SNOW • 10-K • FY 2022 • Positive

Snowflake's Hypergrowth Continues with 106% Revenue Surge Amid Rising Costs

March 30, 2022 • 1 min read

TL;DR

Snowflake delivered exceptional growth with revenue reaching $1.219B, up 106% YoY, demonstrating continued strong enterprise adoption of their data cloud platform. Product revenue grew 106% to $1.14B, while remaining performance obligations jumped 99% to $2.6B. However, operating losses widened to $715.1M as the company invested heavily in sales expansion and R&D. Customer count grew 44% to 5,944, with net revenue retention rate at 178%, suggesting strong upsell momentum but also rising customer

Financial Performance Overview: Revenue surged 106% YoY to $1.219B, driven by strong product revenue growth of 106% to $1.14B. Gross margin improved slightly to 75% from 74%, while operating margin deteriorated to -59% from -54% as sales and marketing expenses grew 115% YoY. Net loss widened to $679.9M from $539.1M despite the revenue growth, reflecting aggressive investments in growth initiatives. The company maintained strong customer momentum with 184 customers generating >$1M in product revenue, up 139% YoY.
Strategic Initiatives and Operational Changes: Snowflake expanded its platform capabilities through strategic acquisitions including Streamlit ($800M) for data science collaboration and Cryptonumerics for data privacy. The company launched Snowpark for Java and Snowpark Accelerated to broaden developer ecosystem access. Major partnerships with AWS, Azure, and GCP were strengthened, with multi-cloud deployments now representing 18% of customers. Management increased R&D investment by 96% YoY to develop industry-specific solutions and enhance platform security.
Market Position and Competitive Dynamics: Snowflake maintained its leadership position in the data cloud market with 178% net revenue retention rate indicating strong platform stickiness. Customer count grew 44% to 5,944, with Fortune 500 penetration reaching 47%. The company faces increasing competition from cloud hyperscalers and emerging players, but maintains differentiation through superior performance and cross-cloud capabilities. International revenue grew 133% YoY, now representing 21% of total revenue.
Operational Efficiency and Profitability: Despite revenue growth, operating efficiency declined with operating margin falling 500bps to -59%. Sales efficiency metrics showed some deterioration with CAC payback period increasing to 18 months from 15 months. R&D expenses grew 96% while G&A grew 133%, indicating heavy investments in platform development and organizational scaling. The company maintained strong gross margins at 75% but needs to demonstrate operating leverage as it scales.
Growth Catalysts and Material Risks: Key growth drivers include expansion into new verticals, international markets, and broader platform adoption through Snowpark. The company faces rising competition from cloud providers, potential pricing pressure, and high customer concentration with top 10 customers representing 11% of revenue. Security and compliance requirements continue to increase, requiring sustained investment. Management expects >$10B in product revenue by FY29, implying 35%+ growth CAGR.

Revenue

$1.219B ( YoY) with product revenue at $1.14B ( YoY)

↑ +106%

Gross Margin

(+100bps YoY) driven by infrastructure optimization

↑ 75%

Free Cash Flow

-$149.8M (improved from -$168.8M)

Operating Margin

(-500bps YoY) reflecting growth investments

↓ -59%

Growth Indicators

5,944 ( YoY)

↑ +44%

Arr Or Bookings ↑$2.6B in RPO (+99% YoY)

Retention Metrics ↑178% net revenue retention rate

Key Risks

Cloud provider competition with control over infrastructure
High customer concentration (11% from top 10)
Consumption-based model revenue variability
Elevated stock-based compensation at 45% of revenue

Key Opportunities

International expansion (21% of revenue, growing 133% YoY)
Vertical-specific solutions development
Data marketplace network effects
Developer ecosystem expansion through Snowpark

Bottom Line

Snowflake's FY2022 results demonstrate the company's strong execution in capturing the growing data cloud opportunity, with exceptional revenue growth and customer expansion. However, the path to profitability remains unclear as investments in growth initiatives continue to outpace revenue scaling. The company's platform evolution beyond core data warehousing through Snowpark and strategic acquisitions positions it well for sustained growth, but rising competition from cloud providers requires continued innovation and differentiation. Key metrics to watch include net revenue retention rate, multi-cloud adoption, and operating leverage improvement. The ambitious target of >$10B in product revenue by FY29 suggests management confidence, but execution risks remain elevated given the rapid pace of market evolution and competitive dynamics.