Snowflake Inc (NYSE: SNOW), a cloud data company, is increasing its research and development (R&D) investment to create tools for testing generative artificial intelligence (AI) in business applications.
The company, which went public in 2020 and experienced rapid growth during the pandemic, provides a platform for data storage, organization, and analysis across multiple cloud providers, including Amazon.Com, Inc Amazon Web Services (NASDAQ: AMZN) and Microsoft Corp (NASDAQ: MSFT) Azure, the Wall Street Journal reports.
Despite a slowdown in revenue growth earlier this year due to reduced enterprise technology spending, Snowflake's financial performance has stabilized.
A key focus for the company is generative AI, with significant R&D investment aimed at enabling customers to use Snowflake's platform for testing and refining AI models.
In the quarter ending October 31, Snowflake's R&D spending surged by 57% from the previous year, reaching $332.1 million, whereas revenue increased by 32% to $734.2 million.
R&D expenditure in the last fiscal year amounted to 38% of its revenue and will likely surpass that rate this fiscal year due to investments in AI-related services.
Snowflake competes with firms like Databricks and Amazon.com. The company recently launched Snowflake Cortex and Snowpark Container Services in private preview to assist in AI queries and data organization for AI models. It also acquired Neeva, a generative AI search data startup.
Snowflake plans to generate revenue from its AI tools in the latter half of the following year. It charges customers based on data storage and query volumes rather than fixed contracts.
The company anticipates a 35% increase in revenue in the coming fiscal year, with 5-10% expected from generative AI products. The stock has gained over 45% year-to-date.
Price Action: SNOW shares traded higher by 1.01% at $198.54 premarket on the last check Thursday.