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Home » Snowflake CEO Slootman Sees Upturn: Customers No Longer ‘Cutting Off Limbs’
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Snowflake CEO Slootman Sees Upturn: Customers No Longer ‘Cutting Off Limbs’

Bob EvansBy Bob EvansAugust 31, 20234 Mins Read
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While business customers haven’t begun spending like it’s 2021 all over again, their outlook and their outlays have both improved to the point where they’re no longer “cutting off limbs” or committing other “unnatural acts” to meet draconian budget cuts, says Snowflake CEO Frank Slootman.

Always a colorful speaker unafraid to use blunt language to make his points, Slootman was contrasting the extreme cost-cutting measures undertaken by many businesses over the past couple of years with a new but still measured sense of confidence and spending commitments that arose during Snowflake’s fiscal Q2, which ended July 31.

In more prosaic terms, Snowflake continues to “execute in an unsettled macro environment but with incremental improvement in general sentiments and engagement,” Slootman said on last week’s earnings call.

Snowflake CFO Mike Scarpelli outlined the upturn in spending this way: “Consumption was in line with our expectations for the quarter. In May, we saw a return to growth with strength continuing into June and July. From a booking standpoint, we saw promising signs of stabilization with new bookings outperforming our expectations.”

But Scarpelli also emphasized that he views the current state as one of “stabilization” rather than full “recovery.”

Decline in ‘Unnatural Acts‘

Despite those repeated notes of caution from both Scarpelli and Slootman, it was apparent from various Slootman comments during the call that a huge shift in mindset has occurred among many Snowflake customers as they begin to once more invest heavily in the data technologies, cloud-based data services, and broad data-centric capabilities that are essential to success in the digital economy.

“We’ve really seen a sort of a sentiment change from the earlier quarters where people were sort of trying to cut off their limbs to fit within budgetary constraints and all this kind of stuff,” Slootman said in describing the shift.

“And that’s where you see unnatural acts to save money. That has really subsided considerably, and the conversation has really gone back to where it historically has been: ‘We want to do these applications, these workloads, these migrations.’ And we’re pushing the boundaries on the much more sophisticated use cases in machine learning. And obviously people want to understand how do I deploy a large language model on a Snowflake platform,” Slootman said during the Q&A portion of the call.

“And we’re super excited about how that’s unfolding for us and our customers.”

That new customer mindset on tech spending — unquestionably sparked by CEO-level belief in the transformative power of generative AI (GenAI) — has also been recently reflected in strong quarterly results from Microsoft, Google Cloud, SAP, ServiceNow, and Workday. And I expect that when Oracle releases its fiscal-Q1 numbers in a couple of weeks, its results will also reflect very strong demand from business customers who realize they cannot sit on the sidelines during the GenAI revolution.

Slootman underscored that attitude when an analyst asked him if the uptick in spending was more a function of salespeople being more effective at selling rather than customers deciding it’s time to boost investments.

“Look, it’s not the sales team — there’s really been a change in how customers are engaging,” Slootman said.

“A couple of quarters ago, like I said earlier, people were doing unnatural acts to force themselves into an inflexible spending envelope, and they were doing it almost regardless of consequence.

“The fixation on that reset — we obviously felt that,” he said.

“The change in sentiment is that that has passed. We are now, sort of, ‘Okay, we’re comfortable with the path that we’re on, and we’re talking again about our projects and migrations and use cases, and we’re trying to basically get a grip on deploying large language models, and what all do we have to do with data, with our infrastructure, answering governance questions, and so on,’ ” Slootman said.

“So in other words, the sentiment is very constructive and engaging on core data strategy. And that’s a big, big change from where we were a couple of quarters ago.”

Key Q2 Numbers for Snowflake

  • Product revenue was up 37% to $640 million;
  • Q3 guidance: Product revenue is expected to rise between 28% and 29% to $670 million to $675 million for the 3 months ending Oct. 31; and
  • full fiscal-year 2024, product-revenue is expected to be $2.6 billion, which would represent growth of 34%.

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Bob Evans

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Cloud Wars Founder Bob Evans actively analyzes the Cloud and AI categories through video reports, in-depth analyses, and interviews with the Cloud and AI market’s leaders and innovators. He’s also the creator of the Cloud Wars Top 10, a ranking and ongoing analysis of the world's most influential tech companies driving digital business and the digital economy. Bob is recognized as a world-class strategic communicator focused on emerging business strategy, disruptive innovation, and forward-looking leadership.

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