Have you watched the Barclays webcast with Snowflake’s CFO? I’m pulling the paraphrased notes I took from it when I watched it last month and apologize I may be butchering the webcast here but this is what I got from it (please watch it if you haven’t!):
“We have seen product revenue growth rate accelerate due to diverse broad based consumption on platform…NRR is fueled by the largest most mature customers…high NRR is very durable and will remain best in class…”
“Takes 9 months to see customers begin to consume at the contract rate…”
“Average customer consumption is increasing as they continue to move workloads”
“Many customers’ growth is dependent on consumption of SNOW, like lacework or coinbase”
“Never had a data science team in a finance department before. My data science team builds models using Snowflake to project customer by customer revenue on a daily basis, based upon the prior day’s customer consumption. We dive deep into the top 50 customers with our sales team for a sanity check on these projections”
“Our sales reps are increasingly motivated for consumption of existing customers. Some reps have quotas on growth (acquiring new accounts) vs consumption (from existing accounts). Some are 90% growth, 10% consumption. Some are 10% consumption, 90% growth. We rebalance sometimes so reps might keep an account for one year or longer…we want reps that understand each customers’ business, in order to translate values to that business. We are focused on the vertical clouds to generate new use cases that our reps are focused on”
"We have over 300 customers built directly upon Snowflake. But the vast majority are on-prem, and they will all eventually find new use cases, which is why our NRR is so strong and durable. Only thirty of our customers have completely shutdown Teradata. The vast majority will take many years to migrate all of their workloads. That’s why you will see us have very high NRR that will stay best in class."
"The founders always had data sharing in mind and it is part of the architecture from day one…we are seeing investment companies, hedge funds, financial service customers are asking their vendors to be on snowflake to facilitate data sharing. For example our media cloud data cleanroom (NBC, disney) - video streaming customer and retail customer can share data to help target specific advertisements and monetize their data. Data sharing is very much early innings and not yet a driver of revenue, but it is driving customer lands as they all very much want to data share.
“More and more companies want to replatform onto Snowflake, like Blackrock, or to build new offerings on Snow. We see lots of small tech companies want to replatform onto Snow. I deal with these companies on a daily basis. It takes time for the small companies to be meaningful, but it all opens the opportunities for data sharing.”
“We don’t want sales productivity to go too high too quickly, because it means you are missing out on opportunities… We see successful enterprise sales reps that come out of onboarding into our inside BDR sales team program for a year or two, then go into inside sales for a year or two, and then they become enterprise sales rep. Some of the strongest enterprise sales reps come out this way. We have good muscle for onboarding new people. The reps dealing with our major accounts are those with twenty plus year experience.”
What I’m seeing:
1.) Most customers are still on-prem, and these will take years to migrate more and more workloads onto SNOW. The NRR is also said to be driven by large, mature customers. Combine these two, and you could have product revenue growth sustained for an incredibly long time, possibly for years, from existing customers alone. The CFO sees their NRR remaining best in class for a reason.
2.) There are an increasing number of customers landed where their business growth is directly tied to (dependent upon) the use of SNOW. Think about AMPLITUDE or BRAZE, which are hypergrowth companies talked about on this board. https://www.braze.com/resources/videos/the-power-of-braze-an…
3.) Data sharing looks like it will be a huge driver of future product revenue through increasing use cases by existing customers, and also driving future customer lands
4.) Using sales headcount to measure incremental customer lands is not going to be very useful.
First, some sales reps don’t even go into enterprise sales until 1 to 4 years out from onboarding.
Second, you have no idea what mix of sales reps are directed toward something like 90% consumption quota versus 10% growth quotas.
While number of customers added are something to pay attention to each quarter, I won’t sell out of SNOW unless I see actual product revenue growth decelerate too quickly.
5.) And as many other posters have already pointed out, the customer mix is very heterogeneous. One large customer land could be driving 8 or 9 figure contracted minimum spend deals.
6.) Others have also pointed out the comparison to hyperscalers. SNOW could very well be like one of them - the market has seen how AWS can grow at ridiculous rates for years (and years more to come), and I believe the market will value SNOW accordingly. What I mean is, when SNOW does decelerate from triple digit growth rates, its high growth durability is likely to remain intact, and that might be much, much more highly prized than any of us can anticipate.
Data growth is exponential, use cases growing constantly. SNOW is consumption based. This is vastly different from other hypergrowth companies like CRWD. CRWD’s growth is heavily dependent on customer lands - there’s only so many modules they can compel their customers to add in the long-term. So when CRWD has persistent deceleration, the market will not assign large forward multiples anymore - it believes high growth can’t be durable for years to come.