nearly double from last year.
We're campaigning globally to expand our audience. This fall our data cloud World tour travel to 'twenty six cities worldwide in person attendance at these events reached 23000 to nearly double from last year.
Speaker 4: Next up is our Build Developer Conference in early December , where we anticipate 35,000 registrations. Build is focused on building apps, data pipelines, and AI ML workflows. We hope to see you there.
Next up is our build developer conference in early December where we anticipate 35000 registrations built is focused on building apps data pipelines and AI ml workflows, we hope to see you there.
Speaker 5: With that, I will turn the call over to Mike. Thank you, Frank. In Q3, we saw strong consumption from a broad base of customers. Our performance was evenly split between large and small accounts. Our largest customers stabilized as expected. Migrations drove growth in Q3. Our two fastest growing customers were both migrating workloads from a legacy vendor. One of these accounts is in their second year on the platform, the other in their eighth year on the platform.
I will turn the call over to Mike. Thank you Frank and Q3, we saw strong consumption from a broad base of customers.
Formats was evenly split between large and small accounts, our largest customers stabilized as expected Mike.
<unk> drove growth in Q3, our two fastest growing customers, where it both migrating workloads from a legacy vendor one of these accounts is in their second year on the platform. The other in their eighth year on the platform.
Speaker 5: We added four customers with more than $5 million and two customers with more than $10 million and trailing 12-month product revenue in the quarter. Both in September exceeded...
Got it for customers with more than $5 million and two customers with more than $10 million and trailing 12 months product revenue in the quarter.
Growth in September exceeded expectations.
Speaker 5: For three weeks, consumption grew faster than any other period in the past two years. Consumption continued to grow in the month of October .
For three weeks consumption grew faster than any other period in the past two years consumption continued to grow in the month of October Q3 represented a strong quarter for bookings execution remaining performance obligations grew 23% year over year to $3 7 billion.
Speaker 5: Q3 represented a strong quarter for bookings execution, remaining performance obligations grew 23% year-over-year to $3.7 billion. Of the $3.7 billion in our PO, we expect 57% to be recognized as revenue in the next 12 months. APJ, an SMB drove growth in that new booking.
The $3 7 billion and our Po, we expect 57% to be recognized as revenue in the next 12 months.
P J and F&B drove growth in net new bookings, we are making significant progress in delivering margin expansion non-GAAP product gross margin of 78% was up approximately 300 basis points year over year.
Speaker 5: We are making significant progress in delivering margin expansion. Non-gap product gross margin of 78% was up approximately 300 basis points year over year. Improved terms from the cloud service providers have contributed to margin expansion. We also benefit from increase in consumption of higher priced editions of Snowflake. In Q3 price per credit increased 4% year over year.
<unk> terms from the cloud service providers have contributed to margin expansion. We also benefit from increasing consumption of higher priced editions of Snowflake and Q3 price per credit increased 4% year over year.
Speaker 5: non-GAAP operating margin of 10% was ahead of expectations. Operating margin benefited from revenue performance and increased hiring scrutiny.
non-GAAP operating margin of 10% was ahead of expectations operating margin benefited from revenue outperformance and increased hiring scrutiny non.
Speaker 5: Non-Gap adjusted free cash flow margin was 15% benefiting from favorable timing of collection.
non-GAAP adjusted free cash flow margin was 15% benefiting from favorable timing of collections. We ended the quarter with $4 5 billion in cash cash equivalents and short term and long term investments our strong cash position allows us to opportunistically repurchase shares in Q3, we used.
Speaker 5: We ended the quarter with $4.5 billion in cash, cash equivalents and short-term and long-term investments. Our strong cash position allows us to opportunistically repurchase shares. In Q3, we used $400 million to repurchase 2.6 million shares. To date, we have used $592 million to repurchase 4 million shares at an average price of $147.50.
<unk> $400 million.
We repurchased two 6 million shares year to date, we have used $592 million to repurchase 4 million shares at an average price of $147 50.
Speaker 5: Now let's turn to guidance. For the fourth quarter, we expect product revenue between $716 and $721 million, representing year-over-year growth between 29 and 30 percent. We are increasing our full year guidance to approximately $2.65 billion, representing 37 percent year-over-year growth.
Now, let's turn to guidance for the fourth quarter, we expect product revenue between 716 and $721 million representing year over year growth between 29% and 30% we are increasing our full year guidance to approximately $2 $65 billion.
Representing 37% year over year growth.
Speaker 5: Consumption trends have improved. We are seeing stability in customer expansion patterns. Our guidance is based on observed patterns and assumes continued stability of consumption. For the fourth quarter, we expect operating margin of 4% and 360 million deleted weighted average shares outstanding.
Consumption trends have improved we are seeing stability and customer expansion patterns. Our guidance is based on observed patterns and assumes continued stability of consumption for the fourth quarter, we expect operating margin of 4% and 360 million diluted weighted average shares outstanding for the full year we are.
Speaker 5: For the full year, we are increasing our non-GAAP product gross margin guidance. We now expect non-GAAP product gross margin of 77%. We still expect a product gross margin headwind in the fourth quarter associated with new products.
<unk>, our non-GAAP product gross margin guidance, we now expect non-GAAP product gross margin of 77%, we still expect a product gross margin headwind in the fourth quarter associated with new products.
Speaker 5: We are increasing our fiscal 2024 non-GAAP operating margin guidance. We now expect non-GAAP operating margin of 7%.
We are increasing our fiscal 2024 and non-GAAP operating margin guidance. We now expect non-GAAP operating margin of 7% we are increasing our fiscal 2024 and non-GAAP adjusted free cash flow margin. We now expect non-GAAP adjusted free cash flow margin of 27% for the full.
Speaker 5: We are increasing our fiscal 2024 non-GAAP adjusted free cash flow margin. We now expect non-GAAP adjusted free cash flow margin of 27%.
Speaker 5: For the full year, we expect diluted weighted average shares outstanding of $361 million. We are on track to add more than 1,000 employees this year, inclusive of M&A. With that operator, you can now open up the line for questions.
The year, we expect diluted weighted average shares outstanding of $361 million. We are on track to add more than 1000 employees. This year inclusive of M&A with that operator, you can now open up the line for questions.
Absolutely.
Speaker 2: Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you would like to turn that question. Please press star followed by two again to ask a question press Star one.
Speaker 2: As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as...
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question. We'll pause here briefly ask questions here, but I just said.
Speaker 2: Our first question is from the line of Mark Murphy with JP Morgan. Please proceed.
Our first question is from the line of Mark Murphy with Jpmorgan. Please proceed.
Yeah.
Speaker 6: thank you so much i love the eleven minute uh... earnings call and congrats on uh... on a fantastic result so frank we are hearing broadly that conversations are starting with generative a i and they're stopping at data uh... because they find their data states aren't in good enough shape are you sensing uh... more tangible uplift there around that concept that
Thank you so much I love the 11 minute earnings call and congrats on.
On a fantastic result, so Frank we're hearing broadly that conversations are starting with generative AI and theyre stopping of data.
Because they find their data as states arent in good enough shape are you sensing.
More tangible uplift there around that concept that snowflake might be on the front edge of AI projects, and perhaps seeing that spillover into customer conversations are.
Speaker 6: Snowflake might be on the front edge of AI projects and perhaps seeing that spillover into customer conversations or drive more pipeline for some of your other products like snow pipes and snow park and data sharing.
Five more pipeline for some of your other products like snow pipes.
Snow Park and data sharing.
Speaker 4: Generally speaking, yes. You know, one of the interesting things is that.
Generally speaking yes.
One of the interesting things is that.
Speaker 4: customers are now getting preoccupied with their data states because they have to get them into shape where they can productively take advantage of their newer technologies, which we are now also showcasing and delivering where they can just turn it on.
Customers are now getting preoccupied with their data as states because they have to get them into shape, where they can productively.
Take advantage of the newer technologies, which we are now also showcasing in delivering what I can just turn it on.
Speaker 4: and have well-governed frameworks to run them with all the things that they're used to from Snowflake. So it's definitely true that the frenzy and the high degree of interest in AI has a knock on the sack.
Well governed.
Frameworks to run them.
With all the things that they are used to from snowflake. So it's definitely true that the.
Frenzy and a high degree of interest in the AI.
As a knock on effect on the interest in and data strategy data platforms and people are also not just looking at the quality of their data and the optimization of our organization duration of data, but also what kind of data they need to be able to have access to some people have taken a much broader view of their data estates as well in terms of what's in it and what.
Speaker 4: on the interest in data strategy data platforms. And people are also not just looking at the quality of their data and the optimization or organization, curation of data, but also what kind of data they need to be able to have access to. So people are taking a much broader view of their data as well in terms of what's in it and what should be in it. Yes.
It should be in it.
Thank you very much.
Thank you Mr Murphy.
Speaker 2: Our next question is from Keith Weiss with Morgan Stanley . Please proceed.
Our next question is from Keith Weiss with Morgan Stanley. Please proceed.
Great. Thank you <unk>.
Speaker 7: Maybe just start off with a quick question on, sort of, you mentioned several times on the call, the stabilization that you're seeing within your growth, and we've obviously heard that from sort of your hyperscale peers as well. When you're looking at an account level, could you give us sort of an idea, like, how much of the stable is there?
Maybe just start off with a quick question on sort of you mentioned several times in the call. The stabilization that you are seeing within Europe.
Within your growth and we've obviously heard that from sort of your Hyperscale appears as well when you are looking at an account level could you give us sort of an idea.
How much of the stabilization is coming from cost optimization scrutiny alleviating versus sort of existing customers is slow walk migrations leaning in more versus customers leaning more into new products.
Speaker 7: from cost optimization, scrutiny alleviating versus sort of existing customers who slow walk migrations leaning in more versus customers leaning more into new products. Is there any way that you can kind of give us more color of what, what parts are playing out already and which are yet to come maybe into the next.
Is there any way that you can kind of give us more color of what what parts are playing out already and which are yet to come maybe into next year.
Speaker 4: Yeah, one of the things Frank, what I mentioned, you know, is the
I Wonder if Keith one of the things strength, what I mentioned.
As our customer.
Speaker 4: customer base has evolved in recent years to include much larger enterprises and institutions.
Our customer base has evolved.
Recent years.
To include much larger enterprises and institutions.
Speaker 4: you know, are typically not prone to overconsumption and unbridled expansion that they then later have to reset and rationalize. You know, because of that, the exposure.
Typically not prone to over consumption.
And unbridled expansion that they then later have to reset and rationalize because of that the exposure to these drastic resets and optimizations that we saw earlier in the year is getting less and less with each incremental quarter secondly.
Speaker 4: to these drastic resets and optimizations that we saw earlier in the year is getting less and less with each incremental quarter. Secondly, people have really driven themselves through these processes and rationalized themselves and are now in a good place to move forward. You can only optimize and rationalize so much. At some point, you know, it's diminishing returns.
People have really driven themselves through these processes and rationalize themselves and are now in a good place to move forward not only optimized and rationalized. So much at some point you know it's diminishing returns you will get tired of it and they're moving on to things that are that are now new and interesting, namely preparing for <unk>.
<unk> AI and ml technologies.
Speaker 5: I'll add to that too that why we see that stabilization is nine out of our top ten customers all grew quarterly, sequentially. And the other point I'll make is we are seeing a shift, as Frank mentioned, our biggest customers are mature enterprises we're seeing now and mature.
Ill add to that to that.
Why do we see that stabilization is nine out of our top 10 customers all grew quarterly.
Sequentially.
And the other point I'll make is we are seeing a shift as Frank mentioned, our biggest customers are mature enterprises, we're seeing now and mature enterprises have always scrutinize cost they always will.
Speaker 5: enterprises have always scrutinized costs. They always will.
Speaker 5: And so there's nothing new there and that will continue.
And so there's nothing new there and that will continue.
Speaker 5: And that's just the way anyone should run a business.
And that's just the way you have anyone should run our business.
Speaker 7: Got it. That's helpful. And then maybe one quick question on your sales and marketing headcount. Obviously we notice it's basically flat quarter over quarter this quarter. Um, but then again, it's only sort of one number. Can you shed some light in terms of like, what regions are you maybe leaning more into versus, um, getting more efficiencies or any sort of areas that you're investing in still? Because obviously growth seems pretty healthy. So just. Some column.
Got it that's helpful. And then maybe one quick question on your sales and marketing head count obviously, we noticed it's basically flat quarter over quarter this quarter.
But then again its only sort of one number can you shed some light in terms of like.
What regions are you may be leaning more into versus.
Getting more efficiencies or any sort of areas.
Investing in still because it's obviously a growth seems pretty healthy so just.
Some color on where you're investing versus not would be helpful.
Speaker 5: Yeah, so first of all in general with sales and marketing heads, most of those typically are added right at the end of Q4 or even more so the beginning of Q1 so people can get.
Yes, so first of all in general with sales and marketing heads most of those typically are added right at the end of Q4 or even more so the beginning of Q1, so people can get.
Speaker 5: involved in our sales kick-off and what I would say is we are continuing to invest very heavily in our sales and marketing function, in particular in Europe we talked about.
Involved in our sales kickoff and what I would say is we are.
Our continuing to invest very heavily in.
Our sales and marketing function in particular in Europe, we talked about.
Speaker 5: six months ago or so we added a new leader there. We have been changing out some people and investing and we're continuing to and we will continue to prune underperformers globally and invest more in the right people as we go forward. And APJ is another one that we continue to invest in.
Six months ago, or so we added a new leader there we have been change.
Changing out some people and investing and we're continuing to and we will continue to prune underperformers globally and invest more in the right people as we go forward and <unk> is another one that we continue to invest in.
Excellent. Thank you.
Thank you Mr White.
Speaker 2: Our next question is from the line of Ramo Linshaw with Barclays. You may proceed.
Our next question is from the line of Raimo <unk> with Barclays. You May proceed.
Speaker 8: Thank you. Congrats from me as well. Guys, you have like a crazy amount of new exciting products coming out. How do you think about the field setup here now going forward because you're going?
Thank you congrats from me as well.
Thank you.
The amount of new exciting products coming out how do you think.
I think about the setup here now going forward, because you are going to be able to address lots of different areas.
Speaker 8: be able to address lots of different areas from like classic data to kind of more AI. Does that mean you would sales approach needs to change? Frank here going forward and you know it doesn't sound like you are going to have crazy sales scores expansion here. Like how are you going to do that going forward and ensure that all these new products are actually finding the market? Thank you.
From like coffee eager to kind of more AI does that mean, you would sales approach needs to change Frank here going forward and it doesn't sound like you are going to have the craziness.
And as far as expansion like how do you want to do that going forward to ensure that all of these new products are actually finding that market. Thank you.
Yes, Theres actually that's actually an excellent.
Speaker 4: Yeah, that's actually an excellent observation. We have historically had one dominant selling motion that we deployed everywhere and anywhere. It has served us well. But as you correctly observe, the market has really changed when you go back to 2015.
Observation.
We have historically at sort of one dominant selling motion that we shall have deployed everywhere and anywhere that has served us well, but as you correctly.
Observe.
The market has really changed when you go back to 2015.
Speaker 4: Snowflake really swam in swim lanes that were very narrowly defined and very well understood. Now we're in the mega market. These are very, very broad-based platforms that are incredibly capable in many directions.
Snowflake.
Really swim and swim lanes that were very narrowly defined and very well understood now or in the Mega market right. These are very very broad based platforms that are that are incredibly capable in many directions and we've been working very hard as you've seen in recent years and delivering just an absolute.
Speaker 4: And we've been working very hard, as you've seen in recent years, in delivering just an absolute ton of capabilities.
Tonic capabilities to enable these platform in all of these different directions, I mean, our drive towards applications. The whole program Programmability framework, the onslaught of AI and ml capabilities. All of that is coming to fruition now we have a ton of irons in the fire and Theyre now all they're now getting.
Speaker 4: to enable these platform in all these different directions. I mean, our drive towards applications.
Speaker 4: the whole program programmability, you know, framework, the onslaught of AI and AM and our capabilities, all of that is coming to fruition. Now we have had a ton of irons in the fire and they're now all getting...
Speaker 4: So from a sales standpoint, we have much more specialization happening, and that is going to literally, you know, going all over the world because it is impossible for a single person to be.
So from a sales standpoint.
Much more specialization.
Happening and Thats going to literally going all over the world because it's impossible for a single person to be to be expert in all of these technologies and all these disciplines.
Speaker 4: to be expert in all these technologies and all these disciplines.
Speaker 9: So we're going to have people that have general purpose capabilities, sort of core skills, if you will. And then we will have teams, the specialists, that will augment these groups wherever they're needed. So our basic selling motions and how they are supported will evolve rapidly in the coming year. OK.
So we're going to have people that have general purpose capabilities sort of core skills. If you will and then we.
We will have teams of specialists that will augment these groups.
Wherever they are needed so our basic selling motions and how they are supported will evolve.
Rapidly in the coming year.
Okay makes sense. Thank you.
Thank you Mr. Lorenzo.
Our next question is from the line of Kirk <unk> with Evercore ISI. Please proceed.
Speaker 10: Yeah, thanks very much and congrats on the quarter. I guess Mike, could you just talk about the impact that some of these newer unstructured data workloads are having on consumption at all, meaning, you know, I assume it's still a very, very small part of overall consumption when you look at it, but you know, is that helping with the stabilization? Can they turn into sort of catalysts for acceleration as we get into 2024? Anything you can do to sort of dimensionalize the impact that has as we think out to next year. Thanks.
Yes, thanks, very much and congrats on the quarter.
I guess, Mike can you just talk about the impact that some of these newer unstructured data workloads are having on consumption at all meaning.
I assume it's still a very very small part of overall consumption. When you look at it but.
Is that helping with the stabilization can they turn into sort of catalysts for acceleration as we get into 'twenty for anything here to sort of dimensionalize the impact that has.
As we think out to next year. Thanks.
Speaker 5: Well, they're definitely helping with stabilization. I can't quantify exactly what unstructured is doing, but it's not just that. It's also, we're starting to see the effects more of Snow Park. That's doing very well for us right now. Some of the new things we're already seeing very early uptick in streaming and dynamic tables. We really...
Well there are definitely.
Helping with stabilization I can't quantify exactly what unstructured is doing but dispatches that itself. So we're starting to see the effects more of.
Snow Park that's due.
Doing very well for us right now.
Some of the new things, we're already seeing very early uptick in streaming and dynamic tables.
We really.
Speaker 5: I would say Streamlit is built into our forecast for next year. The other products, because they're new, we really don't build much in for that because we need history before we can do that. Clearly, we think a lot of these new products that are just going into public preview now in GA next year will be a catalyst for growth for us in 2025.
I would say Streamlet is built into our forecast for next year. The other products because they're new we really don't build much in for that because we need history before we can do that and clearly we think a lot of these new products that are just going into public preview in LNG and next year will be a catalyst for growth for us and.
2025.
One follow on.
AI is it technology.
We've been working on for quite a while and it really was on the basis of an acquisition we did.
Speaker 4: over a year ago, that is now going into preview. And it is incredibly popular out there. And what Document AI does, returns an unstructured document.
Over a year ago.
That is now going into into preview and.
It is incredibly popular out there and what document AI does return to an unstructured documents into a semi structured documents. So it can become a full participant in analytical processing. There is a ton of interest in that and so that really brings the entire state of unstructured data, which is 80% of the world's data.
Speaker 4: into a semi-structured document. So it can become a full participant in analytical processing. There is a ton of interest in that. And so that really brings the entire estate of unstructured data, which is 80% of the world's data, into the analytical sphere. So we do expect that to become very important, especially because AI and LLMs are so heavily focused on unstructured data, textual data, at least today.
Into the analytical sphere, so we do expect that to become very important and especially.
Because AI and ml lens are heavily focused on structured data textual data at least today.
Speaker 4: This will be something that will be a driver in our business.
This will this will be something that will be a driver in our business.
Speaker 10: Thanks. Mike, can you give us an update on where the federal opportunity stands? I know you guys were waiting to hear back on FedRAMP. Any update on that? Thanks.
Thanks, Mike can you just give us an update on where the federal sort of opportunities stand I know you guys are waiting to hear back on fed ramp any update on that thanks.
Speaker 5: You know, federal is a huge opportunity, and I would say it's upside-for us because it's such a small piece, but we should have our FedRAMP high authorization literally any day. I actually thought I might have had it today. So stay tuned. You'll see an announcement on that very soon.
Federal is a huge opportunity and I would say, it's upside for us because it's such a small piece but.
We should have our fed ramp high authorization literally any day I actually thought I might add today, so stay tuned you'll see an announcement on that very soon.
Thanks I appreciate it.
Thank you Mr Mittal.
Speaker 2: Our next question is from the line of Brad Reback with Stiple. You may proceed.
Our next question is from the line of Brad Reback with Stifel. You May proceed.
Speaker 10: Great, thanks very much. Just a quick technical question with Graviton4 now being announced by Amazon, should we think of any potential headwinds there?
Great. Thanks, very much just a quick technical question with Graviton for now being announced by Amazon should we think of any potential headwinds there.
Well as we told you before every year, we count on a 5% headwind associated with software hardware improvements Graviton for was just announced recently, we really have not.
Test of that and not all hardware improvements benefit our software.
We expect there will be some but we just don't know it's too early stay tuned and we'll update you when we have more information.
Great. Thanks very much.
Thank you Mr <unk>.
Our next question is from the line of Alex Zukin with Wolfe Research. Please proceed.
Hey, guys. This is you can book on for Alex you cannot congrats on the nice quarter.
My question is if you are.
Assuming the consumption trends persist through <unk>.
You're guiding I guess, what would be the biggest puts and takes to accelerate growth next year in the <unk>.
Zane.
We think about NRI, just given the stabilizing consumption trends I guess directionally when should we think about when we expect generally stable.
Stabilized trough.
Robert what level would you expect.
So I'll start with I'm not going to guide to and are I do see it stabilizing.
It could dip a little bit more.
Do expect over time as we've said, we will converge with our revenue growth at this size were at and clearly the biggest puts and takes for next year is going to be the to continue to see the stabilization we have.
We're seeing right now and what the impact of a lot of our new initiatives theyre going to be next year and it's just too early to tell right now into to guide to that so stay tuned for our February call. When we give guidance for next year.
Great. Thank you very much and congrats again.
Thank you Mr. Zhang.
Our next question is from the line of Brent Thill with Jefferies. You May proceed.
Yeah.
Thanks, Mike I think you mentioned there is a higher utilization on the higher tiers that youre offering can you just extrapolate what youre seeing there.
Well typically large enterprises or the ones using our business critical and vps and those guys are becoming bigger and bigger customers and as a result, we do see.
More of our revenue being derived from these very large companies who are using our higher skew, which has higher margin for us and that's what we're seeing there.
Okay and quickly for Frank when you think about just the overall AI impact do you feel like this is a bigger tailwind in the back half of 2004 do you think youll see it coming in early 'twenty. How are you or your thought process in terms of adoption in this wave.
In helping you when does that impact hit from a monetization perspective.
Speaker 4: You know, there's going to be, you know, a lot of, uh, nuances to, you know, how AI is going to unfold and translate itself into the effects, you know, on car business. It's not just like.
Just going to be.
A lot of nuances to how AI is going to unfold and translate itself into the effects on our business is not just like.
Speaker 4: turning on the switch and all of a sudden you see, you know, incremental, uh, you know, consumption, you know, happening, you know, as we said, you know, during the prepared, uh, you know, remarks, um, you know, we're already seeing that the interest in AI is also driving interest in the data strategy, which then has a knock on effect.
Turning on the switch and all of a sudden you see incremental.
Consumption happening.
As we said during the prepared.
Remarks.
<unk> already seen that the interest in AI is also driving interest in the data strategy, which then has a knock on effect.
Speaker 4: on consumption. It's also the expansion of the data universe that people are bringing in.
On consumption and also the expansion of the of the data universe that people are bringing in.
Speaker 4: quality of the data initiatives, all of that is going to bring incremental workload utilization to Snowflake even though...
The quality of the data initiatives all of that is going to bring incremental workload utilization to snowflake, even though you would normally not necessarily characterize that.
Speaker 4: you would normally not necessarily characterize that as AI, but these are things that are going to enable AI. And it might well be that a ton of the workload of AI is actually the proverbial iceberg where only the tip of it that's sticking above the water is really AI, but everything that has to happen to support it.
But these are things that are going to enable AI and it might well be.
One of the workload of AI is actually.
The proverbial iceberg, where only the tip of that stick in the both the water is really AI, but everything that has to happen to support as is happening below the surface and then we're going to be a huge beneficiary of that and we think that snowflake is super well prepared because our data is states are in very very advanced state because our customers have spent.
Years years and years and in some cases literally decades from from prior legacy platforms to building these estates secure into data and organizing and optimizing for the data to be completely trusted and sanctioned and their environments and that is a huge value. When you start tackling AI and ml models.
Thank you.
Thank you Mr. Joe.
Our next question is from the line of Patrick Colville with Scotiabank you May proceed.
Alright. Thank you so much for taking my question.
In your prepared remarks, you talked to very strong consumption in September.
Consumption continued to grow in October.
We're now 29 days through November can you just talk about trends thus far this month.
What I would say is trends are good but you have to remember it also has.
A big holiday in the U S. In the week of Thanksgiving is typically.
A slow week with that said.
I'm happy with the consumption, we're seeing and that's reflected in our guidance.
Perfect. Thank you so much.
Thank you Mr Colleville.
Our next question is from the line of Tyler Radke with Citi. You May proceed.
Hi, good afternoon. Thanks for taking the question wanted to ask you about container services. It sounds like you're seeing some good early momentum there more than 70 customers in private preview I'm curious how many of those are actually deploying large language model dropdown, there sounds like data and.
For those customers that are doing that what type of uplift or.
I'd kind of characterize that consumption when when they do that thank you.
Yes, Hi, this is Christian.
We have seen a variety of use cases, but.
Good number of those private customers are leveraging GPU instances in the retro payment services for.
Use of large language models, so for sure I mean.
As part of the early adoption use cases, and we've got lots of encouragement and excitement.
One out of the preview.
Great and just.
Question on go to market. So I think earlier this year you talked about some.
Execution issues and it seems like Thats been.
Partially resolved to get good results in APAC I guess do you feel like you have all the right key sales leaders in place at this point or are there still.
Since enrolls youre looking for.
I guess ultimately do you feel like you've turned the corner on those.
Execution issues as well.
Yes, it's Frank look.
And then the global sales organization that we're running.
We're running all the way from an on demand selling motion. That's on the tenant if you will by salespeople to an SMB to an ISP.
To mid range.
And then the extremely large customers there.
It's always a working process, there's always opportunity for improvement that's been true.
For for as long as I've been here.
I feel we're getting incrementally better stronger deeper in terms of our ability to sell we are becoming.
A much more consistent.
And more and more productive every day, so a lot of stability and a lot of a lot of progress, but this is something thats never over anybody has been in this business knows how this work it's a very dynamic.
Mix of things, but on the whole.
We have to as a company.
$3 billion or something of that order of magnitude at run rate, we lean hard on our organization to show up and deliver those results.
Every quarter, so it's becoming.
A formidable enterprise in terms of our go to market capabilities.
Okay.
Great. Thank you.
Thank you Mr Rodkey.
Our next question is from the line of Brent <unk> with Piper Sandler you May proceed.
Thank you and good afternoon, Frank we'll start with you here I think last quarter unstructured data was mentioned twice.
You've called it out here more than a dozen times you talked about October trends being up I think 17 X increase year over year.
How much of a game changer is this particularly as we think about document AI and Singapore containers coming out next year clearly a focus here. It certainly hasnt been an area youre supported in the past, but it feels like there is a sea change movement here, how much of a game changer unstructured data support.
Relative to the growth opportunity going forward. Thanks.
Alright look.
Unstructured data as I said earlier is the majority of the world's data and until relatively recently, it's been borderline unusable for analytical purposes, because of this unstructured and you cant reference.
And analytical workloads.
It's ironic that both through the on slide large language models that is also extraordinarily capable of dealing with textual data as well as things such as document AI, that's mostly developed and has been.
Turning to the market that this data is going to become a full participant in these types of workloads, it's super exciting because it's going to really.
And rich and really unlock insights and outcomes.
And all of that.
That we Havent had before so this is this is this is going to be a driver of our world as we know it in terms of this type of computing.
That's helpful and then Mike if I look at average consumption revenue per customer.
Those metrics improved on a growth perspective slightly year over year for the first time in over a year.
What are the driving factors there how much of this is just the optimization headwinds now starting to ease versus net new workloads coming onto the platform. Thanks.
What I would say and I'll repeat what I've said numerous times to investors optimizations are part of our life they've been happening at Snowflake from day, one they will continue to happen nothing is new with optimizations I don't see any big ones happening now, but thats not to say they won't happen in the future because history.
As shown they happen all the time most of the growth that we're seeing within our customers as we talked about two of our biggest growth customers was.
On Prem legacy migrations into South Lake. So there's initial migrations, but we're also seeing new workload expansion within existing customers as well too so it's.
There is no one thing thats driving it its just general consumption, we're seeing and I will say snow park is starting to kick in for us still not 10.
10% of our revenue that's a long ways to get to get there, but it's still meaningful for us.
Great to hear thank you.
Okay.
Thank you.
Mr Brookman.
Our next question is from the line of Derrick Wood with TD Cowen you May proceed.
Great. Thanks, I guess I wanted to dovetail off of that on premise legacy migrations.
I guess for Frank I mean, when we saw the macro hit I think it did.
Cause a slowdown in customers looking to re platform from on Prem to cloud.
Just curious I mean.
Guys are kind of highlighting consumption trends improving here, but wondering what youre seeing in the pipeline for new global 2000 accounts and if youre seeing legacy of re platforming initiatives start to kick back up now that the macro environment has gotten a little bit more stable.
Well I mean, there's no doubt that legacy re platforming is sort of the hard core of our business.
Almost surprisingly there is just enormous amount of workloads still sitting on premise.
That is still waiting to get migrated to the cloud. So I expect this to continue for a very long period of time, but.
Like I said, it's very important once once you get those data states into the clouds.
Our new architectures and our new technologies are now enabling opportunities.
That people haven't had before and so that drives workload expansion. So it's not just like okay. We're going to we're going to be doing in the cloud we used to be doing.
And that's the foundation of the business. It is definitely foundational, but the opportunity is really.
Gross from that that's been the Snowflake story from day, one because of what's now possible, we don't have to capacity constraints and people come again.
Unlimited numbers of workload to now with all the new technologies and transfer program ability AI and ml the sky's the limit.
Conversation with customers and I was telling US is that your problem is no longer the technology Youre problem is your imagination on your budget right now not that those are easy thanks, but technology is not holding us back anymore. It's our ability to harness the technology and then of course, you have to pay for it as well.
I'll just add to that there too on your question about global 2000.
Added to global 2000 from last quarter and as I've said, many times before selling into a global 2000 is that campaign. It's a one to two sometimes three year sales cycle.
With that said, we have a number of global 2000 and our pipeline.
For Q4, and what I also want to say too is not every global 2000 starts with an on Prem migration many of them start with a first gen cloud solution. They had purchased to migrate to snowflake, yes.
Almost all of them have a <unk>.
State, but that doesn't always happen at first.
It really varies by customer, but with that said, we still see a lot of on prem migration to be done over the coming years and.
And it's going to be for many many years.
Got it.
Mike a follow on for you really around <unk> and <unk>.
We've heard a more companies looking to take a pay as you go approach. So could you speak to what extent customers are shifting to that approach in versus annual or multi year commits and how that may play into your RPM growth trends looking forward.
No.
Yeah.
I don't see that that much the only time you see pay as you go or ones that who had signed a three year contract and then they run out of capacity and then they just pay as they go actually one of our top 10 customers like that they have until April to continue before they have to do another contract if they want to get the same pricing that they have.
I actually expect Q4 is going to be a pretty.
Significant bookings quarter with a number of renewals that are up or customers are going to do something.
And we continue to.
Push for three year contracts with their customers payment terms I do expect though that is one of the things I would rather give up on payment terms.
Discount to price per credit.
And Thats really.
I've said, all along I anticipate longer term customers will want to do more monthly in arrears payment terms and that is available to customers. It all comes down to what price you want to pay per credit and to date. Most people want the lower price per credit and are willing to pay in advance.
Sure.
Helpful. Thank you.
Thank you Mr. Wang.
Our next question is from the line of Joel Fishbein mature.
You May proceed.
Thanks for my question and congrats on the great quarter, I guess suites for you.
Snowflake summit.
Now to the expanded partnership with Microsoft.
I'm just curious how that partnership is going in.
We also announced a joint product integrations, so I'd love to get an update how thats going and how you feel about that going forward.
It's Frank.
Yes, we actually.
We saw quite a bit of energy.
Coming from the Azure platform this quarter.
The things that we worked on and the renewed relationship with Microsoft is really much better alignment.
In the field from a compensation standpoint that is super Super important.
Our world.
We're seeing the effects of that in the <unk>.
Microsoft platform really uptick.
During the quarter I don't have the exact numbers at hand, but it was.
It measurably.
Up so we're encouraged by the behavior, we're seeing in the field than we were.
We're encouraged in the overall sentiment that's developing in the field.
It's definitely.
Healthier agenda, then the relationship with Microsoft has been historically, so we're pleased and optimistic about it.
Thanks, any milestones we should be looking for there from the.
Sure.
Not really.
Thanks.
Thank you Mr Fischbeck.
Our next question is from the line of Mike <unk>.
With the Mexico. Please proceed.
Okay. Thank you for getting me on here and good to hear some of the earlier comments around Snow Park, which is consistent with some of the growing momentum we've heard some of our checks.
I think the question is probably more for maybe Mike or Christian but is there enough empirical data or sizable enough customer base, yet for snow park to start talking about.
The snow part customers I guess, what adoption of Snow park those for consumption versus non snow park customers or maybe how we should think about usage building over time.
It becomes a larger part of those customers workflows.
Yes.
I think it's still too early to tell I will say.
We have one customer doing is significant migration, which will incur.
Increase there.
<unk> and snowflake to roughly $1 5 million a year.
And there are a number of those that we've identified and POC, but we havent done the migrations I see that one customer going into production right now, which by the way has save them significantly on their legacy vendor.
So clearly there with some customers is quite meaningful the consumption, we're starting to see.
And we expect that trend will continue into next year.
Understood Thanks for calling that out Mike.
Okay.
Can you give us just because.
Our next question is from Patrick <unk> with JMP you May proceed.
Hi, This is Alan Hoffman on for Pat Thanks for taking the question and congrats on the strong quarter.
So starting off I guess, how much consumption comes from the different hyperscale or is there one that kind of a.
Is it split evenly between the three of US one kind of having the majority of compute share there.
No AWS by far is our biggest.
Followed by <unk>.
Azure and then <unk> is up two 3% right now.
Microsoft Azure is the fastest growing one but AWS is still 76% of our business with Microsoft being 21, as I said GCB is 3%.
I will tell you.
One of the reasons why <unk> is not as big as it is just so much more expensive for our customers to operate in <unk> than it is in AWS and Azure and as a result of our salespeople are really not inclined to do much in GCB.
Thank you and then doing bigger picture, maybe just one question for Christian as well.
Is the goal of the data scientists do serve kind of change as we move through the era of big data and machine learning and now into AI and I guess, where do you see that going in the future.
Yes, we see excellent.
On both.
<unk> data science.
Old platform, and we had a number of announcements.
For those types of use cases.
Obviously.
Lots of interest on generative AI and longtime was models.
We have also expanded scope is obviously the ability to do both hosting so by container services, but more seamless inferencing.
News Corp. So we see strong demand from our broad customer base for both types of use cases.
Great. Thanks, so much.
Thank you Mr Waldman.
Our next question is from the line of Gregg Moskowitz with Mizuho you May proceed.
Alright, Thank you very much Brian since you speak with a lot of large company exact I'm curious to hear any thoughts you have on IC budgets next year as well as whether there will be incremental budget dollars approved for AI in Canada, 24 or <unk>.
Primarily or maybe even entirely come from other areas.
No.
I don't even hear the words AI and budgeted in the same sentence.
In other words.
Going to make resources available.
To enable it.
What if anything is holding back is really.
Understanding how to do it.
It takes time and tech to mature and evolve deployment architectures, where everybody involved is fully confident and comfortable.
These are the right way to do it so you see a lot of.
Benchmark and compare and contrast experimentation testing all these kinds of thanks.
We're going to go through many many iterations of that we will as well.
I think the field will become very proliferated.
Large foundational models many many many.
Sub sector specialized models that are very very very deep, but also we are very very narrow in purpose. So it's going to become an enormous field I will tell you that.
When you talk to the.
The C suite.
And large enterprises people are.
<unk> for a reset of economics.
For example in contact centers.
<unk> optimizations supply chain management, I mean, really very very big impact.
Opportunities these are not sort of marginal incremental.
Thanks.
That has the attention data.
As always had that promise, but it's really on steroids now under the implements of the newer technologies that we're all excited about.
Very helpful. Thanks, and then for Mike.
Encouraging of course to hear that for three weeks consumption grew faster than any other period over the past few years over which three weeks, though did you see that particularly strong consumption was that post labor day or does it span of different time periods.
Post labor day.
Alright, perfect. Thank you.
Thank you Mr Moskowitz.
Our last question is from the line of Willpower with Baird You May proceed.
Okay, great. Thanks.
Mike you referenced.
Don in your top 10 customers.
It sounds like you're nicely.
Quarter over quarter, I guess I wonder was there any common use cases or products or common threads kind of driving that and any other color behind the strength there.
No. These are just all very large customers with massive data states that.
Two one was doing.
A big migration, but the others are just continuing to move workloads to stuff like very industry specific as well.
Okay, and maybe just a quick question on product gross margins last couple of quarters, you're kind of already at your longer term.
Target I think it sounds like there may be a couple of headwinds there in Q4.
Is this kind of a general level to expect going forward and maybe any color on.
Kind of the upside surprise I guess, if you will given it seems like you've gotten there faster than you might have expected.
Yes, I don't really see a lot of upside in our long term guidance and for a number of reasons.
The big headwind that we're seeing this quarter to our margin is with all these new products that are going into public preview, we have to start to amortize the costs associated with.
The software development costs that were required to capitalize under GAAP that are now going to start to be amortized on top of that in particular, something like unit store a lot of times when we introduce new products.
Many times, we actually have negative contribution margins until it takes us usually up to a half a year to nine months to actually <unk>.
Fine tune the software to get the.
To take costs out of operating those new features and so we just have so many new products that are coming out this quarter that if that is going to have a headwind on the margin.
That's helpful. Thank you.
Thank you Mr. Paolo.
That concludes our question first question as well as today's call. Thank you for your participation you may now disconnect your lines.