Gerstner dismisses valuation concerns for Snowflake at 100x forward sales given 100%+ growth in strategic software category.
“No growth investor would listen to that and think that there's anything unusual about a company growing well over a 100% in the most strategic location of all of software.”
Gerstner describes identifying the post-internet data explosion trend nearly a decade ago as foundation for Snowflake thesis.
“when we started thinking about the biggest trends, this was almost a decade ago, the post internet trends, the explosion of data, and how we make sense out of data to yield useful insights.”
Gerstner cites Snowflake growing free cash flow over 100% annually with Q4 revenue of $1.4B versus $1.2B prior year.
“Snowflake this year will grow its free cash flow at over a 100% a year, next year probably, you know, 80 or 90%. Free cash flow, not just revenue, free cash flow.”
Snowflake grew from $170M to over $50B enterprise value with Altimeter still a major shareholder.
“Yeah, that was total enterprise value of Snowflake when we got involved, and we're still one of their largest shareholders today, and it's over $50,000,000,000 in enterprise value,”
Gerstner invested $170M in Snowflake's Series B when it was pre-revenue with only 10 beta customers.
“So those are, you know, in the case of Snowflake, that Series B was $170,000,000 The Series C was 500,000,000 The Series B, it was still pre revenue.”
Gerstner says Databricks and Snowflake are accelerating because they provide the data substrate for agentic AI solutions.
“But there are other companies that we own and love, like Databricks and Snowflake, that are actually accelerating. Why are they accelerating? They are the data substrate upon which enterprises are building agentic solutions.”
Gerstner cites Databricks growing over 60% as example of companies accelerating because AI relies on them.
“I think this quarter, they're they grew over 60%. Snowflake, Clickhouse, these are companies that are accelerating their core revenues because AI relies on them.”
Gerstner says Snowflake raised full-year guidance by more than Q1 beat due to AI accelerating core business growth.
“They took up their full year guide by more than their q one beat. And the massive beat really came from these two trends.”
Gerstner reports Snowflake beat consensus with 33% growth versus 27% expected and raised full year guidance.
“33% growth, accelerating growth versus consensus of 27% growth. They took up their full year guide by more than their q one beat.”
Gerstner defends rotating out of Snowflake (up 10%) into Micron and Arm (both up 200% year-to-date).
“Compare that what we moved the money into, like Micron, which is up 200% year to date, or Arm, which is up 200% year to date.”