Snowflake Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Keith Weiss - Morgan Stanley & Co LLC - Analyst : Excellent. Thank you guys for taking the question and congratulations on a solid quarter. It's really good to hear about the optimization starting to normalize. You guys are -- you seem to be settling into just about like a 30% product revenue growth rate over the past couple of quarters. There's a lot of concerns coming into this quarter about impacts from Iceberg Tables. There was concerns that accrued during the quarter about the data leakage. That wasn't your fault, but it definitely was a marketing headwind. There was concern about the Crowdstrike cybersecurity incident maybe impacting consumption. Were any of these outsized impacts -- were any of these additional impacts on the consumption in the corridor versus what you guys were expecting when you originally gave us the guide? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 9:00PM, SNOW.N - Q2 2025 Snowflake Inc Earnings Call

Question: Keith Weiss - Morgan Stanley & Co LLC - Analyst : Got it. And then was Iceberg Tables in line with your expectations?

Question: Keith Weiss - Morgan Stanley & Co LLC - Analyst : That's super helpful. Thank you, Mike.

Question: Raimo Lenschow - Barclays Bank PLC - Analyst : Thank you. Two quick questions. Mike, can you give the gross margins this quarter are better than model? Can you speak to some of the factors for that? And then Sridhar, for you, like -- around the Iceberg ecosystem, there's obviously -- there was a lot of change this quarter with the tabular acquisition by someone. What do you see in terms of attracting talent to drive the roadmap forward there? Like, how is your positioning in that Iceberg ecosystem evolving? Thank you.

Question: Raimo Lenschow - Barclays Bank PLC - Analyst : Okay, perfect. Thank you, well done.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Thank you very much, a lot of my congrats. Mike, you mentioned a couple of nine-figure deals in the quarter. I'm curious if those are renewals with expansion, or perhaps if they're related to anything else, for instance, Iceberg Tables unlocking new business where companies want to tap into some larger data sources that are in an open format, or just whether there's anything else to call out on the nine figure deals? And I have a quick follow up.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Yeah, I understand. Okay. And then as a follow up, as we start to think forward into the next fiscal year, I think we're trying to balance out the large slate of products that recently reached a GA that you mentioned, TRIDAR, and might start to contribute. Then on the other side of the ledger, potential for any discrete headwinds from hardware and software improvements that you pass along. Storage compression, in the past you had auto warehouse, I think. Any high-level thoughts, Sridhar, on how to pencil that out in terms of new products, you know, ramping and then on the other side some of those improvements?

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Thank you.

Question: Kirk Materne - Evercore ISI - Analyst : Yeah, thanks. Just two really quick ones. Sridhar, actually, a lot of your partners and customers at the Summit event talked about the excitement around some of these newer products like Cortex and Snow Park. But one of the refrain was, we just need better maps to understand how to use them. And from an industry perspective, it came up a lot too (technical difficulty) country is really, you are being. [the product that they can push in the ROI].

Question: Kirk Materne - Evercore ISI - Analyst : (technical difficulty) I'll stop here. Thanks.

Question: Kash Rangan - The Goldman Sachs Group Inc - Analyst : Hey, thank you guys. So one for you, Sridhar. One for you, Mike. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 9:00PM, SNOW.N - Q2 2025 Snowflake Inc Earnings Call Sridhar, when you look at the product portfolio, some clearly initiative is to get these services out in quick cadence. I think you pointed out the net new 809 services. But one of the conversations with customers, like when they are discussing these services with you, what is your take on where we going to be a year out with the consumption profile of an average Snowflake customer, kind of this, I think, on average? How do you see that mix changing between the core, if you want to just bluntly call it, warehousing, later revenues versus unstructured data, what are we calling it, Cortex, AI, and the other emerging buckets, how does that mix change for customers as they start to appreciate the net new products you have coming out? And one for you, Mike. You said that the second force compensation tilt towards consumption is still in its early days. But you also intimated that in fiscal 2006, we could start to see the fruit of all this. So help us understand what you mean by that and what are the KPIs that you'd be internally monitoring to inform you, and therefore us, that that tilt towards getting more consumption within your customers is actually working to your advantage? Thank you so much.

Question: Karl Keirstead - UBS Investment Bank - Analyst : Thank you, guys, one for you through the ones that you might come through that. When you look at the product portfolio, sincerely initiative is to get these services can quickly. And as you pointed out, the net new Internet services, one of the conversations with customers like when they are discussing new service with you or does it take on where are we going to be a year out with the consumption profile of an average Snowflake customer and kind of the business, I think on average? How do you see that mix changing between the core ones? Just bluntly conduct some warehousing later revenues versus unstructured data, literally uncluttered Cortex AI. And the other emerging buckets, how does that mix change for customers as they start to appreciate the net new products you have coming out? And one for you, Mike, you said the force compensation still tours consumption is still early days, but you also intimated that in fiscal 2006, we could start to see that hood of all the. So help us understand what you mean by that and what are the KPIs that you'd be turning monitoring to inform you in there for us that that tilt towards getting more consumption within your customers is actually working toward package? Thank you so much.

Question: Kash Rangan - The Goldman Sachs Group Inc - Analyst : Excellent. Thank you so much.

Question: Karl Keirstead - UBS Investment Bank - Analyst : Okay, great. Hey, Mike, I'd love to just ask you about usage trends as you closed the July quarter and what assumptions you're embedding in the second half product revenue guide? I think we've -- everybody on the line has heard fairly ample evidence from Microsoft all the way down that it's a tough IT spending environment. So I'm just curious, as you set the 3Q and 4Q product revs guide, what you would call out as the key variables or maybe changes in macro related assumptions that you embedded in that guide? Thank you.

Question: Karl Keirstead - UBS Investment Bank - Analyst : Okay, Mike. And then just maybe a follow-up. I know that you've embedded in your guidance the assumption of some degree the runoff of the storage revenues that you just repeated earlier, still represent 11% of revs. Is the expected pace of that storage runoff in this new guidance tracking similar to what you embedded three months ago? Or is it a little bit lighter or a little bit faster?

Question: Karl Keirstead - UBS Investment Bank - Analyst : Okay. Thank you, Mike.

Question: Brent Thill - Jefferies LLC - Analyst : Thanks. Sridhar, can you give us an update on the adoption of Cortex and how you're seeing that trend? And from Mike, just on RPO, it's good to see really good sequential growth in the acceleration of RPO, but the gap between revenue and RPO continues to be one of the highest we've seen. Is there anything that's going on that we should consider there? Is this just similar on a consistent patterns you've seen in the past?

Question: Brent Thill - Jefferies LLC - Analyst : Thanks.

Question: Brad Zelnick - Deutsche Bank Securities Inc - Analyst : Great. Thanks so much for taking the question. It's really a bigger picture question for Sridhar; maybe, Christian. If the world increasingly interacts with data through generative AI and LLMs, how does the role that data warehouse, as we've known it for decades, evolve from here? And why is Snowflake well-positioned to help enterprises bridge these worlds, leveraging mountains of enterprise data to build newer-generation AI applications? Thanks.

Question: Brad Zelnick - Deutsche Bank Securities Inc - Analyst : Thank you very much for that, Sridhar. Maybe just a quick one for you, Mike. Am I too optimistic to think that ARR could stabilize here, especially in light of all the new product that you guys are bringing online? Thank you.

Question: Brad Zelnick - Deutsche Bank Securities Inc - Analyst : Makes sense. Thanks so much, guys.

Question: Joel Fishbein - Truist Securities Inc - Analyst : Thanks and congrats on the good execution. Sridhar, you spoke about this hospitality customer using Iceberg. Can you give us some more color about that use case and maybe ROI? And maybe if that use case may be used as an example to attract other customers? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 9:00PM, SNOW.N - Q2 2025 Snowflake Inc Earnings Call

Question: Joel Fishbein - Truist Securities Inc - Analyst : You talk about a hospitality customer using Iceberg for a specific use case. I was just hoping to get a little bit more detail and color around that. And then maybe if that can be used as an example to attract other customers?

Question: Joel Fishbein - Truist Securities Inc - Analyst : Okay, thank you.

Question: Patrick Colville - Scotiabank - Analyst : Thank you so much for taking my question. So my question is for Sridhar. I want to ask about kind of classic data analytics and warehousing. Do you mind commenting on the pace of migrations, new analytical workloads coming online, query placing, competition in analytics now versus six months ago? Is there anything to call out there?

Question: Patrick Colville - Scotiabank - Analyst : Super helpful. Thank you, all three of you, for answering that question. I guess I want to ask a quick follow-up. I'll leave it open to whoever wants to answer. It's about the prepared remarks saying you're not factoring in benefit from new products and then only minimal benefit at fiscal '25 from Cortex and Snow Park. I think when could those hockey stick and more materially drive product revenue? Because the previous answer was that the call is rock solid and very healthy. So what about the new stuff and when that's gonna really reflect? Thank you.

Question: Patrick Colville - Scotiabank - Analyst : Thank you so much.

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : Hey, great. Thanks. I appreciate you taking the questions. Sridhar, I want to go back to that last point just to ask your perspective. You mentioned innovation as a key focus areas. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 21, 2024 / 9:00PM, SNOW.N - Q2 2025 Snowflake Inc Earnings Call So as we're thinking about those newer product efforts and you are having those initial customer conversations, particularly around Summit, what are the couple of product areas beyond Snow Park that you see the most certainly demand signals or just how's customer conversation around?

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : That's helpful. I also just -- summarizing a lot of the little comment on rest of your guidance, just go back to that point. We initially started the year with I think it was around 625 basis points of potential impact contemplated from the mix of things you've talked about throughout the calls. Is that still the right zip code for us to think about? And is it fair to assume that you're leaving room for storage to come down from 11% level and the second half, but you're not seeing that at this point? Is that the right takeaway for us?

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : Understood. Thank you.

Question: Tyler Radke - Citigroup Inc - Analyst : Yes, thanks for taking the question. Encouragingly here that you didn't see any negative impacts from the cyber headlines intra-quarter. I was wondering if you could just sort of talk about some of the offsets to this strong consumption impact in financial services customers that you saw? The magnitude of the [beat] was smaller than maybe some Q1. And I know there were some may be part of the trend in Q1 that didn't continue into Q2. But if you could just help us reconcile the magnitude of the smaller from Q1 into Q2? That would be great. Thank you.

Question: Tyler Radke - Citigroup Inc - Analyst : Yeah. Helpful. Helpful commentary. On cash flow, I think collections were a bit lighter. I think that could be a function of the go-to-market changes. You talked about on the full year cash flow outlook was maintained. Can you just talk about the moving pieces in cash flow? Is there any impact from lower CapEx just given some of the GPU availability you talked? And are you seeing kind of the billings terms compress more than expected?

Question: Tyler Radke - Citigroup Inc - Analyst : Right. Thank you.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Great. Thanks, guys. Mike, for you, there was an early question on gross margins. It sounds like you still have some GPUs to procure in the second half. But I'm curious now that you're kind of thinking through the impact of AI on Snowflake confidence in sort of the medium term that the gross margins have in fact bottomed. And I think we could see start to see it upward trajectory here at some point?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Got it. Thanks, Mike. And then with US Fed being a big quarter for you guys, next quarter, and sort of, I guess, some of the uncertainty in the US election, have you discounted some of some US Fed expectations for 3Q? Just kind of kind of curious on sort of how you should think about how we're thinking about that vertical going into next quarter.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Got it. Great color. Thanks, Mike.

Question: Aleksandr Zukin - Wolfe Research LLC - Analyst : Hey, guys, thanks for taking the question. Mike, maybe to the -- and Sridhar, may be to the question you got a little bit earlier, obviously, really, really great commentary on bookings growth, RPO strength, the raise being more than double the B, which is, I think, the strongest brands in a while for product revenue. But to the public, what -- it's a little bit surprising to hear kind of technology being a strong vertical for you guys. Can you maybe talk about what you're seeing from the financial services and technology verticals that is maybe different? Is it just the macro in those areas as the use cases? And maybe where it was a little bit on the other side, a little bit weaker and kind of what you expect there?

Question: Aleksandr Zukin - Wolfe Research LLC - Analyst : Got it. And then maybe just just one more. If you think about the competitive landscape, that's kind of been a lot of the got a little bit of a charge topic this year, particularly for investors, what are maybe some of the major misconceptions or misunderstandings that you would say are out there? And how -- or any changes you observed in the competitive landscape over the course of the quarter or even the first half of the year or from a pipeline perspective?

Question: Aleksandr Zukin - Wolfe Research LLC - Analyst : Super helpful. Thank you, guys.