Snowflake (SNOW 1.54%), the disruptive data cloud, saw its sky-high growth rates continue unabated again in fiscal Q2. Its top line grew 83% year over year to $497 million. Unlike some work-from-home companies like Zoom, Peloton, and Fastly, Snowflake's high growth rates haven't come back down to earth since 2020 and early 2021. Sure, there has been some slight moderation in the company's growth rate -- but it has been gradual.
To help investors appreciate just how impressive Snowflake's momentum is, they must go beyond the company's revenue growth rate to look at the strength in some of the key metrics driving this growth. Snowflake's net revenue retention rate, its growth in $1 million customers, and its new hires all highlight how this disruptive company is growing rapidly.
Net revenue retention rate
One of the most impressive aspects of Snowflake's growth is that much of it is coming from existing customers. The tech company's net revenue retention rate, which measures existing customers' spend with Snowflake over the trailing-12-month period compared to the period 12 months earlier, is a great measure of the utility customers are getting from Snowflake's data cloud. After all, they wouldn't be spending more if it wasn't providing value.
Snowflake's net revenue retention rate for the period ended Aug. 24 was 171%.
Impressively, Snowflake chief financial officer Mike Scarpelli said in the company's fiscal first-quarter earnings call that this metric will gradually come down but will likely "remain above 130% for a very long time."
Of course, new customer growth is helping, too. The company saw its total customer count grow from 6,322 in the first quarter of fiscal 2023 to 6,808 in fiscal Q2. But it usually takes a while for new Snowflake customers' spend on the platform to ramp up to meaningful levels.
$1 million customers
Another key metric useful for helping investors better understand Snowflake's growth is the company's momentum with large customers. Snowflake said it finished fiscal Q2 with 246 customers who contributed more than $1 million or greater of trailing-12-month product revenue for Snowflake. This is up from 206 customers just three months earlier.
Finally, there's the rapid pace of hiring at Snowflake. While many companies have slowed or even paused hiring, Snowflake is doing everything it can to capture what it believes is a sizable opportunity in front of it to enable customers to unlock the value of data management in the cloud.
"Year to date, we have added almost 1,000 net new employees," Scarpelli said in the company's fiscal second-quarter earnings call. Indeed, Snowflake CFO Mike Scarpelli thinks that reduced hiring from other companies is an opportunity. "We view the current hiring market as favorable for Snowflake and have not altered our hiring plans for the year."
All of these impressive metrics help explain not just the company's surging top-line growth but also the stock's wild valuation. The stock's post-earnings jump higher on Thursday has put Snowflake's market capitalization higher than $61 billion at the time of this writing. If the company can keep executing this well for the foreseeable future, it should have no trouble growing into its high price tag.