Snowflakes melt in spring

Today on Runtime: why Snowflake's run as a stock market and data darling might have hit a wall, ransomware continues to plague businesses, and the quote of the week.

snow melting in a forest
Photo by Ales Krivec / Unsplash

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Today on Runtime: why Snowflake's run as a stock market and data darling might have hit a wall, ransomware continues to plague businesses, and the quote of the week.

April is the cruelest month

A quick glance at Snowflake's earnings results for its first fiscal quarter of the year — a 50% jump in revenue that beat Wall Street expectations on Wednesday — does not explain why investors punished the cloud data warehouse upstart over the rest of the week. The company's executives filled in the gaps with their comments after the numbers were released.

"We are … operating in an unsettled demand environment and we see this reflected in consumption patterns across the board," said CEO Frank Slootman, as transcribed by Seeking Alpha, on a conference call Wednesday. "While enthusiasm for Snowflake is high, enterprises are preoccupied with cost in response to their own uncertainties."

  • Snowflake rose to prominence thanks to a sticky cloud data warehouse that made it faster and easier than ever before to analyze large amounts of data.
  • When it went public in 2020 in the middle of a pandemic-related glut in IPOs, it was the largest software company IPO ever.
  • But as anyone paying attention to cloud and enterprise tech has noticed, the pandemic-related boom in enterprise software spending has come crashing down over the last year as broader economic concerns have taken hold across the business world.

Snowflake fared better than most of its counterparts over that period, growing revenue by 70% during its 2023 fiscal year, which ended in January. That resilience came to an end during the past quarter.

  • "Starting in April, consumption slowed after the Easter holidays through today," said Mike Scarpelli, Snowflake's chief financial officer, on Wednesday.
  • He went on to acknowledge that "it is challenging to identify a single cause of the consumption slowdown between Easter and today," and while stock analysts are pretty forgiving cheerleaders on most days, they do not like uncertainty.
  • The simplest answer is that Snowflake's customers have decided they no longer need to use the expensive service quite as heavily when they're watching every dollar they spend.
  • And it's not hard to imagine that if those customers emerge from this cautious period no worse off for having reduced their consumption, that those same levels of consumption are not coming back.

If data is the new oil, these days enterprise tech buyers are looking for hybrid cars.

  • We'll have more on this next week, but after conversations with data vendors and buyers over the last couple of weeks, it definitely seems like the free-wheeling days of throwing money at data tools are over.
  • "In 2020 and 2021, there was -- it was growth at all costs and the mentality was, 'let it rip.' Now we're in the complete inverse of that situation," Slootman said on the earnings call.
  • Optimization is the new mantra, and data-adjacent companies that don't recognize that new reality will find themselves on a different trajectory.

However, if the AI boom has staying power, eventually those customers will need to increase their use of data to power those new applications.

  • Snowflake announced this week that it acquired Neeva, a startup that was trying to build AI technology for search but announced plans to shut down and pivot to enterprise tech applications last week.
  • Snowflake's technology has been popular with business users sorting through financial statements and customer data, but Neeva could help it make more of a case for the Snowflake data warehouse as a repository for AI developers.
  • "With AI right now, I mean, it's going to drive a whole other vector in terms of workload development," Slootman said.

It was always going to be hard for Snowflake to live up to the expectations set by its IPO. It could be even harder to convince its current customers to keep spending.

Your money or your data

Security professionals were holding out at least a little bit of hope last year that the collapse of the crypto market might put the brakes on ransomware, which had become an enormous problem for businesses around the world. New research from Veeam suggests that was wishful thinking.

Ransomware attacks grew 12% last year, according to a survey of 1,200 IT professionals conducted by Veeam. Victims of ransomware have been able to buy insurance policies to protect them in the event of such an attack, but insurance companies are starting to balk at the idea: 21% of respondents said "ransomware is specifically excluded from their security insurance" and 74% of respondents said their premiums went up.

It's a tricky problem to solve given the international nature of many attacks, and the reluctance of many businesses to acknowledge they've been victims of ransomware. In its report, Veeam — which sells backup and recovery software — urged companies to invest in backup and recovery software as a way to mitigate the problem, but that's a tough sell at the municipal government level, where such attacks on cash-strapped agencies can have far-reaching effects.

Quote of the week

"It’s a terrible job. You do not want to be in charge of all the GPUs in a world of AI, and it’s been miserable for five years now." — Microsoft CTO Kevin Scott, lamenting his role as the GPU gatekeeper inside Microsoft as OpenAI and internal teams compete for resources.

The Runtime roundup

The U.S. Treasury Department launched a new steering group to investigate how financial services companies, government agencies, and cloud computing companies should work together.

New Relic might stay independent a little longer. Francisco Partners and TPG are no longer in talks to acquire the company, according to Reuters.

A good weekend read: The infamous Mirai botnet was created in order to crash the course registration site at Rutgers University because a freshman student couldn't get into the electives he wanted.

Thanks for reading — see you Tuesday!

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