Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Product revenue for Q2 was $829 million, up 30% year over year.
- Remaining performance obligations totaled $5.2 billion, with year-over-year growth accelerating to 48%.
- Strong adoption of new AI capabilities, with more than 2,500 accounts using Snowflake AI weekly.
- Significant customer wins, including Capital One, NBCU, Petco, Pfizer, Snapchat, and Western Union.
- Successful Snowflake Summit with 15,000 on-site attendees, showcasing new products like Cortex AI and Iceberg.
Negative Points
- Non-GAAP product gross margin of 76% was down slightly year over year.
- Non-GAAP operating margin of 5% is lower year over year due to increased R&D and go-to-market investments.
- Cybersecurity incidents involving customers, although not Snowflake's fault, created marketing headwinds.
- Challenges in GPU availability affecting some deployments, particularly in Asia and Europe.
- Storage revenue, which is 11% of total revenue, is expected to face headwinds in the second half of the year due to Iceberg.
Q & A Highlights
Q: Were any of the cybersecurity incidents or the Crowdstrike outage impactful on Snowflake's consumption this quarter?
A: Sridhar Ramaswamy, CEO: The cybersecurity incident had no impact on our consumption. The Crowdstrike outage was minimal and did not affect our production. Iceberg Tables are rolling out as expected, with 400 customers using it for new workloads.
Q: Can you explain the factors behind the better-than-expected gross margins this quarter?
A: Michael Scarpelli, CFO: Margins were slightly better due to delayed GPU deployments. However, we maintain our full-year margin guidance of 75%.
Q: What is the impact of the tabular acquisition on the Iceberg project?
A: Sridhar Ramaswamy, CEO: The acquisition has no impact on the Iceberg project, which is an Apache open-source project. We see it as a validation of our strategy to bet on Iceberg.
Q: Can you provide more details on the nine-figure deals signed this quarter?
A: Michael Scarpelli, CFO: These were renewals with expansions from existing customers, not net new customers. They plan to do more with Snowflake, but Iceberg was not specifically a factor in these deals.
Q: How do you see the mix of Snowflake's product consumption changing over the next year?
A: Sridhar Ramaswamy, CEO: Customers typically start with data platform adoption, then move to collaboration and data engineering. AI is gaining traction, but it's too early to specify percentages. Our goal is broad adoption and significant revenue growth.
Q: What are the key variables in your second-half product revenue guidance?
A: Michael Scarpelli, CFO: We see a stable customer buying pattern and positive consumption trends. The guidance includes expected storage runoff in the second half.
Q: Can you update us on the adoption of Cortex AI?
A: Sridhar Ramaswamy, CEO: Cortex AI adoption is strong, especially for text analysis and sentiment detection. We also see demand for Cortex Analyst and Cortex Search, which enable easier data interrogation.
Q: How is Snowflake positioned to help enterprises leverage data for AI applications?
A: Sridhar Ramaswamy, CEO: Snowflake is often the central data platform for enterprises. Our ease of use and reliability make us well-positioned to drive AI and machine learning applications.
Q: Have you noticed any changes in sales cycles or demand generation due to cybersecurity headlines?
A: Sridhar Ramaswamy, CEO: We proactively address security in conversations with customers. There has been no noticeable effect on sales cycles or demand generation.
Q: Can you provide more details on the hospitality customer using Iceberg?
A: Sridhar Ramaswamy, CEO: The customer adopted an open platform architecture, starting with a small use case to validate interoperability before scaling up.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
