Bozeman, Mont.-based cloud data warehouse service provider Snowflake has gone public just over a year ago. Its price increasing by a third on the very first day of trading. It closed at $240. Since then, its shares have gained 31% by September 23 — a fraction of the S&P 500’s 36% rise.
Snowflake is expanding rapidly, but its latest earnings report predicts triple- or double-digit growth.
To boost its shares to a higher level, I believe it needs to exceed expectations when it releases the third quarter’s results and increases its forecast.
Snowflake collaborates in partnership with Amazon Web Services (AWS) to assist businesses in gaining the most value for their money from AWS’s machine-learning (ML) as well as artificial intelligence (AI) solutions. One of the companies -Western Union — told me that the collaboration had helped their business.
The partnership also includes Snowflake making significant payments in exchange for AWS for infrastructure services, as well as the possibility of competition with AWS’s data warehouse service.
Does the partnership between Snowflake and AWS help Snowflake grow? Although Snowflake did not share the profits it earned through AWS, in a statement about the AWS alliance, AWS said, “Amazon SageMaker (the ML-based service for which Snowflake is the data cloud provider among the fastest-growing services of AWS time. More than 100,000 of our customers are that use the AI/ML service.”
The Snowflake’s Hopes Beat Growth
For the quarter that ended in February 2021, even though it was slowing its previous pace before being listed, Snowflake continued to overgrow, beating the top-line expectations while losing more than the investors had anticipated.
What is the extent to which it’s slowing of growth? For the year ended January 2020, the sales of Snowflake increased by 173.7 percent to $264.7 million. Meanwhile, its net loss almost tripled up to $348.54 million. As I reported in July 2020, Snowflake reported a 121 percent growth in revenue during July 2020’s closing quarter.
That increase was still impressive; however, it was slower than the previous year. For the 2nd quarter of 2021, the company’s revenue rocketed 104.5 percent to $272.2 million, which is approximately 6% higher than analysts anticipated — and its loss for the second quarter increased by 251% to $190 million, according to market watch.
Snowflake expects its growth to slow to the still-high double-digit rate. In the first quarter that ended in October 2021, Snowflake expects product revenues between $280 and $285 million; the midpoint is 90% higher than its previous year’s sales. Snowflake anticipates for the whole 2022 fiscal year product revenues to be in the range of $1.06 or $1.07 billion, the midpoint being approximately 93% higher than what it had in the previous year.
“Snowflake was able to sustain its momentum through Q2 as it saw triple-digit growth of sales of its products, indicating a rise in the consumption of customers,” CEO Frank Slootman declared in a press release.
The Snowflake Collaboration With AWS
Snowflake and AWS collaborate to serve numerous essential customers such as Instacart, Western Union WU +1.1 percent, Anthem, Acquia, Convoy, and Siemens. In the year 2019, they saw their “co-selling opportunities doubled” as they collaborated to help businesses migrate to cloud computing,” noted the company.
The companies plan to increase their co-selling possibilities by focusing on specific industries such as financial service, entertainment, and media in the coming year.
The goal of this partnership is to assist companies in gaining insights that improve their efficiency and effectiveness.
One company that gains value through AWS is Zocdoc, A service that lets users connect to medical professionals. AWS’s ML software, SageMaker, enabled Zocdoc to start critical applications operating much more quickly by automating models’ development.
What’s the reason? Based on Amazon, Zocdoc data scientists utilized SageMaker from Amazon’s SageMaker to “build the train as well as deploy” models from the beginning to finish in “less than one day,” which enabled users to locate the appropriate doctor and schedule an appointment in the most convenient date and time. Before SageMaker, Zocdoc data scientists created models that “slowed down the design teams.”
ML models operate by analyzing every kind of data, both unstructured and structured (think tweets). Connecting all of this corporatist data ML is the point at which Snowflake can help.
The one AWS service compatible with Snowflake includes SageMaker Data Wrangler, software that can cut the time required to combine data for ML to “weeks into minutes” as per Amazon. In June 2021, businesses that utilize AWS SageMaker Data Wrangler can use Snowflake as a data source without writing any code.
AWS is delighted to collaborate with Snowflake. According to Bratin Saha, Amazon AI VP and General Manager of Machine Learning Services, told me in an interview on September 16, “SageMaker is growing fast because it generates invaluable customer insight. For instance, Georgia Pacific used [our product] to increase the speed of manufacturing paper to increase quality by 40 percent. Snowflake makes all relevant data readily available in our model.”
Snowflake sees tremendous potential in its partnership with AWS. The company’s SVP of Products, Christian Kleinerman, told me on September 16 “We can add value to customers because of two reasons. The first time we’ve done this in over 20 years, we have made advancements in database technology that can accommodate customers’ technical requirements. Companies can utilize our cloud to transform the correct data to ML models to generate business value. By collaborating with AWS, We will help to bring about a democratization of AI and ML by making it a part of every industry including entertainment, sports, and medical care.”
What Benefits Western Union Gets from the Snowflake/AWS Partnership
Western Union helps people and businesses transfer funds through more than 550,000 agent sites across the globe for millions of customers through digital and retail channels.
Western Union has enjoyed significant benefits from the partnership between the two. According to Pavan Yerra, the Senior Director of WU’s Chief Data Officer division, said to me on September 17, “We need a single point of truth to build models. Since we don’t bind ourselves to one cloud provider, we are grateful that Snowflake collaborates in conjunction with them all. Our models assist us in finding the best product for our various customer segments.”
Yerra mentioned that Western Union’s collaboration with Snowflake and AWS helps lower expenses by reducing the complexity of data transfer and increasing revenues by increasing its success in marketing rate by focusing more effectively on promotions to groups of customers who have a greater likelihood to buy.
Gartner Peer Reviews of Snowflake as well as AWS SageMaker
A more comprehensive selection of customers indicates that The Snowflake Data Warehouse and AWS SageMaker are famous among customers, many of whom believe there is room for improvement.
Snowflake Data Warehouse gets 4.7/5 stars from 141 users, according to Gartner Peer Insights. A positive review emphasizes how the product “simplifies the management of capacity and guarantees rapid response times for every type of workload in the company.” The less positive review focuses on the necessity for Snowflake to enhance the “user interaction and experience.”
In contrast, according to Gartner Peer Insights, SageMaker has slightly lower scores -it scores 4.3/5 stars out of reviews of 127. A positive review said that “the features that are available with SageMaker are quite amazing.” One less enthusiastic reviewer stated that Sagemaker can be helpful for inference; however it is not suitable for “training or managing data.”
Snowflake competes and cooperates with AWS.
In the year that Snowflake became public in 2014, CNBC wrote about its complicated connection with AWS. Snowflake is dependent on AWS to provide its infrastructure and has committed to spending $1.2 billion for AWS technology between 2020 and 2025.
Snowflake is betting on that. Like Western Union pointed out, Snowflake operates on different cloud platforms, like those offered by Microsoft and Google.
Snowflake is also competing with AWS’s cloud-based data warehousing service. As CNBC stated, “AWS is making heavy marketing and engineering investments in its rival, Redshift.”
In the year 2018, Amazon realized that Snowflake was gaining customers from Redshift. As a result, AWS established “a sales team to tackle the issue” and introduced Aqua to the service. Andy Jassy — now Amazon CEO — stated increases query performance by ten times over “any other cloud-based data warehouse software available,” reported CNBC.
Snowflake declares that it is content with the challenges of its relationship with AWS. According to Kleinerman in an email, “Our customer’s needs are the driving force behind every aspect of our work at Snowflake. We rival in the same space as Redshift on the subject of data warehouse space, and we collaborate with many other teams from AWS and SageMaker is a prime illustration of a strong partnership. Both companies have a keen understanding of these interactions, and the benefits far outweigh any competitive factors. We do everything that is most beneficial for the customer at the end of the day.”
Without a definitive response from Snowflake, I think that its partnership with AWS might not provide a sufficient boost in revenue to restore Snowflake’s triple-digit revenue growth.
Maybe its report for the third quarter will provide more information about the extent to which Snowflake can keep its growth rate from slowing.