With the initial public offering (IPO) market heating up, data analytics platform Databricks Inc. has been leveraging the renewed interest of venture capitalists to raise funds.
As one of the most promising unicorns backed by chipmaker Nvidia Corp., the company raised over $500 million in capital last month, bringing its valuation to $43 billion. The wobbly tech markets failed to deter the data analytics firm, as Databricks has been cashing in on the rising popularity of artificial intelligence (AI).
"The commitment from long-term focused strategic and financial partners reflects Databricks' continued momentum, the rapid customer adoption of the Databricks Lakehouse, and the success customers are seeing from moving to a unified data and AI platform," Databricks Co-Founder and CEO Ali Ghodsi stated in a press release.
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Prior Funding Rounds
More than 50% of all Fortune 500 companies use Databricks' Lakehouse platform, making it one of the most prominent players in the global data analytics space. The platform raised $1.6 billion during its last Series H funding round in 2021, giving the company a $38 billion valuation.
The $5 billion rise in valuation over the past two years can be attributed to the issuance of new shares, which were distributed to employees.
While some might see Databrick's stagnant valuation growth over the past couple of years as a cause for concern, it is important to note that similar cloud software stocks are grappling with a plummeting valuation. Databricks' biggest rival Snowflake lost nearly 45% of its value over the same period.
Partnership With Nvidia
Databricks has a long-standing history with Nvidia, as the former uses Nvidia graphic processing units in its software. Nvidia's investment in Databricks came as no surprise.
"It made sense to partner more closely," Ghodsi said. "At the core, we're in complementary markets."
"Databricks and Nvidia are building transformative AI technology, and we're excited about the business value and innovation we can bring to our customers," Ghodsi said.
Databricks' acquisition of MosaicML in June has propelled demand for Nvidia's chips, as enterprise data often forms a stepping stone for generative AI.
"Databricks is doing incredible work with Nvidia technology to accelerate data processing and generative AI models," Nvidia Founder and CEO Jensen Huang said.
Shocking Investment From Capital One
U.S.-based banking holding company Capital One also partook in Databricks' latest funding round last month, despite being the largest customer of Snowflake, one of its biggest competitors.
In August 2022, Snowflake CFO Mike Scarpelli disclosed during an investor event that Capital One was annually allocating nearly $50 million to Snowflake. In November, he reiterated that Capital One is Snowflake's leading customer. Nonetheless, Capital One also employs Databricks technology to detect fraudulent activities or patterns.
Robust Growth Trajectory
Databricks boasts a customer base of more than 10,000 globally, including more than 300 customers generating annual revenue run rates of $1 million or more as of July 31. The firm also unveiled 20 new products and features during its sold-out Data and AI Summit in June.
One of Databricks' priorities has been to cut down its costs while maintaining its growth rate. The company's primary cost-cutting avenues have been in technology usage and software subscriptions. This is in sharp contrast to the market view last year, where tech firms were laying off the majority of their workforce to curb their spending levels.
"We spent $30 million on 300 pieces of SaaS (software as a service) software," Ghodsi said. "I said, ‘Let's halve that.'"
Databricks has experienced significant growth and achievements in the second fiscal quarter of 2023, which ended July 31, with over $1.5 billion in revenue run rate, marking over 50% year-over-year revenue growth. This period also saw the company achieve its highest-ever quarterly incremental revenue growth. Additionally, the company achieved a record non-GAAP (generally accepted accounting practice) subscription gross margin of 85%.
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