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in time When many enterprise companies struggle to achieve growth and valuations decline, Databricks continues to prove the exception. In September, the company raised $500 million from a whopping $43 billion valuation. This week, the company announced some impressive revenue numbers to justify investors’ confidence.
For the year ending January 31, 2024, the late-stage startup generated $1.6 billion, a figure that represents growth of more than 50% compared to the previous year. That’s impressive revenue growth no matter what time period we’re talking about — but especially these days.
As a private company, it doesn’t have to reveal its numbers publicly, but with growth like this, why not shout it from the rooftops? The public markets remain a very difficult place, so Databricks seems content to stay private for now, while letting customers and investors know that it’s doing very well, thank you very much.
How does Databricks continue to grow at this rate more than 10 years after its launch? The company seems to be in the right place at the right time, helping companies store and process massive piles of data at a time when data has become the center of enterprise computing. It’s the fuel of AI, and large language models, in particular, require large amounts of it. Databricks is happy to be the place companies go to handle all this data, says Ray Wang, founder and principal analyst at Constellation Research. “They are now the default choice for AI and data,” Wang told TechCrunch.
This may not be the default option, but Databricks is certainly one of the major players alongside Snowflake, which at this point appears to be the company’s main competitor. Founded just a year before Databricks in 2012, the two companies have grown together as the market’s appetite for data has increased.
Both have reaped the rewards of this hunger by providing a place to store, process and operate this data. Snowflake has been a public company since 2020, and although Databricks has chosen to remain a private company, its revenues are similar to those of a public company, and Wang says the company is preparing for an eventual IPO.
“They had to prepare to go public, but now that they have market share and are growing, they can postpone going public. That’s why they can now report the numbers like a public company.
Dharmesh Thakur, general partner at Battery Ventures, who was an early investor in the company, believes the company is just getting started. “We were fortunate to be an early investor in Databricks and are supporting CEO Ali Ghodsi on its growth journey to nearly 100x revenue growth since we invested,” Thacker told TechCrunch. “However, even with $1.5 billion in revenue, the company still appears to be in the early stages of growth, based on the broader market and the company’s competitive position.”
Let’s give them something to talk about
TechCrunch has covered Databricks’ rise as a private company comprehensively over the years thanks to its welcoming penchant for sharing results. These prior disclosures allow us to frame Databricks’ recent growth cleanly. The picture that emerges is an enterprise software company that’s growing faster than any of its public companies, and has critical momentum in a key software business metric that should help it keep its growth flowing this year.
In its most recent fiscal year, the 12-month period ending January 31, 2024, Databricks generated revenue of more than $1.6 billion, fueled in part by the company’s Databricks SQL (data warehousing) product growing more than 200% year over year. year with a run rate of over $250 million.
Driven in part by the rapid rise of Databricks SQL, Databricks’ growth rate of more than 50% makes it a one-time leader in enterprise software growth among companies of its size. Among the general software companies you follow Bessemer Venture Partners Cloud Indexthe fastest growing general Today’s software company is SentinelOne, which grew 42% in its year Last reported quarter. No other public software company has a growth rate of more than 40%, not even Snowflake Recording growth of only 31.5% in total revenue in the last quarter.
It is worth noting that Databricks is not growing on the back of selling its services very cheaply; The company told TechCrunch that in its most recent fiscal year, it had gross margins on its subscription products of more than 80%. This means that the revenue the company collects is of high quality, even for a software business.
And its customers buy more of what Databricks has to offer over time. The company revealed that it had a “net expansion rate” of 140% in its most recent financial year. Again for comparison, Snowflake’s net retention account was 131% in its most recently reported quarter. (We use Snowflake as a benchmark for Databricks, not just because it shares a focus on data, but because Snowflake has been one of the most admired public software companies since its IPO, and thus achieves a good “high water mark” for stacking Databricks up against.)
Growth from smaller products and strong net retention help explain how Databricks has expanded as quickly. The company revealed in August 2022 that it had reached an annual run rate of $1 billion and annual recurring revenue of $800 million at the end of 2021. In about two years, the company has more than doubled (lagged revenue as the company reported). The latest is more conservative than the annual figure, in case you check our calculations).
Being a company that stores, explores and analyzes data for customers is clearly a profitable niche today; Recent findings from Databricks and those from Snowflake make this clear. Similar to how Nvidia appears to be one of – if not the the – Winners of the Current AI Race Thanks to its chip business, Databricks is enjoying growing demand thanks to AI as well.
The company won’t have to rely as heavily on its net retention number to sustain its growth, as it told TechCrunch that its AI-related business helped it achieve its best quarter ever in terms of bookings, doubling its previous record. This bodes well for Databricks’ year.
So, what’s the value of all this?
Let’s do some really simple math
The exact quote has been lost to time, but once while talking with Ghodsi about his business, he pointed out that much of the work TechCrunch did to track his company’s value boiled down to math. correct! So, let’s do some simple math.
Since Databricks doesn’t have an exact counterpart in terms of public companies thanks to its industry-leading growth rate, we have to come up with a revenue multiple for it using calculations that are a bit more rounded than we’d like. But, today’s most valuable software companies on the public markets are still worth about 22 times their trailing revenue per Bessemer. At $1.6 billion, Databricks is worth about $35 billion. This is very close to its most recent private market valuation, and makes our earlier point that the company has been growing its way to a nosebleed value despite a more challenging valuations climate.
Adding a few more quarters of growth, Databricks can argue with some conviction that it is worth the same as its private market price, or more, when it eventually goes public. This assumes, of course, that its growth rate continues to increase and does not slow down too much. (In its fiscal year ending January 31, 2023, the company observed a growth rate of more than 60%, about 10% higher than it reported for its last fiscal year.)
Provided Databricks’ burn rate is modest (the company declined to comment on its current profitability), this is the IPO technology companies have been waiting for. Provided Databricks prices smartly when it lists, it could open an IPO window on its own. Unfortunately for us S-1 nerds, Ghodsi told the Wall Street Journal (which first reported many of the above numbers) says the IPO market isn’t very open right now. To which we will respond Yes, so go open it, but it doesn’t look like we’ll see Databricks exit anytime soon. Even if he had the numbers to do it.
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