Snowflake Inc at Citi Global TMT Conference Transcript

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

Question: Tyler Radke - Citi - Analyst : Great. So speaking of kind of the recent changes, the CEO transition was a big one earlier this year, Frank Slootman handing off the reins to Sridhar Ramaswamy. What have been the main highlights that you've seen, obviously, working with both executives? What has sort of Sridhar been focused on in the two quarters since he's taken over?

Question: Tyler Radke - Citi - Analyst : I've heard that people think of Frank as kind of this hard-charger. Sridhar might be an even harder charger than I've worked with.

Question: Tyler Radke - Citi - Analyst : Sridhar just doesn't sleep. There's not even a cot.

Question: Tyler Radke - Citi - Analyst : Yes. So as you think about the demand environment and kind of on the most recent set of results, I'd be curious just what do you think some of the biggest questions or misconceptions are coming out of last quarter. Obviously, you had a quarter where you delivered upside to your guidance range, and you also raised the full year product revenue by, I think, the biggest magnitude you'd ever done. But what are kind of the biggest issues that you think investors might be missing?

Question: Tyler Radke - Citi - Analyst : Yes, yes. One of the themes you also talked about on the GPU side, and we'll go into kind of the more gen AI-specific questions in a moment, but you did talk about some capacity constraints in certain regions in terms of GPU availability. Can you talk a little bit about those dynamics? And anything else beyond just the consumption volatility that investors should be aware of?

Question: Tyler Radke - Citi - Analyst : Right. And some of the other moving pieces that I think are more applicable in the second half of the year versus the first half are things like some of the performance optimizations that you put forth into your product every year as well as some larger customers looking at Iceberg tables and open table formats. Can you just walk through those dynamics for the audience? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 9:50PM, SNOW.N - Snowflake Inc at Citi Global TMT Conference

Question: Tyler Radke - Citi - Analyst : Yes. One question we've recently got around Iceberg tables is if a customer decides to sort of move the storage layer away from Snowflake and go to Iceberg, is there -- what's the magnitude of that sacrifice on the query performance? Is it --

Question: Tyler Radke - Citi - Analyst : Right, right. Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 9:50PM, SNOW.N - Snowflake Inc at Citi Global TMT Conference

Question: Tyler Radke - Citi - Analyst : Right. I guess do you have a view on the customers that do go to Iceberg? Is it going to be sort of a mix of managed and unmanaged? Or how do you think that plays out?

Question: Tyler Radke - Citi - Analyst : Right. It opens for them.

Question: Tyler Radke - Citi - Analyst : Right, right. Moving to the topic of gen AI, maybe we can start high level and then get into the specifics. But what is Snowflake's gen AI strategy? We get a lot of questions of just how does a traditional data warehouse look in the world of LLMs and JSON documents? How do you sort of see yourself playing in this evolving gen AI landscape?

Question: Tyler Radke - Citi - Analyst : Right. So maybe going back to the products, and we're obviously a few months post the Snowflake Summit where there was a lot of product announcements, Sridhar's been hard at work. As we think about the AI-enabled products at Snowflake, what's sort of the vision and road map? You talked about Cortex. I think that's one of kind of multiple ways that you're sort of addressing this market. But just sort of give us the -- give us a vision and how investors should think about that product. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 9:50PM, SNOW.N - Snowflake Inc at Citi Global TMT Conference

Question: Tyler Radke - Citi - Analyst : Right. Right. And then on the LLM side --

Question: Tyler Radke - Citi - Analyst : Right, right. But for customers that may have a preference on using something from Hugging Face or some of the -- I think you support a number of them.

Question: Tyler Radke - Citi - Analyst : Right, right. As you think about these new products, Cortex, we talked a lot about that. How is adoption going? I know it's early, but how are you thinking about the adoption curve? And how those -- the timing of when those become a meaningful part of the business?

Question: Tyler Radke - Citi - Analyst : Got it. Got it. And I think Sridhar has talked about seeing significant contribution from some of these emerging products, maybe as early as next year. I mean, how should we sort of think about the pace in which these ramp up? Because on one hand, I mean, 2,500 customers is -- it's, I think, 40% of your installed base or somewhat, which it's a pretty good start, considering these products are only out for a couple of quarters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 9:50PM, SNOW.N - Snowflake Inc at Citi Global TMT Conference

Question: Tyler Radke - Citi - Analyst : Right, right, right. And I think, no contribution expected from these new products embedded in the guide?

Question: Tyler Radke - Citi - Analyst : Right. Even though you're seeing something?

Question: Tyler Radke - Citi - Analyst : Right, right. As you think about Snowpark, we talked a little bit about Notebooks, which sounds pretty exciting. Are there additional products or feature improvements that you're looking to that can potentially grow that business? Obviously, I think $100 million is great, but it could be orders of magnitude larger.

Question: Tyler Radke - Citi - Analyst : Yes. You brought up your friends at Databricks. So I'd be curious how you're just thinking about the competitive landscape. Obviously, they're private, so we only get selective disclosure from them, but they seem to be on par to adding similar amounts of new business this year as you are. We'll see obviously, but how often are you running into them? Do you view them as your number one competitor? Just give us a sense on the competitive landscape.

Question: Tyler Radke - Citi - Analyst : Right, right. I guess I'm a little surprised to hear you say Microsoft is a bigger competitor than Databricks.

Question: Tyler Radke - Citi - Analyst : Yes, yes.

Question: Tyler Radke - Citi - Analyst : Yes. I guess on the partnership front with the hyperscalers, how are those relationships going? I think Snowflake is still sort of a Tier 1 partner. In terms of the Azure Marketplace and AWS, you have a good relationship. But any changes just as they're rolling out Fabric in arguably more competitive products? Or --

Question: Tyler Radke - Citi - Analyst : Yes. Yes. Definitely.

Question: Tyler Radke - Citi - Analyst : Right. Right.

Question: Tyler Radke - Citi - Analyst : Right, right. And I guess just going back to the last couple of quarters, we talked a lot about the consumption volatility. I think one thing that's been much stronger and less volatile, frankly, has been the bookings and commitments. You've seen very strong growth there. Can you talk about the strength? What are -- and a lot of these are multiyear, right? What are those conversations like with those customers? What are they sort of buying into from the platform vision that's causing them, in some cases, to commit nine figures of business your way?

Question: Tyler Radke - Citi - Analyst : And on the migration point, I mean, there's still a lot of legacy business out there, whether it's IBM or Teradata. You got even some of the Gen 1 cloud data warehouses like Redshift. You talked earlier about AI potentially accelerating some of those legacy migrations. How are you approaching that? Is there some relational migrator tool that you guys are introducing? How do you think about that?

Question: Tyler Radke - Citi - Analyst : Okay. So a lot of partner-led stuff on the AI front.

Question: Tyler Radke - Citi - Analyst : Right. Right. Right. Okay. And if you could just sort of think about the biggest opportunities on the legacy migration side and maybe throw in AWS in there too, how would you sort of stack rank it? It sounds like you're seeing maybe more Oracle now than you had in years past. But what does that mix look like?

Question: Tyler Radke - Citi - Analyst : Right. Okay. As you think about your go-to-market, I think you made some changes over the last few quarters just to incentivize consumption more than pre-committed bookings. Obviously, the bookings have continued to be strong. Several companies in like, call it, cloud consumption software have talked about some sales executions this year. How has -- how have those changes been executed at the sales force? Or how are you seeing kind of productivity levels and just overall how, considering some of the CEO-level changes and kind of the dynamics in the market?

Question: Tyler Radke - Citi - Analyst : Right, right. Okay. So sort of prioritizing the new logos, which got lost and -- because there's still a lot of Fortune 500 and Global 2000s that aren't Snowflake customers.

Question: Tyler Radke - Citi - Analyst : Yes. Internationally, how is execution over there? I think you made some international sales leader changes in the last year or two.

Question: Tyler Radke - Citi - Analyst : Right. Or that long of a deal. Got it. Got it. I guess, as we think about data sharing, you mentioned that earlier as kind of one of the key drivers and key use cases. Any way of sizing that opportunity or, I guess, that contribution across your base? And do you feel like we're still sort of in early innings of that adoption? I remember that was a huge kind of killer app or killer use case around the time of the IPO. But is that still the predominant driver that you're having in a lot of these customer conversations?

Question: Tyler Radke - Citi - Analyst : Right. And in the disclosure, I think you give every quarter around stable edges. Is that sort of the best way for investors?

Question: Tyler Radke - Citi - Analyst : Got it. Got it. I guess turning to profitability. Since the IPO, the margins have come up significantly, particularly on free cash flow. This year, you are reinvesting. We talked a little bit about the pressures on the gross margin side with GPUs. Also, Sridhar acquiring -- not acquiring necessarily, but hiring great talent, right, to build out these emerging products. How are you thinking just about the pace of profitability investors should expect here? And what are sort of the guardrails that you have in terms of ensuring that these AI contributions are ultimately going to be high margin long term?

Question: Tyler Radke - Citi - Analyst : Okay. Okay.

Question: Tyler Radke - Citi - Analyst : Right. Do you think on the revenue accelerate -- is that more just the contribution from new products? Or are there other things investors should be thinking about?

Question: Tyler Radke - Citi - Analyst : Yes. Yes. Got it. And then on the efficiency side, I mean, obviously, the faster you grow revenue, the easier it is to expand margins. But what are some of the ways that you would look to optimize efficiency?

Question: Tyler Radke - Citi - Analyst : Yes. Some optimizations of [tiers]. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 9:50PM, SNOW.N - Snowflake Inc at Citi Global TMT Conference

Question: Tyler Radke - Citi - Analyst : Right, right. Yes, that makes sense. Probably a lot of transition costs this year with the new engineering team. We got about a minute left. I thought I'd turn it over to you just if there was anything else that you wanted to hit on or stuff that maybe we didn't ask you about that you wanted to leave with investors before we wrap it up.

Question: Tyler Radke - Citi - Analyst : Right, right. Well, we look forward to that. Thanks for coming out to the conference, and appreciate everyone staying late with us. Thank you very much.