The Bessemer State of the Cloud Report includes a very interesting new metric, the growth endurance rate.
Growth Endurance equals current year growth rate divided by last year’s growth rate.
Essentially growth endurance is a measurement of how well a company sustains its growth year to year. Bessemer talks about how the market has underestimated growth endurance for cloud software - something we have been well aware of.
They have an interesting scatterplot showing the range of growth endurance across cloud companies. The median growth endurance is around 80%. So if a cloud company is growing 50% this year, one could make an odds-on bet, knowing nothing else about the company, that it will grow 40% next year.
That said, some companies will experience accelerating growth, with growth endurance over 100%, and some companies will have less growth endurance.
I think this is a nice way to get one’s mind around exponential growth and decide if a company is trading at an insane valuation or not.
Take Snowflake, for example, the poster child for “extreme” valuation.
Their TTM revenue is 489.3M and grew 117.4% last quarter.
If Snowflake experiences the median growth endurance of 80%, their next five years revenue will look like this.
ttm +1: growth 93.92%, rev: 948.9m
ttm +2: growth 75.14%, rev 1661.8m
ttm +3: growth 60.11%, rev 2660.7m
ttm +4: growth 48.09%, rev 3940.1m
ttm +5: growth 38.47%, rev 5455.8m (March 2026)
With a present day market cap of 67.32 billion, we can infer that snowflake, if it looks to be a typical cloud business, is trading at 12.34x Mar 2026 earnings.
While this is just napkin math, it gives us a basis for deciding if we are bullish or bearish. We can ask ourselves to what degree Snowflake will have to outperform in terms of growth endurance for its valuation to rate as a buy, and how likely that outperformance is to occur. This is where we get out our crystal balls and think about competitive advantage and industry profile and all that. Profitability also needs to be factored in because we’ve seen companies like Teladoc experience a significant degree of dilution. On the other hand, Paycom is buying back shares.
What I like about growth endurance is that it is a starting point. I’d love to find companies where I can say, “This is a company that should have great growth endurance, and even if this company experiences drastically less growth endurance than the median cloud company, it is still undervalued.”
In the Snowflake example, I do like what I see. I do believe the company will have a better growth endurance than the median, and I’m happy to own some shares based on the numbers here. We won’t really have a sense of Snowflake’s growth endurance until it reports a few more quarters, but we can likely infer growth endurance of other companies through past results. Okta for example seems to have quite a high level of growth endurance.
Anyways, I just thought this was an interesting metric from the Bessemer report that I wanted to bring to the board’s attention.