The snowflake cost structure is skewed toward the productbusiness, which not only generates most of the revenue for the company, but its gross margins.
Indeed, in 2023, on $2 billion of revenue, the company reported $717 million in cost of sales, and $1.35 billion in gross profits, at a 62% gross margin, mostly coming from the productbusiness, which generated a 71% gross margin in 2023, whereas the professional service business is run at 34% negative gross margin, in the same period.
In short, Snowflake leverages the professional service business to boost its productbusiness. And the former is run at negative margins, while the latter is run at widely positive margins.
Snowflake’s professional service business is run at negative margins, as it’s used to provide support for the productbusiness, which instead is run at positive gross margins. Indeed, in 2023 the professional service business reported a gross loss of $43 million in 2023 and nearly $32 million in 2022.
Cost of professional services comprise primarily personnel costs.
Snowflake generates most of its revenue from products of over $1.93 billion in 2023; the productbusiness is the core of Snowflake, and also the business that generates wide gross margins.
Snowflake generates most of its revenue from products/software. For instance, in 2023, almost 94% of its revenue came from product and 6% from professional services. Indeed in 2023, product generated $1.93 billion in revenue, compared to nearly $127 million from professional services.
Snowflake generated over $2 billion in revenue in 2023, compared to $1.22 billion in 2022 and $592 million in 2021. Snowflake reported $797 million in net losses in 2023, compared to $680 million in net losses in 2022 and $539 million in net losses in 2021.
The snowflake cost structure is skewed toward the productbusiness, which not only generates most of the revenue for the company, but its gross margins.
Indeed, in 2023, on $2 billion of revenue, the company reported $717 million in cost of sales, and $1.35 billion in gross profits, at a 62% gross margin, mostly coming from the productbusiness, which generated a 71% gross margin in 2023, whereas the professional service business is run at 34% negative gross margin, in the same period.
In short, Snowflake leverages the professional service business to boost its productbusiness. And the former is run at negative margins, while the latter is run at widely positive margins.
Snowflake generated 65% in gross margins in 2023, compared to 62% in 2022 and 65% in 2021. All gross margins come from products, with a 72% gross margin in 2023, compared to professional services running at negative gross margins of 34% in 2023.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
