Berkshire’s bet on data analytics
Jamie Louko (Snowflake): Warren Buffett is known for owning stable, low-volatility stocks, but Snowflake does not fall into that pile. Snowflake makes it easier to analyze data stored in different clouds -- a migraine-level problem for large enterprises. Snowflake is a usage-based service where customers only pay when they store and compute data, and as businesses create more data, it will only become a more vital service.
Shares are down 66% from their all-time highs, but Snowflake’s business performance is soaring higher. In its fiscal first quarter, which ended April 30, 2022, the company reported revenue growth of 85% year over year to $422 million. This was driven by the number of customers spending more than $1 million, which soared 98% year over year to 206.
One of the big problems with usage-based businesses is that customers can easily dial back their usage during a worrisome economic environment. However, Snowflake is in a relatively recession-resistant market because consumers need to continuously analyze data, which won’t change during an economic downturn.
Management expects specific customers to cut back on spending, but the company maintained its guidance set in the fourth quarter, indicating this won’t take a major toll on growth.
The company lost $166 million in Q1, but it has over $3.8 billion in cash and expects to generate over $300 million in adjusted free cash flow during the full fiscal year, both of which could subsidize these losses. With a product that could become more necessary over the long term, Berkshire Hathaway seems to think that Snowflake could be a great company to own, and you might want to consider following in their steps.
