The Next Trend in Data Infrastructure as Seen in Snowflake's Earnings Beating Market Expectations
Snowflake announced results for the first quarter of fiscal year 2025 that exceeded market expectations. The background to surpassing consensus on both adjusted earnings per share (EPS) and revenue is the rising demand for data infrastructure accompanying the spread of AI agents, which also provides significant implications for the outlook of the entire software sector. This article explains the situation through five perspectives: (1) earnings overview, (2) strength of the large-scale customer base, (3) AI agents and data demand, (4) competitive environment, and (5) implications for the software industry and upcoming Salesforce earnings.
1. Highlights of Snowflake's Q1 Fiscal Year 2025 Earnings
1-1. Key Financial Metrics
Adjusted diluted EPS: $0.24 (expected $0.21)
Revenue: $1.04 billion (expected $1.01 billion)
Year-over-year growth rate: approximately 26% increase
The results, which exceeded market expectations, demonstrate strength following the 28% growth of the previous quarter, confirming that the company's business model is functioning robustly even while concerns about an economic recession continue to linger.
1-2. Guidance as a Leading Indicator
Q2 product revenue outlook: $1.04–$1.00 billion (consensus $1.03 billion)
Full-year product revenue outlook: $4.33 billion (market expectation $4.29 billion)
Despite being announced at the end of the quarter, the upward revision of the full-year outlook was well-received, and the stock price rose approximately 7% in after-hours trading following the announcement.
2. Strength of the Customer Base Centered on Large Enterprises
Customers with over $1 million in annual revenue: 606 companies
Forbes Global 2000 companies: 754 companies
Total number of customers: 11,000 companies
CEO Sridhar Ramaswamy emphasized that "our growth is supported by long-term partnerships with large enterprises," demonstrating the high level of reliance on cloud data infrastructure regardless of organizational size or industry.
3. Data Demand Driven by AI Agents
Pat Walravens, Director of Technology Equity Research at Citizens, points out the following in his earnings analysis:
"To make agents do work, you need 'data,' and many companies' data resides on Snowflake."
As a concrete example, when leaving a 'late checkout' request at a Marriott hotel to an AI agent, a platform that can retrieve data such as reservation information and stay history in real-time is essential. Such needs are further increasing the value of Snowflake's platform.
4. Competitive Environment with Databricks
Alongside Snowflake, Databricks, which specializes in data science, is also attracting attention.
Databricks: Revenue of approximately $3 billion, approximately 60% year-over-year growth, valuation of approximately $62 billion
Snowflake: Revenue of approximately $4.5 billion, approximately 26% year-over-year growth, Snowflake's valuation is slightly higher
Snowflake highlights the ease of use of its data warehouse functions, while Databricks emphasizes its rich features for AI and data science; both companies are scheduled to hold user conferences in San Francisco consecutively in June.
5. Implications for the Software Industry and Ahead of Salesforce Earnings
13 out of 25 reported companies saw stock price increases: Primarily companies with March fiscal year-ends
Software is unaffected by tariffs: Unlike hardware, the impact of advance orders due to import tariffs is limited
Salesforce's perspective: First-quarter growth is relatively slow at approximately 9%. The shift to the AI agent product 'Agentforce' holds the key
Regarding Salesforce, Mr. Pat analyzed:
'The full-scale introduction of Agentforce and the consumption-based pricing model will be the biggest catalysts determining future performance'. The 'strength of data demand' demonstrated by Snowflake could also be a tailwind for Salesforce's AI strategy.
Snowflake's strong earnings have clarified the core role of data infrastructure in the era of AI agents. With an eye on the competition with Databricks and the performance trends of major software companies like Salesforce, attention is focused on the strategies and technological innovations of data platform companies. In upcoming quarterly earnings, the full-scale adoption status and revenue contribution of AI-related products will be the primary focus.
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