Snowflake Inc. (SNOW) September 2026 Conference Transcript

We'll go ahead and get rolling. I am Rob Owens. I head our technology research practice at Piper, and I also cover infrastructure and cybersecurity stocks. I'm very happy to welcome our first company this morning, Snowflake. And with us from the company, can't forget Catherine McCracken, who's sitting in the front row, and CFO Brian Robbins. So, Brian, welcome.

Thank you for having us here today, Rob.

Thank you for coming. Chairman, maybe just start with a little bit of perspective. A year ago, you had signed on as a Snowflake CFO, but came here in the capacity of GitLab on a kind of going out. I think it was your last week, effectively. It's been a hell of a year. It's been a fun year. Apocalypse, you name it, everything else.

So maybe a little perspective about year one at Snowflake for you, looking back. yeah um you know i guess i would start with what my priorities were and what i've done for a long time and you know really the focus on go-to-market execution revenue growth and just operating efficiency in the model and so one of the reasons why i joined snowflake um you know so what do you want to do when you grow up type story i wanted to be at a company that was really at the center of AI. And I read or heard somewhere, you have to have a data strategy, you have an AI strategy. And you look to see what Snowflake was doing and all the customers that were putting their data into Snowflake. That coupled with the fact that Snowflake had just recently had a CEO change. And Street R was just really, really well-known in the industry for product innovation, product velocity, and so forth. And so for me, those elements were extremely compelling and interesting and so it's been a year and you know we've had great operating leverage in the model we committed to being gap profitable and 4q of next year and then in addition to that we've also re-accelerated growth we just had a tremendous print this last quarter and doing it in a number of different areas doing it in the core business as well as and a number of ai products that were releasing and speaking of what you want to do when you grow up, but you're obviously not new to this.

You've worked at a scaled enterprise before as CFO in VeriSign, high growth in GitLab, both public companies. Maybe speak to walking into Snowflake day one and what it was like there, some of the puts and takes and differences versus prior companies because it had scale and growth.

Yeah, absolutely. And so my first 90-day priorities at Snowflake was, one, spent a lot of time with the team. The outgoing CFO was transitioning out for a period of time, and so I wanted to make sure that I could spend time with all my directs and folks that report to them and so forth, and so spending time with the team was super important. I also wanted to get out and talk to a lot of customers. I think being a CFO, when I was a financial analyst out of grad school and sitting in a cube, I said, man, if I ever make it to the CFO office, I really want to be out in the field talking to customers, as I think that really helps you on resource allocation and where to allocate dollars around the business. And so I sort of made a career working closely with the CRO, and so had met with a lot of customers to understand why they're using Snowflake. But most importantly, I'd ask them, like, where can we improve? What can we do to be better? And how are we differentiated? And then third was meet with investors. Obviously, we're here due to our customers and our investors, and really wanted to understand what was on investors' top of mind, what things were going well, what wasn't going well, and if there's anything that I could influence and change in my first 90 to 180 days.

So you mentioned you wanted to be at a company that was at the center of AI. And clearly, I think with new leadership, Snowflake's affected a lot of change from a product strategy standpoint and has become that AI leader. In fact, a couple of weeks ago when you reported, It was one of the strongest quarters we saw across our entire coverage universe. So maybe talk about those elements of the business that are going right right now.

Yeah, we're super fortunate to have built this database technology about 10 years ago that is super scalable and cost-effective for our customers. And so you had to have a really good foundation to do that. That coupled with just the amazing leadership that we have across the entire company, Sridhar, CK, Vivek, Denise Pearson has been our CMO for about eight or nine years. So we've had really a lot of the people at the company have been there for a while with really deep leadership. And we had the ability to infuse AI into what we already had. And, you know, what was the most impressive thing about what's happened is I probably talk to three to five CFOs or CEOs a week now, either existing customers or potential customers, and talk about how I've changed the way I work and how AI has really impacted myself. And so with AI, we talk a lot about COCO, but we have co-work. We have a number of different things. It's amazing. I interact with my computer. I use WhisperFlow, so I talk to my computer now. And I just prompt my computer most of the day. Do you talk back or? Sometimes. I talk to my computer most of the day. And, you know, it's super interesting. We acquired a small company called Natoma. And with MCP Connectivity now, you know, we now have this harness that I actually work out of, right? And so I can do the orchestration, the optimization. I don't have to go to all these different applications. And it's tied into my calendar. It's tied into Gmail. It's tied into Slack. And so every piece of data around the company, because we're Snowflake, so it's a data company. It's role-based access, has security, has governance.

And so it just makes it a different way of working than how I worked the previous 30 years. and relative to Snowflake and the performance which has been very strong in the last couple quarters the street's all hung up on this 3% mark which I think your model kind of tunes to you've probably never heard that before coming off to 5% plus beat quarters what's really driving this underlying inflection in the business and how durable is this growth rate and how come as you've come in as CFO your predictability has gotten worse because you're beating by more. Thank you, Rob. Yes, you're welcome. He's such a sweet guy.

I'm super fortunate to have inherited such wonderful people at Snowflake who have worked there for a very long period of time. And so in my FP&A organization, I have a data science team, and they've been forecasting the business. They've been there seven, eight years, about eight of them, for a long period of time. And when they first started forecasting the business, you could really understand the degree of variability. But literally every single night, we run several machine learning models. The pipelines run for about four hours. At 5 a.m. every morning, Shradar, myself, and a number of people, Catherine, a number of people around the company, get a very detailed forecast email. And so we are a 100% consumption business, so not the easiest business to forecast. It's not a waterfall of licenses or what have you. And that forecast is based on customer level as well as product level rolled up to, you know, every single region. And so that part of the business, since the team has been doing it for so long, gets forecasted with a very, very, very tight range of, you know, in a tight range. So standard deviation is very small. For new products, it's a little bit more difficult, right? So we have years and years of launching new products. and we obviously save all that data and can go back and look at the pattern recognition of what's happened early in and then we actually try to map that against what's happening. Coco being one of the most successful product launches in the company's history has grown way faster than a number of those other products and so when you have a very short period of data and so when we always talk about sort of our guidance one we say that we haven't changed our guidance philosophy or forecast methodology, you go back and you look at the observed behavior. And with just a short amount of data with sort of high numbers, I think it would somewhat be reckless to extract that out and just apply that to guidance. And so we take that number and apply a haircut to that, and then that's sort of what comes up with the number. In the first quarter, obviously, we had about a quarter's worth of data. Now we have two quarters' worth of data. so we're getting closer to what that number is. But we're really happy with how we've had adoption across a number of different accounts. And so on the call, we talked about roughly 9,100 accounts have adopted Coco, a little over 5,000 have adopted Cowork. And what we're trying to focus on now is get our sales team to go in and talk about the use cases to drive deeper penetration in those accounts so we can get more users. And so that's what we're in the process of doing. But it's really the 5% comes down to the core business is doing well and is accelerating. We're also seeing benefit in the core because of AI. And so Shredar did a post on LinkedIn a little while ago, and I think it was something to the effect that when someone adopts COCO or AI, we're seeing 11% uplift to their core business that they would do otherwise. And so both of those are sort of contributing to the beat.

And maybe you can drill down on that a little bit more because Coco is creating a great unlock just in terms of migrations, moving data over, just how it's benefiting the whole business in this cycle that's benefiting you guys.

Yeah, you know, it's interesting. When I talk to CFOs and CEOs about, you know, where we're at on our AI agentic journey of changing the CFO organization, one of the things I try to stress is, like, all this is within a year. And so no one's behind. You just got to get started. And so COCO, and I also talk about, you know, this is more of a human transformation than a technology transformation. So the biggest thing is just really driving adoption through the organization and to get people to use it. And people, depending upon what organization they're in, use it for a number of different things. And so, for instance, in our group that does our migrations, they use it to actually help migrations. And so we've got a whole bunch of skills and agents that can actually take the migration time down. We're around 10 or 11 months. Now we're around six months. There's some customer dependency there, so we can't get that down to zero, although we'd like it. But we're currently working as much as possible to bring down the migration time frame. For myself, I use it for, call it analytics and business intelligence. And so we've actually canceled all of our BI and analytics contracts. And so I use Coco to Streamlit and can spin up dashboards in a heartbeat with whatever I want around the business, whatever time period. They aren't static. They're interactive. Because of the MCP stuff, I can then turn that into an email and send that straight out of Cocoa. And so there's two different things that we're using it for. One of the things that comes up prior to me getting here, one of the things that the company talked about was optimizations impacting the revenue. And one of the top 10 new skills is a cost optimization skill. And so in a consumption business, it's really, you know, the last thing we want a customer to do is be surprised about how much consumption they have. We want the customer to know exactly how much they're consuming, what they're getting out of it, and we really need to drive that sort of positive ROI for the customer so there isn't this, Shreder announced this unknown time bomb, if you will, on our customer base for them getting billed way more than they otherwise should. And so our account executives and our sales team spends an enormous amount of time with our customers really trying to work with them on the use cases, the ROI, the savings that they're getting out of it, and so forth.

And when you contemplate new customer and new customer growth, how much of that is new products, new projects, excuse me, versus migration of more traditional data warehousing technology? And relative to that more traditional data warehousing technology, how much is left in terms of migration opportunity?

Yeah, we are just starting to scratch the surface. One, there's a ton of data being produced, but there's so much legacy workloads and the legacy solutions. And then there's a lot of sort of solutions today that are AI-pilled. And so AI is really going to help the ability to access those workflows, understand your data, get more people to access the data and so forth. And so one of the things I talked about in Investor Day, we're in a market that is roughly going to $300 billion in the next five or six years. And that doesn't include all the analytics and business intelligence. that doesn't include all the other stuff around it that you can do with Coco and, you know, co-work and so forth. And so that's what's super exciting for us at Snowflake. And that's one of the reasons that was what helped our print. We talked about, you know, 50% of the beat was related to our AI products and 50% was related to the core. And there's these secular tailwinds sort of in the industry now sort of pushing towards getting your data in a database such as Snowflake so you can actually get value out of it. When I talked about, and I don't mean to harp on this too much, but when I go talk to CFOs and CEOs and then show them what we can do, they're like, I want that now. And so when I joined Snowflake over a year ago, I wasn't having any of those conversations. I probably spend 25% of my time now talking to customers. I'll be in New Zealand and Australia on a customer trip, start and hold CFO roundtables, discuss how AI has impacted businesses. And so there's a number of things where the interest level is so high and there's so much curiosity that that's really driving demand as well.

And I thought one of the big surprises coming out of your analyst day, Brian, was the fact that, I believe it's six quarters from now, but that you're going to achieve gap profitability in the fourth quarter of next year. And it was a more contentious comment than I thought because there are some that applauded it and said, this is great. And there's others who said, no, you should be leaning in. Now, you're one of the very few AI acceleration stories. Subscription revenue or consumption revenue has been, what, four or five quarters now. You've seen that acceleration. Why is this the right move at this time to push towards gap profitability? Because you've got a pretty big competitor out there that's running a free cash flow break even.

Yeah, you know, I'll answer it the reverse way in the sense that say, did I do anything that put constraints on the business to be able to make that comment? And the answer is absolutely not. Like we're spending as much as we want to spend in the business. You know, we go in, you know, to these large enterprises and, you know, our gross retention rate is really high. that the core of our business really comes from customers six, seven, eight years ago because they get on Snowflake, they move more and more into Snowflake. Now with stuff like Cocoa, more people within the companies are actually using it. And we're seeing, so you can imagine as a customer builds, we have a great net retention rate, one of the best in the software industry. Because of that, the core of our business is older customers, and we're doing everything we want to do. So there's nothing, you know, it's sort of a misnomer that to grow fast, you can't get operating leverage in a business. I think if you look back at my history, at VeriSign. I've never called you cheap to your face. Spend wisely. You know, VeriSign, when I got there, we were in low single digits. We, you know, took the operating margin up very high. I'm not going to say it because I don't want to apply anything. But we tripled, quadrupled the market cap of the company. under my CFO tenure, did the same thing in a number of different companies. And I'm a real big believer that you can drive accountability and execution in a company to get top-line growth as well as bottom-line leverage. And what's great about Shridhar is being a business partner, he's in a 100% agreement. And so I think this really is starting to play out. We talked about it a little bit in Investor Day, but it was a little bit too early to see it. But on this earnings call, I talked about, when we reported the call, the number of heads that we've hired this year compared to the number of heads we hired last year really shows us. So we're re-accelerating revenue. We increased our full-year guide from 31% year-over-year to 36% year-over-year, so increased about 500 basis points in just one quarter. And at the same time, year-to-date this year, we've added roughly about 330 people, of which 170 to 180 of them came from Observe Acquisition. So 150 compared to the same period last year, it was roughly about 940 people. And so we're doing that with a lot less people as well.

You were one of the first execs, at least that I interact with, that talked about the now disconnect between revenue growth and bodies, that you are driving massive efficiencies within your business. So maybe you can double-click on that a bit relative to where you're actually finding those efficiencies and able to drive them.

Yeah, so the good news is you find them all, it's all around the business, you know, completely. And so, you know, we as a company will constantly get economies of scale and stuff that we do with the hyperscalers and all that. But we're using technology, primarily Snowflake, to actually get more out of the existing workforce. And then part of our plan to be GAAP profitable was really in engineering, you don't have to hire senior leaders that require large stock option packages. You can hire people with one to two years college experience who are AI-pilled that can actually prompt and vibe code and be more productive at a fraction of the cost. So all around the business, like to me today, I got this thing, I talk about called a good morning CFO skill. I run it. It pulls data from about 40 different sources and tells me everything I need to know about the business in the morning. Then if I have a question, I can then prompt that data to actually give me more and more information all the way down to like a SKU level or a customer level within a region. I can look at it over whatever time period I want. So if you think about that, typically that would require someone in FP&A a lot of time to go back and forth and get reports and so forth, and you don't have to do that anymore. And so that's one area. We've got something called Snowflux, and so we're doing our monthly closed flux analysis through AI as well.

It's almost built out. We do our BVA analysis. We talked about it on earnings call. We're doing our long-term planning through a lot of agents and less people.

And so it's all over. We have an agent in our sales force called Raven, And basically, you can go in and ask Raven anything. So the amount time that it would take for an SDR or BDR to actually go prep an AE before a call is now done automatically through our sales agent. And so these things just provide a wealth of information. And what's really important is that you don't stop here, that you continue on to actually get more benefit. And so, like for that sales agent, then to tie enablement materials into it, you know, then tie that into like Salesforce and you can actually, you know, put a probability to something and it can help be a check on the forecast. And so we're trying to drive those changes all across the business. One of the things that I stress to my team is when we first started using AI, what I noticed was people was actually using AI. Sometimes they called it AI. It wasn't AI, but they're using AI-like things to just redo the work that they're doing. And part of the process, and you have to get into the details to do it, but part of the process I've gone through with each one of my directs, and I spent a big chunk of my other part of my time doing this, is redefining how work gets done. And so work, by default, was created based on limitations in technology and certain handoffs, but you can actually break a lot of that down and change the ability of people to process work to just make decisions. And so we're in the process of doing that, which is super fun.

Great. And last quick one from me. You made the comment that more and more customers are pushing for fourth quarter renewals. and obviously that's coming up. So how big is that pipeline shaping up to be and how do you manage some of the inherent risk that comes with a big lump of customers in a fourth quarter renewal conversation?

Yeah, so not uncommon to really any software business, right? Fourth quarter is always big. It aligns with the budget season when they're budgeting for next year. And so we've signed seasonality-wise. We've got the majority of our contracts in fourth quarter and that's happening. You know, when you're a consumption business and your rep, and that's your livelihood, you are talking to those customers all the time, right? Talking to them about how to use AI, how to use our AI gateway or AI functions, co-work, co-co, all of our different AI stuff about what migrations you can actually bring in, savings that you can get on migrating off legacy software, BI and analytical tools that you can replace. And so our reps are in with those customers literally on a weekly basis. And so the timing of a renewal is just, it's not like a major event. It's just a normal event for us. And they're already working on that, you know, as we get up to that renewal. So I don't have any concerns with that.

So we're going to have a breakout across the hall with Stowflake. Unsurprisingly, it was one of the more requested names. So please join us there and we'll continue the conversation.

Appreciate it, Rob. Thank you so much.