TLDR
- - Snowflake vs Databricks, both seek to become the single platform for large enterprise data storage, analysis, and analytics.
- - Neither has achieved profitability but yet the services they provide are essential to all big tech companies. If they shift from growth to earnings focus they could both be promising businesses.
- - Databricks, which is still private, has a larger valuation than Snowflake's market cap but makes only 60% of the revenue. The illiquidity of being a private business is likely at play here.
SNOWFLAKE
- Snowflake is a public company, IPO’d 2020
- Not yet achieved profitability
- $37B market cap
- $2.8B revenue for 12 months ending Jan 31, 2024, represents 35.9% Y/Y growth
- Large accumulated deficit of $5.6B as of July 31, 2024
- $1.8B deferred revenue as of July 31, 2024
DATABRICKS
- Databricks is a private company
- Not yet achieved profitability
- $43B private market valuation
- Heavily VC funded, $4.18B raised to date according to NASDAQ private market
- $1.6B revenue for the 12 months ending Jan 31, 2024, represents 50% Y/Y growth
COMPARISON
Clearly both companies are in fast growth mode, with no profitability and huge revenue growth numbers. Additionally both companies are acquiring data and AI startups in an effort to consolidate functionality onto their platform. Databricks is a little less transparent because they are still a private company, which may give them some advantages, but they have been preparing for an IPO for some time now.
When it comes to revenue Snowflake still has the upper hand, however, Databricks is growing faster with a crazy 50% Y/Y increase. This isn’t too far ahead of Snowflake though, and if we look back a few years to when Snowflake was showing similar numbers we see that they went from $1.22B in 2022 to $2.07B in 2023, which is an even higher growth of 69%, so clearly Snowflake can keep up.
An interesting fact to note is that if we go based on their annual revenues the Databricks valuation might be inflated compared with Snowflake’s. Databricks has a multiple of 26.9 (43B/1.6B), if this was applied to Snowflake it would result in a valuation of $75.25B (26.9*2.8B), while their market cap is only sitting at $37B.
One danger for Snowflake is the huge deficit they are building up as a result of this fast paced growth. Their growing $5.6B deficit, which grew by about $700M in Q2 2024, represents a risk if the company does not eventually achieve profitability. That’s not to say Databricks isn’t losing money though, with a supposed loss of around $900M in 2023 and 2022 (although their numbers are harder to find).
Another interesting thing on the Snowflake balance sheet is their $1.8B deferred revenue, which means that they have been paid for services that they have not provided yet, mostly likely prepaid compute plans. This could be seen as a good or a bad thing, because money given ahead of time is always worth more, however, it also means that they may not see more money from these customers for some time (although it will still be reflected on the income statement as the service is delivered over time). So if they want to continue revenue growth they will need to continue their expansion.
CONCLUSION
Both players are scooping up big names as customers and expanding their product offerings at breakneck speed. However, both are still not profitable enterprises. Snowflake is currently in the lead on their revenues but it isn’t decided yet who will be the biggest player in the space.