Earnings Call Transcript - SNOW Q2 2024

Operator, Operator

Good afternoon, and thank you for joining the Snowflake Q2 Fiscal Year 2024 Earnings Conference Call. My name is Kate, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the call over to your host, Jimmy Sexton, Head of Investor Relations at Snowflake. You may proceed.

Jimmy Sexton, Head of Investor Relations

Good afternoon, and thank you for joining us on Snowflake's Q2 fiscal 2024 earnings call. With me in Bozeman, Montana are Frank Slootman, our Chairman and Chief Executive Officer; Mike Scarpelli, our Chief Financial Officer; and Christian Kleinerman, our Senior Vice President of Product, who will join us for the Q&A. During today's call, we will review our financial results for the second quarter fiscal 2024 and discuss our guidance for the third quarter and full year fiscal 2024. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, products and features, long-term growth, our stock repurchase program, and overall future prospects. These statements are subject to risks and uncertainties which could cause them to differ materially from actual results. Information concerning these risks is available in our earnings press release distributed after market close today and in our SEC filings, including our most recently filed Form 10-Q for the fiscal quarter ended April 30, 2023, and the Form 10-Q for the quarter ended July 31, 2023, that we will file with the SEC. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. We'd also like to point out that on today's call, we will report both GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. To see the reconciliations of these non-GAAP financial measures, please refer to our earnings press release distributed earlier today and our investor presentation, which are posted at investors.snowflake.com. A replay of today's call will also be posted on the website. With that, I would now like to turn the call over to Frank.

Frank Slootman, Chairman and CEO

Thanks, Jimmy. Welcome, and good afternoon. Q2 product revenue grew 37% year-over-year to reach $640 million. Non-GAAP product gross margin expanded to 78%. And non-GAAP adjusted free cash flow was $88 million, representing 50% year-over-year growth. In Q2, we continued to execute in an unsettled macro environment, but with incremental improvement in general sentiments and engagement. Generative AI is at the forefront of customer conversations. However, enterprises are also realizing that they cannot have an AI strategy without a data strategy to base it on. We have a head start in this race, with the epicenter of highly curated, optimized and trusted enterprise data. We now have a presence with 639 Global 2000 customers. AI reaches beyond enterprise boundaries. Models need external data to answer challenging questions. Data sharing makes Snowflake uniquely positioned to enable AI workloads. As of Q2, 26% of Snowflake customers are data sharing, up from 20% in the same period last year. Approximately 70% of customers with more than $1 million in trailing 12-month product revenue are data sharing with an average of six stable edges. For years, we focused on the programmability of our platform via Snowpark. We are seeing momentum. In Q2, we added more than 400 Snowpark customers and our consumption grew approximately 70% quarter-over-quarter. 63% of our Global 2000 customers are using Snowpark on a weekly basis. Document AI is now in Private Preview. With Document AI, customers can use natural language to ask questions of unstructured data. Legal contracts or invoices are now available for inquiry and analytics. This is an early example of how language models are expanding our opportunity. With Snowflake Container Services, we are bringing LLM models like Reka and NVIDIA's NeMo into Snowflake. You heard in my conversation with Jensen, Snowflake is sitting on a gold mine of data. Together, we can help customers turn that gold mine into intelligence. We announced Snowpark Container Services two months ago. Since then, hundreds of customers have requested access to the Private Preview. With our support of Iceberg Tables, we are expanding our data lake scope. Many customers already use Snowflake as a data lake. A large financial services customer consolidates data in Snowflake to eliminate useless extract and transfers of data. This means new use cases are deployed 80% faster. Iceberg Tables will bring additional scope in open file formats to Snowflake. We expect to unlock more data lake opportunities with these capabilities. We've also reached an inflection point on the applications front. At Summit, we launched so-called Native Apps in Public Preview. And we have over 25 native application providers today. Snowflake is a safe, certified, and sanctioned place to deploy applications. Grassroots support is building. We now have more than 145,000 monthly active developers on Streamlit. This represents an increase of 160% year-on-year. Our start-up program allocates resources to developers planning to build on Snowflake. Approximately 20% of new customers landed in Q2 landed on Snowflake through our start-up program. General sentiment appears to be incrementally getting better. Snowflake Summit in June was the highlight of energy and excitement about what is becoming possible in the world of data. We hosted over 20,000 on-site and virtual attendees. This was up over 85% from last year. Next up is our Data Cloud World Tour. The World Tour brings Summit messaging to a wider audience. We expect to double the attendance of Summit. This is in 26 cities worldwide. With that, I'll turn the call over to Mike.

Mike Scarpelli, CFO

Thank you, Frank. Consumption came 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. However, we believe productivity has room for further improvement. Q2 remaining performance obligations grew 30% year-over-year, totaling $3.5 billion. Of the $3.5 billion in RPO, we expect approximately 57% to be recognized as revenue in the next 12 months. This represents a 32% increase compared to our estimate as of the same quarter last year. Our net revenue retention rate of 142% includes six new customers with $1 million in trailing 12-month product revenue. We now have 402 customers with trailing 12-month product revenue greater than $1 million. We continue to focus on growth and efficiency. We generated $88 million in non-GAAP adjusted free cash flow, outperforming our Q2 target. Q2 represented another quarter of continued progress on profitability. Our non-GAAP product gross margin was 77.9%, benefiting from a one-time credit from one of our cloud service providers. Non-GAAP operating margin was 8%, benefiting from tight controls on headcount additions and the over-achievement in product gross margin. Our non-GAAP adjusted free cash flow margin was 13%. We continue to have a strong cash position with $4.9 billion in cash, cash equivalents, and short-term and long-term investments. We did not repurchase any shares in the quarter, but plan to opportunistically repurchase shares using our free cash flow. Now let's turn to guidance. Our forecast assumes that our largest customers will continue to be a growth headwind. We are seeing encouraging signs of stabilization, but not recovery. Our forecast calls for these customers to more closely align their consumption with their annual contract value. For the third quarter, we expect product revenues between $670 million and $675 million, representing year-over-year growth between 28% and 29%. Turning to margins, we expect, on a non-GAAP basis, 4% operating margin. And we expect 364 million diluted weighted-average shares outstanding. For the full year fiscal 2024, we expect product revenues of approximately $2.6 billion, representing year-over-year growth of approximately 34%. Turning to profitability. For the full year fiscal 2024, we expect, on a non-GAAP basis, approximately 76% product gross margin, 5% operating margin, and 26% adjusted free cash flow margin. And we expect 362 million diluted weighted-average shares outstanding. We will continue to prioritize hiring in product and engineering. We still expect to add approximately 1,000 employees in fiscal 2024, inclusive of M&A. With that, operator, you can now open up the line for questions.

Operator, Operator

Absolutely. We will now begin the question-and-answer session. The first question will be from the line of Keith Weiss with Morgan Stanley. Your line is now open.

Keith Weiss, Analyst

Excellent. Thank you for taking the question, guys. Mike, I wanted to dig into the comment about kind of a large customer activity. You talked to us about sort of consumption coming more in line with the committed contracts. Can you give us any visibility what's happening on the contract renewals? Because as you go through these big contract renewals, are you seeing any change in their behavior of what the large customers are willing to commit to you? And any impacts that we should be thinking about on how that's going to impact bookings and sort of RPO on a go-forward basis?

Mike Scarpelli, CFO

Yes. No, we're seeing customers renew. This quarter was a good renewal quarter. We had our largest customer; they renewed under their existing terms. They did a $100 million three-year renewal, even though their revenue run rate is at a higher amount than that. I think we did $9 million or $10 million plus TCV deals this quarter, and most of those were renewals. And so, customers are doing that. But remember, that doesn't necessarily equate to consumption, and we do know some of our largest customers are trying to consume at their contract rate rather than going above that.

Keith Weiss, Analyst

Got it. So, the dynamic is really on consumption; it is not on contracting as of yet?

Mike Scarpelli, CFO

No. It's around consumption. As I said, the contracting actually felt the sentiment really just seems to change in July with customers really re-engaging with us. And so, I think we'll have good bookings, but that doesn't equate to consumption. It takes time for the consumption to come in.

Keith Weiss, Analyst

Got it. And then, if I can sneak one in for Frank as well. You talked about, you need a good data strategy to have a good AI strategy and that's something we hear a lot when we're talking to customers and people out there in the field. So that really resonates. When it comes to kind of go-to-market and sort of the selling motion, does having to have the gen AI conversation while a long-term positive disrupt the sort of typical kind of data cloud discussion that you guys have been having for the past five years with these customers? Does it have that risk or has it been elongating the sales cycles in a real way?

Frank Slootman, Chairman and CEO

No, I would agree with you, Keith. We believe that having well-organized, optimized, and reliable data is crucial for deploying large language models. If someone thinks they can simply apply a model to a data lake and see what happens, that's unlikely to produce good results, and this realization is becoming evident. It's essential to be very serious about building a strong foundation; if the foundation isn’t solid, there’s not much that can be built on it. There are also many governance issues at play. Our industry has spent decades establishing strict guidelines on data access, which now need to be adapted for large language models. Many significant questions arise that are vital for the effective use of language models and AI as a whole. Being extremely organized with data is going to be very important, and while we've been focused on this, its significance has certainly increased.

Keith Weiss, Analyst

Got it. Yes, it definitely resonates with the competition we're having as well. So, thank you very much for the time, guys.

Operator, Operator

Thank you. The next question will be from the line of Mark Murphy with JPMorgan. Your line is now open.

Mark Murphy, Analyst

Thank you very much. Frank, I'm wondering if you can speak to the expanded Microsoft relationship. I believe you referred to it as nearly a doubling of the commitment. And I'm wondering if you're optimistic on seeing that alignment in the field coming together and perhaps unlocking some new opportunities relating to Azure or even some of the OpenAI workloads that you wouldn't have seen previously. Then I have a quick follow-up.

Frank Slootman, Chairman and CEO

Yes. Look, the bottom line of working with the cloud vendors is not what gets set at the top levels, the good intentions. What matters is what are the incentives when you get 14 layers down at street level, how do people get paid, that determines whether they're either going to fight you and double and triple down on that or they're going to partner with you. And we see models where we've worked out really, really well, of course, with AWS. But Microsoft, we were not in the place that we wanted to be at street level in terms of the incentives. So, we really took this opportunity when we were renegotiating our relationship with Microsoft to say, 'Hey, we have to tackle this, right?' And Microsoft very much wanted to be a bigger percentage of our business and because they are not punching at their weight at all. They're not as a bigger percentage of our business as they should be based on their market share, and they want to be. And this is the way to do it. It's really you need to bring alignment to the field organizations, then you're going to get partnerships and then you're going to get joint selling and then you're going to get your fair share.

Mark Murphy, Analyst

Okay, thank you for that. And Mike, as a follow-up. In Q2, did you observe any customers adjusting their indexing or reducing data retention timelines? It looks like the quarter went well overall. But I'm curious if you sense any more or less of that optimization activity heading into the second half here.

Mike Scarpelli, CFO

In terms of customers changing their retention policy, we really didn't notice any of that. If anything, we saw growth in the amount of storage in the quarter. And I just want to call it, there was really one large customer that changed the retention from five to three years; that was pretty unusual. And in terms of optimizations, we continually work with customers on their own optimizations, but we're continuing to optimize our software as well too because we are really dedicated to delivering price performance for our customers. And I want to stress, we've been talking about optimizations with investors since we went public. These will always continue optimizations, whether it's customer or us doing the optimizations, because history has shown when we improve price performance, more workloads come to us.

Mark Murphy, Analyst

Thank you very much.

Operator, Operator

Thank you. The next question will be from the line of Kirk Materne with Evercore ISI. Your line is now open.

Kirk Materne, Analyst

Yes, thanks very much. Mike, I was wondering if you could just talk a little bit more about the comment you're seeing stabilization in consumption, but not recovery. I'm just kind of curious when you say that, is that the pressure from the top-down on practitioners starting to ease a little bit and they're starting to feel better about what they can consume and then there's waiting for budgets to kind of get refreshed to sort of get going on the recovery side. I'm just kind of curious if it's sort of the top-downs easing or if it's more that they're taking a little while to sort of ramp back up on projects that perhaps they've slowed down six months ago, three months ago.

Mike Scarpelli, CFO

I think it's both factors at play. We noticed that customers have been re-engaging with us on contracts since July, and this trend is continuing into the current quarter. There appears to be a slight easing at the top level regarding customer approvals and their willingness to commit. However, it takes time for this commitment to translate into actual consumption. That being said, consumption is looking positive; for instance, it was quite strong today, but it's just one data point. We need more consistent data to determine if we are truly seeing a recovery. For now, stabilization is a more appropriate term, and we are not observing any reduction in customer consumption at this moment.

Kirk Materne, Analyst

Okay. And then Frank, just as you spoke to a lot of executives at Summit, do they recognize the fact that the road to AI does require perhaps a heavier level of investment than they were thinking 12 months ago? How do you think that factors into sort of their thinking on budgets as we go into '24? Thanks.

Frank Slootman, Chairman and CEO

Yes. The reality is that there is still uncertainty regarding the extent of the investment needed. Many have described their efforts with language models as experimental and exploratory, trying to understand the scope of what’s involved. It will take time before we can accurately assess what the investment levels will be. There are individuals willing to take on this challenge. Historically, one of the strengths of search has been its effective business model, which funds its operations. We cannot fully embrace AI without a sustainable business model, or interest will quickly wane. Additionally, the cost of GPUs from NVIDIA is significant, despite their capabilities. We need to align our strategies and focus on sensible future plans. Many use cases will revolve around the question of value—what are we gaining from this? This isn’t just a casual endeavor; people will demand to know the tangible benefits.

Kirk Materne, Analyst

Thank you, all.

Operator, Operator

Thank you. The next question will be from the line of Raimo Lenschow with Barclays. Your line is now open.

Raimo Lenschow, Analyst

Thank you. It's encouraging to see the stabilization from my perspective, congratulations on that. Frank, I have a question for you. As we all recognize, data has become the new fuel, and we're observing situations where companies emphasize their data ownership, which slightly shifts their approach compared to your past partnerships. How do you perceive the competitive landscape changing for you, given that you are essentially a key source of data used in AI? How do you think this will unfold for your team? Thank you.

Frank Slootman, Chairman and CEO

Well, we see it play out really well. I think we agree with you. I mean, we think that data is becoming infinitely valuable and that's for all kinds of reasons, because we can no longer run enterprises and institutions based on what we call anecdotal observation because the world is too dynamic, too disruptive, and we have this massive disintermediation happening. We no longer have all these intermediaries between us and the end customer. You can only run direct-to-consumer businesses with data. I mean, you see that, for example, in insurance like the auto industry, companies like GEICO, Progressive, and Liberty Mutual, I mean, you can only run these businesses on top of data, telemetry data being really important. And we think every business, every institution is going to develop a complete and total dependency not just on data, but the ability to harness that data. So, this is a full-on transformation really of how industry and institutions have operated and worked at the leading edge of it, but we're also very much at the beginning of it.

Raimo Lenschow, Analyst

Okay. Thank you.

Operator, Operator

Thank you. The next question will be from the line of Karl Keirstead with UBS. Your line is now open.

Karl Keirstead, Analyst

Thank you, Mike. I just have a couple of quick questions. You mentioned a one-time credit from one of the CSPs. Can you explain how significant that was? It seems like it may have impacted gross margins, but I wanted to confirm.

Mike Scarpelli, CFO

That was about $4 million that hit in the quarter.

Karl Keirstead, Analyst

Okay, got it. Thanks for that. And then maybe just a follow-up. Mike, what I'm hearing you describe is an effort, you mentioned, certainly, your largest customer, but perhaps others taking their usage a little bit closer to their ACV. So, one would think that that would result in a decent amount of headwind, yet your guidance for the third quarter, in my judgment anyway, is relatively solid. So, what's the offset? What customer segment might be ramping nicely to offset to some extent the headwinds from your large customers? Thanks so much.

Mike Scarpelli, CFO

We currently have 639 Global 2000 customers who are averaging about $1.5 million to $1.6 million in consumption over the past year. Many of these customers are still in the process of migrating, and we do not expect that to change. While larger customers are continuing to grow, their growth rate is slower than before. However, since this is a consumption model, the situation could change at any time.

Operator, Operator

Thank you. The next question will be from the line of Kash Rangan with Goldman Sachs. Your line is now open.

Kash Rangan, Analyst

Thank you so much. Frank, I think your fireside chat with Jensen was absolutely illuminating. He was looking at the opportunity set with structured data in the Snowflake ecosystem and almost salivating, and yet you seemed a little moderated and that you need to have a business case. So, when are we likely to reach a point where Generative AI coupled with Snowpark could really lead to a tangible increase in consumption outside of the core data cloud business? And one for you, Mike. If we are to read your comments, three months of stability, four months of stability, does that mean that net expansion rates reach a bottom and could potentially start to stabilize and rebound as we head into the later part of the year? Thank you so much.

Frank Slootman, Chairman and CEO

Well, it's Frank, Kash. In the very short term, within days, weeks, and months, the language model will start to directly influence the business, particularly in SQL generation. The role of analysts will be significantly enhanced, enabling individuals to formulate data queries much more effectively and quickly, requiring far fewer skills than in the past. We're demonstrating this every day. Nowadays, you don't even need to be literate to interact with your data. This represents a tremendous growth opportunity and is quite relevant to how we utilize data and platforms like Snowflake. Another area where we'll see increased workloads is in the ability for people to search for data that aligns with their general inquiries more effectively than before. It's crucial to search across enterprise boundaries, as data context isn't confined to those limits. There are countless use cases to discuss. As we delve deeper, individuals will be able to pose complex questions that previously required entire analyst teams to investigate. Now, the systems will be capable of generating queries and the necessary data, quickly leading to valuable insights. This capability will become the forefront of structured proprietary data, which is at the core of our business.

Mike Scarpelli, CFO

And on your question on net revenue retention, I just want to remind you I'm not going to guide to net revenue retention. But I do think over time it is going to continue to converge closer to our growth rate. I do think it will stabilize, but I do expect it's going to come down slightly from where it's at right now just in what we're seeing today.

Operator, Operator

Thank you. The next question will be from the line of Brad Zelnick with Deutsche Bank. Your line is now open.

Brad Zelnick, Analyst

Great, thank you so much. I've got one for Frank and one for Mike. Frank, stable edges continue to tick up, which is great to see, and I know it's an important metric for the company and its strategic vision. Anything else perhaps qualitative that you can share in terms of how data sharing is progressing? And for you, Mike, great to see the margin upside, everybody is happy about it. But with such a huge opportunity, how can you be sure you're striking the right balance of investment, especially when you're up against such well-capitalized competitors? Thanks, guys.

Frank Slootman, Chairman and CEO

On the topic of data sharing, we carefully monitor and manage that aspect of the business on a quarterly basis. However, data edges can often be very specific to individual enterprises, so the use cases are tailored to their particular needs, forming bilateral relationships between Snowflake accounts and various institutions. The real exciting part happens when data sharing is applicable across industries or sub-industries. In the financial sector, for example, financial institutions have historically been handling vast amounts of data for generations, making this a clear opportunity. Most data edges have traditionally been within the financial services sector, establishing a standard approach for moving data efficiently. Asset management, in particular, shows a significant demand for this capability. Another area of growth is supply chain management, where numerous entities can easily gain visibility and respond to supply chain events effectively if they all have Snowflake accounts. This need for data sharing among supply chain partners is becoming increasingly compelling. We highlighted our partnership with Blue Yonder, the leading software company in supply chain management, at the recent Summit, where they are transitioning to the Snowflake platform. We believe this will create further opportunities across sectors, especially among every manufacturer and retailer. This provides insight into how we see these developments unfolding.

Mike Scarpelli, CFO

On your question on investments in the business, Brad, given the opportunity, we are investing as fast as we think we need to invest. You did see the guided margins to 4% for operating margin where we just did 5% this quarter, and that's because we're investing. As an example, we have a 1,000 H1100 GPUs reserved; that's an extra $1 million a month as we're working on AI. I'm not getting requests that people need more headcount in the engineering organization and the sales and marketing. Until we see an increase in productivity, we're going to be very methodical about how we add resources into those areas. So, we're definitely not under-investing in the business; at least I'm not getting the feedback from any of the executive team with regards to that.

Operator, Operator

Thank you. The next question will be from the line of Tyler Radke with Citi. Your line is now open.

Tyler Radke, Analyst

Yes, thanks for taking the question. First question just on the commentary around some of the projects you are starting to see better momentum there, particularly in July. I was wondering if you could just comment on the nature of those projects. Are they larger deals than you typically see, or maybe they include more Generative AI or data science given all the new products that you released? If you could just kind of contrast the pickup and kind of where that's coming from?

Frank Slootman, Chairman and CEO

Yeah, do you want to get started?

Mike Scarpelli, CFO

You, go ahead, Frank.

Frank Slootman, Chairman and CEO

You shouldn't confuse projects with deals because there are many projects underway related to use cases, workloads, and applications. We mentioned in our prepared remarks that we have observed a shift in sentiment from earlier quarters, where people were trying to make significant cuts to meet budget constraints. This led to unusual measures to save costs, but that pressure has decreased significantly. The discussion is returning to a more traditional focus, where we are looking to implement applications, workloads, and migrations. Additionally, we are exploring more advanced use cases in machine learning. People are eager to understand how to deploy large language models on the Snowflake platform, and we have provided detailed explanations and demonstrations of how we are accomplishing this. We are very enthusiastic about the progress we are making for ourselves and our customers.

Tyler Radke, Analyst

Great. And then follow-up, just in terms of the Snowpark revenue. Any update on kind of where you're expecting that to track as you exit this year? And then these related services, whether it's the Native App Store or Container Services, would that all fall under Snowpark theoretically when that goes GA next year? Thank you.

Mike Scarpelli, CFO

In terms of Snowpark, as we said, whereas Frank talked about seeing 70% growth in Snowpark consumption, still relatively small, but meaningful. We have a number of customers that are in the process of doing their migrations, a few quite large ones. I do think next year, it will be more meaningful to revenue. But on $2.6 billion in revenue, it's a couple of percent of our revenue this year.

Frank Slootman, Chairman and CEO

Once that container services become primetime and that is part of Snowpark, obviously that means any workload becomes a fair game to be deployed on Snowflake. This is obviously running close to the data, inside our governance perimeter, it's essentially virtualization for the cloud. So, we think there is enormous upside for us once those services become generally available across all our cloud platforms.

Mike Scarpelli, CFO

Which will be next year.

Operator, Operator

Thank you. The next question will be from the line of Brent Thill with Jefferies. Your line is now open.

Brent Thill, Analyst

Mike, you mentioned at the Analyst Day you are idling back quota-carrying sales capacity on the new hire front. Have you seen any difference to lean back into hiring quota reps in '23?

Mike Scarpelli, CFO

It really depends upon the territory and the opportunity. There are some territories where kind of regions we're shrinking where it's overcapacity, and we're re-shifting those heads to other more productive territories. I'm not planning on adding net a lot of new ones for the balance of this year. But as we're starting to plan for next year, there are additional headcount going into the quota carrying rep area.

Brent Thill, Analyst

Great. And for Frank, on the vertical side, any verticals that are showing more excitement that perhaps weren't online that weren't firing up? Are you seeing anything change here?

Frank Slootman, Chairman and CEO

Actually, that's a great question because we had massive outperformance by our healthcare vertical this quarter, and healthcare usually runs fourth or fifth in the lineup of verticals and a massive way to really excited about, it feels like that healthcare is really getting a move on, if you will. They have not traditionally been an aggressive adopter of technology. But in the world of data, they are moving. They're moving hard and you see it on the provider side, you see it on the payer side, you see it on the pharma side. So I think that's going to become a great contributing segment for us.

Mike Scarpelli, CFO

Yes. Healthcare and life sciences grew 61% year-over-year in revenue for us.

Brent Thill, Analyst

Thanks for the color.

Operator, Operator

Thank you. The next question will be from the line of Michael Turrin with Wells Fargo. Your line is now open.

Michael Turrin, Analyst

Hey, great. Thanks. Appreciate taking the question. I think one of the comments mentioned new bookings outperformed expectations. I appreciate you're still seeing room for improvement, but anything you can add around what drove the improvement versus last quarter? It sounded like healthcare from the prior commentary, but wondering if some of that or certain product releases maybe also contributed there.

Mike Scarpelli, CFO

It’s difficult to determine if this was due to a product release. We experienced significant renewals from customers that showed growth. We also secured two major initial contracts, including a $22 million deal in the insurance sector in Europe, and a large gaming company in Korea committed to a $9.5 million deal. This indicates that our message resonates with customers, and they recognize our efforts, particularly in AI. However, they first need to integrate their data into Snowflake, which will be a gradual process for them. Achieving AI capabilities won't be immediate for our customers.

Michael Turrin, Analyst

I like and appreciate those large deal stats. Maybe just quickly on the back half. If you can just help level set what's embedded in the rest of the year outlook? You've seen multiple comments around stabilization. Is that fairly consistent with what informs the outlook, and maybe just any refresh on second half seasonality as expected? Thank you.

Mike Scarpelli, CFO

Well, Q4 is usually one of our largest bookings quarters, and it's shaping up, but that's not necessarily consumption. But the sentiment within our sales team has definitely shifted from where it was in the first half of the year.

Operator, Operator

Thank you. The next question will be from the line of Patrick Colville with Scotiabank. Your line is now open.

Patrick Colville, Analyst

All right. Thank you so much for taking my question. I just want to double-click on your comments. I think you said customers are reengaging in July. You said that in the prepared remarks. I mean, I guess, what do you mean by that? Is it new customers, existing customers, consumption, contract negotiations? And then, any color you can give us on thus far in August would be helpful.

Mike Scarpelli, CFO

All three of the above. We have new customers. I just pointed out those two large Cap Ones. We usually don't do Cap Ones that big, and it was a very good quarter with some large new customers. We're seeing our existing customers. We saw some nice early renewals with customers where they were consuming faster. And we're seeing customers willing to do larger deals rather than just do a co-term to bridge them through to another period. So, that's what I mean by the sentiment is changing with our customers.

Patrick Colville, Analyst

All right. I guess my follow-up is that NVIDIA reported results tonight. Looking at the numbers, the data center revenue rose by 150% sequentially. It’s clear that AI spending is affecting the silicon layer. A question I frequently get from investors is when AI spending will more clearly impact the software layer. Do you have any thoughts on that?

Mike Scarpelli, CFO

I think it's going to be next year. As I said, it's going to take some time for AI. And people are still struggling to get GPUs, and there is a time lag between when a chip manufacturer sells their chips to it gets built into the hardware that actually gets deployed in a rack in a data center, and it gets deployed to customers.

Frank Slootman, Chairman and CEO

I think you will see the leading actually happening in months to come. But the material impact, I think most analysts out there are seeing in 2024, and we tend to agree with that.

Mike Scarpelli, CFO

And I would say in my prior life, when we were buying racks of servers, there's a six-month delay between when we bought them and when they were actually going into production. And I don't see that any different with GPUs.

Operator, Operator

Thank you. The next question will be from the line of Alex Zukin with Wolfe Research. Your line is now open.

Ethan Bruck, Analyst

This is Ethan Bruck on for Alex Zukin. I just had a quick kind of numbers question. So, if we calculate the product revenue of cRPO booking growth, it decelerated to 13% from about 30% last quarter. So, just curious, how should we think about this as an indicator of future consumption for future product growth?

Mike Scarpelli, CFO

So, I guided to full year revenue at $2.6 billion, and we'll guide next year next year.

Ethan Bruck, Analyst

Okay. And then I guess just to ask the August trends question in a different way. I guess, has some of the stability you called out trended into August kind of the first one for the quarter? And then just on the seasonality, is there any kind of month to note as you think about the rest of the year that seems that either seasonally strong or seasonally weak?

Mike Scarpelli, CFO

Well, as I said, August is shaping up very good. I called out yesterday, it was actually a very good consumption, but one day doesn't make a trend. Q4 is definitely seasonality with the holidays, with Thanksgiving in the U.S. and the Christmas holidays that does impact daily consumption. From a bookings perspective, Q4 though, is clearly our largest bookings.

Operator, Operator

Thank you. The next question will be from the line of Brent Bracelin with Piper Sandler. Your line is now open.

Brent Bracelin, Analyst

Thank you. I would like to return to the topic of the increase in model training capacity. We are investing billions in NVIDIA GPUs, and data is essential for training these models. I understand there will be a delay between when the investment is made and when it impacts the data layer. Are there any technical obstacles we need to address, or is this cycle different with other factors to consider? I’m pondering the current investment in infrastructure and what other elements we should consider before it affects the data layer. Thank you.

Frank Slootman, Chairman and CEO

I'll start, and then Christian can follow while considering the question. AI cannot be defined as a singular entity, as it encompasses various applications such as unstructured data processing, copilots, systems, and tutors, all of which are heavily reliant on contextual data. We are seeing practical applications in areas like support call records and contact centers. However, companies like Snowflake, which manage vast amounts of structured proprietary enterprise data, operate in a different space for AI compared to the standard text model inquiries. Based on my discussions with customers, many are still catching up with the text-based aspect and figuring out how to handle proprietary data. We see this as central to our business strategy and are actively pursuing it, hence the importance of organizing data properly. You cannot simply deploy a large language model and expect optimal results due to the various governance issues and the need for clarity on the data being generated. In the initial stages, we anticipate significant improvements, allowing analysts to generate data much faster and more effectively than ever before. This will greatly reduce the level of skill and sophistication needed to achieve those results. Data itself will be a key driving force for us.

Christian Kleinerman, SVP of Product

Yes, Christian here. I would add maybe two areas in addition to what Frank mentioned. The first one is around having the right data to be fed into these models. Frank started the call with no AI strategy, without data strategy. And it is very pleasing that the results of traditional ML or Gen AI is a function of having the right data, the right data quality, and the right metrics. The technology will be as good as the data that is fed into. All of the investments that we make on data quality and cleansing and pipelines, all of that is very important. The other piece that I think will be a technical imperative for everyone doing AI and Gen AI is around the measurement and feedback of how good are the solutions, how do I know if there are potential buyers into the data or are there gaps in their understanding and performance of the model. Those two are inherent parts of the lifecycle and interestingly, they all run to having a great data foundation enabled service.

Brent Bracelin, Analyst

Helpful color. And then lastly for Mike on consumption, one follow-up. The implied Q4 product growth is, I think, 26% at the midpoint. I know there's a delta between signing growth and consumption. Exiting this year, do you think product growth stabilizes in the mid-20% range, maybe starts to reaccelerate next year, or is it just too early to tell?

Mike Scarpelli, CFO

Let us finish Q3, and then we'll provide guidance for Q4, and I'll assess the outlook for next year. However, I do expect that many new initiatives launching next year will positively influence our consumption. Keep in mind that Streamlit will go into General Availability, Unistore is expected towards the end of this year, and Containerized Services will be introduced next year. There are several developments underway that should all contribute positively to our revenue growth rate next year. So stay tuned for that.

Operator, Operator

Thank you. The next question will be from the line of Brad Reback with Stifel. Your line is now open.

Brad Reback, Analyst

Great. Thanks very much. Gentlemen, you've talked about changing sentiment a couple of times during the call. How much of that is your sales team being better able to engage with the customers selling value, just looking at the problem from a different perspective given the macro trends versus customers just feeling better about their businesses and the macro unleashing the demand? Thanks.

Frank Slootman, Chairman and CEO

It's Frank. Look, it's not the sales team. There's really a change in how customers engage. A couple of quarters ago, like I said earlier, people were doing unnatural acts to force that themselves into spending envelope, and they were doing it almost regardless of consequence, that fixation on that reset, we obviously felt that. 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, now we're talking again of our projects and migrations and use cases. We're trying to basically get a grip on deploying large language models. What do we have to do with data, with the infrastructure, answering governance questions and so on. So in other words, the sentiment is very constructive and engaging on core data strategy; that's a big change from where we were a couple of quarters ago. Obviously, the salespeople are perceiving that as very positive, that's where you want to be.

Brad Reback, Analyst

That's great. Thanks very much.

Operator, Operator

Thank you. The next question will be from the line of Derrick Wood with TD Cowen. Your line is now open.

Derrick Wood, Analyst

Thanks. Mike this is the strongest sequential growth quarter you've had in three quarters, I think you were at 6% and 6% and this was 8.5%. Your guidance for Q3, there's kind of 5.5% sequential and further some level of conservatism in there. But just in terms of the Q2, are there any kind of one-time consumption dynamics to call out? Or does that just really kind of inform us that the optimization headwinds that you saw in Q4 and Q1 kind of dissipated in Q2?

Mike Scarpelli, CFO

Yes. Q2 has more days in it. Remember where consumption model was actually 5% quarter-over-quarter, working days adjusted was the growth rate. And actually Q3, it goes up when you look at the working days in Q3. Remember on a consumption model where really kind of 70% is the scheduled work; there is a big piece that is tied to work days that does have an impact. So, there is growth next quarter in that guide on a days adjusted basis, working days.

Frank Slootman, Chairman and CEO

Container Services was the absolute hit, star performer at our Snowflake Summit conference. I mean, customers were just mesmerized by the possibilities that a platform capability has because we essentially eliminated any limitation on deployment on Snowflake. And why do you care? I mean the thing is, first of all, you wanted to deploy close to the data for all the reasons that we talk about. This enabled us, you get a fully trusted sanctioned platform where you can deploy applications without any further questions. And one of the challenges that you have in cloud computing is, who's managing this, right? I mean what is the safe space to deploy into and whose is really guaranteeing the high trust enterprise-grade capabilities of the platform? So, we are bringing that. So, we're going to see a lot of services, a lot of them could be on-premise legacy engines that are going to be containerized and re-service as a cloud service, right? So, a lot of things that were old will be new again. So, it's virtualization for the cloud and having secure, safe, high-performance, very, very efficient spaces to run services and applications. And so, the sky is the limit on this capability, and we and our customers and our partners could not be more excited about the potentials and the possibilities here. But specific to AI, this matters a whole lot because the containers, our vehicle, our vessel, if you will, to deploy large language models, there is no limits on which models and how many models and for what segments of the business we can deploy. And we can shift gears very, very quickly. And we have incredible flexibility in terms of deploying these capabilities, because you're going to see a lot of change and a lot of movements. We've already seen an enormous amount. That's going to continue. So, we're very, very well-positioned architecturally, platform-wise to enable the AI revolution with Container Services.

Derrick Wood, Analyst

Awesome. Thank you.

Operator, Operator

Thank you. And the final question will be from the line of Sterling Auty with MoffettNathanson. Your line is now open.

Sterling Auty, Analyst

Yes, thanks. Hi, guys. Just one question from my side. You mentioned sales productivity a couple of times. I'm curious, how would you grade your go-to-market sales execution in the quarter? And are there any specific changes that you're making to further optimize given the environment for the back half?

Mike Scarpelli, CFO

I think overall our sales execution in Q2 was quite good and showed improvement. However, there are still areas where we can do better in certain territories. We have a new leader in the EMEA region, and while some markets there are performing well, others have significant room for improvement. Similarly, in Asia, there are pockets of good performance, but other areas also require attention. Overall, our bookings demonstrated good execution last quarter.

Operator, Operator

Thank you. That will conclude today's Q&A session and today's conference call. Thank you all for your participation. And you may now disconnect your lines.