Snowflake – Trying to be a Snowball

Snowflake – Trying to be a Snowball

Beneath every artificial intelligence application lies a vast sea of data. Snowflake allows companies to store their structured, semi-structured, and unstructured data in one location, and access it from anywhere around the world. Moreover, companies can seamlessly tap into third-party datasets through Snowflake’s Market Place. Currently, Snowflake is expanding its suite by integrating Generative AI tools into their products, enabling users to interact in natural language with Snowflake applications. Sridhar Ramaswamy has replaced Frank Slootman as CEO, as Snowflake tries to further develop its AI strategy. Ramaswamy held the position of Senior Vice President of AI at Snowflake.

For Q4 2024, Snowflake’s net revenue increased 33%, reaching $775 million. Simultaneously, Snowflake’s operating loss increased by 5.7%, now standing at ($276mn). A positive shift is evident in Snowflake’s gross margin, which increased from 73% a year ago to 74% this quarter. Additionally, the operating loss margin improved, decreasing from -44% a year ago to -36% this quarter.

Breaking down the expenses, Sales & Marketing, and Research & Development each constituted 47% of the revenue. Notably, a significant portion of this allocation was attributed to stock-based compensation. This practice is prevalent among smaller companies like Snowflake that have limited financial resources and use stock options to top up cash payments for staff. The aim is to incentivise employees to stay at their company for longer by offering them a higher amount of equity. In contrast, larger entities such as Microsoft, Amazon, and Meta, can rely more on cash-based compensation to secure top-tier talent.

Snowflake faces stiff competition from other well-resourced AI businesses, including Microsoft and Amazon. This compels them to make significant investments in sales and marketing for customer acquisition and engagement. Snowflake operates on a pay-per-use model, which has its own set of challenges. Companies tend to utilise less of their Snowflake credits during times of perceived uncertainty. Snowflake’s focus is to get more businesses to join their data cloud, while making their products easier for individuals to use.

Snowflake, Microsoft, and Amazon are held in the Lunar BCI Worldwide Flexible Fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
207.05
This Week
205.68
% Change YTD
9.21% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
74 213
This Week
72 775 Lunar Capital stocktake arrow down
% Change YTD
-5.36% Lunar Capital stocktake arrow down
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
15 997
This Week
16 274 Lunar Capital increasesymbol
% Change YTD
8.41% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
5 089
This Week
5 137 Lunar Capital increasesymbol
% Change YTD
7.70% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
19.31
This Week
19.09 Lunar Capital stocktake arrow down
% Change YTD
4.32% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
20.89
This Week
20.68 Lunar Capital stocktake arrow down
% Change YTD
2.53% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
81.66
This Week
83.33 Lunar Capital increasesymbol
% Change YTD
8.26%Lunar Capital increasesymbol
Source: Iress

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Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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