Snowflake surges on Q2 earnings: The Investment Committee's software strategy

WHAT'S BEEN FEEDING THE ROTATION. AND THIS THIS TALK ABOUT THE 30 YEAR, THE TEN YEAR. IT'S REALLY JUST SORT OF IN ITS OWN LANE. AND I THINK NOT THE MAIN THING FOR INVESTORS TO BE FOCUSED ON. >> YOU KNOW, WHAT IS SNOWFLAKE? LET'S LOOK AT THAT CHART. >> YEAH, LET'S JUST DO IT RIGHT NOW. >> WE WILL DO IT RIGHT NOW BECAUSE IT DESERVES TO BE DONE RIGHT NOW. LOOK AT THAT 21%. THAT STOCK IS UP BLOWOUT EARNINGS. IT'S A NEW 52 WEEK HIGH. I'LL STAY WITH YOU JOSH, FOR A MOMENT BECAUSE YOU FLAGGED THIS IN LATE MAY AT WHEN IT WAS 205. OKAY. IN BEST STOCKS IN THE MARKET IN LATE MAY, THE STOCK WAS TRADING AT $205. UBS TODAY GOES TO 500 WAS THE HIGHEST ONE THAT WE SAW OUT OF THE GROUP OF OF TARGET INCREASES TODAY. THIS IS EXACTLY WHAT YOU'RE TALKING ABOUT. AND THIS IS ALSO PLAYING A BIG ROLE IN WHY YOU SEE GREEN ALL OVER THE PLACE TODAY, ESPECIALLY IN SOFTWARE, ESPECIALLY IN THE NASDAQ AND TECH. >> THAT'S RIGHT, SCOTT. AND I DON'T WANT TO DOWNPLAY THE MAGNITUDE OF THIS CALL THAT I MADE BECAUSE. ALLOW ME, I'M FULL DISCLOSURE, I'M LONG THE STOCK. OBVIOUSLY WE'VE BEEN TALKING ABOUT IT. BUT IN LATE MAY, WHEN IT CAME ON TO THE BEST STOCKS IN THE MARKET LIST, IT'S A VERY DIFFICULT THING TO COME ON AND TALK ABOUT A STOCK THAT HAS JUST REPORTED EARNINGS AND HAS GONE UP 36% IN ONE DAY, WHICH IS WHAT SNOWFLAKE DID. I CAME TO IT A WEEK OR TWO LATER, AND I'M TALKING ABOUT THE NAME AS THIS IDEA. WE HAVE ALL THESE SOFTWARE STOCKS THAT HAVE BEEN BLOWN TO SMITHEREENS. A LOT OF THEM DIDN'T DESERVE IT, AND THIS WAS ONE OF THEM. AND WHAT'S EVEN MORE GRATIFYING THAN THE FACT THAT THE STOCK HAS ALMOST DOUBLED IS THE REASON WHY IT'S WORKING, IS EXACTLY WHAT WE LAID OUT AT THE BEST STOCKS IN THE MARKET COLUMN ON CNBC PRO NET REVENUE RETENTION OF 120% TO 130%. THAT IS THIS RANGE THIS COMPANY IS IN. LET ME EXPLAIN TO YOU WHAT THAT MEANS. THAT IS, EXISTING CUSTOMERS CONTINUING TO SPEND OR SPEND MORE WELL IN ADVANCE OF ANY CUSTOMERS WHO ARE DROPPING OFF. NOBODY'S DROPPING OFF. AND THE REASON WHY IS BECAUSE IT IS BECOMING VERY OBVIOUS. THE AGENTIC ERA OF AI, WHICH WE'RE HEADING INTO, REQUIRES DATA GOVERNANCE. AND THIS IS THE DATA GOVERNANCE LAYER. WHY DO WE THINK THAT CORPORATIONS WANT TO MOVE THEIR DATA ELSEWHERE, PULL IT ONTO DIFFERENT PLATFORMS, DUPLICATE IT WHEN THEY CAN JUST CARRY OUT A GENETIC WORKFLOWS DIRECTLY IN THE GOVERNANCE LAYER. THAT IS WHAT SNOWFLAKE DOES. THEY HAVE 9000 CUSTOMERS CURRENTLY DOING SOMETHING AGENTIC DIRECTLY INSIDE OF THEIR DATA LAKES WITH SNOWFLAKE, AND THAT IS WHAT THE STREET HAS WOKEN UP TO. AND THAT'S HOW YOU GET A STOCK GO FROM 205 TO 371 IN THE COURSE OF A SINGLE QUARTER. >> YOU'VE BEEN PLAYING THIS GAME IN THIS ONE TO JASON SNYDER 100. TELL ME YOUR THOUGHTS AS YOU SEE THE STOCK DO WHAT IT IS DOING AGAIN 500 BUCKS AT UBS. YEAH IT'S BEEN A STANDOUT FOR SURE. >> YEAH MAN. I MEAN WHAT AN UNBELIEVABLE QUARTER. I THINK THAT THE MAJOR TAKEAWAYS FOR ME IS PRODUCT REVENUE GROWTH. PRODUCT REVENUE GROWTH WAS IN THE LOW 20S. YOU KNOW, OVER THE LAST YEAR IT WAS UP 37% THIS QUARTER. WOW. RIGHT. SO THAT'S A HUMONGOUS NUMBER. I THINK THE OTHER THING, AS YOU THINK ABOUT PRODUCT REVENUE GROWTH AND COMPANIES LIKE SNOWFLAKE WHO ARE INVESTING HEAVILY IN AI, THEIR OP MARGINS ARE ALSO EXPANDING AT THE SAME RATE, SIMILAR RATE TO, TO THEIR GROWTH RATE. AND TO, TO JOSH'S POINT ON NET REOCCURRING RETENTION REVENUE 126%. THAT JUST MEANS THAT FOLKS THAT ARE ON THE EXISTING PLATFORM ARE ONLY CONSUMING MORE. ONCE YOU GET IN, YOU'RE JUST BUYING MORE PRODUCTS AND SERVICES. THAT'S WHY SNOW IS RUNNING LIKE IT IS. IT'S UP 50% PRIOR TO THE PRINT. IT'S NOW UP 70% YEAR. >> THE TIDE IS LIFTING A LOT OF BOATS TODAY IN THAT SPACE. I MEAN, BRIN, PALANTIR IS GOOD FOR 8% TODAY. YOU GOT THE CYBER NAMES WORKING LIKE CROWDSTRIKE IS UP 4.5%. SALESFORCE, WHICH REALLY TOOK OFF LAST WEEK AFTER ITS OWN EARNINGS UP 3%, OKTA PLUS 3%, ORACLE PLUS 5.5%. THIS IS WHAT A BLOWOUT REPORT LIKE THIS DOES IN A SPACE THAT REALLY HAS BEEN TRADING WELL OF LATE. >> TRADING SO WELL. AND I THINK, YOU KNOW THESE HEDGE FUNDS SO MANY BUT IN ADDITION TO THE SITUATIONAL AWARENESS, HAVE BEEN SHORT THESE NAMES, LET'S SAY THE SOFTWARE BASKET, YOU KNOW, RICH AT LARGE, THAT THAT IS THE DANGER HERE OF GETTING TOO BEARISH, YOU KNOW, ON ANY OF THESE TECHNOLOGY SECTORS AND LETTING THE NARRATIVE TAKE PLACE IF YOUR PRICE. AND SO, I MEAN, ALL OF THESE NAMES HAVE HAD V-SHAPED BOUNCES OFF THE BOTTOM. AND I, YOU KNOW, CONTINUE TO THINK, YOU KNOW, IGV IS ABOUT TO MAKE A MAKE RACE BACK TO ITS HIGHS. AND SO I JUST THINK THAT THAT SOFTWARE NARRATIVE HAS SOMEWHAT DIED, THAT THEY'RE ALL GOING AWAY. AND TO JOSH'S POINT, AND JASON'S LIKE SNOWFLAKE, THEY ARE A CORE PART OF THE ECOSYSTEM, WHICH IS JUST NOW GETTING STARTED. >> YEAH. I MEAN, WHAT SAAS APOCALYPSE? WELL, IS IT FAIR TO ASK, IS IT FAIR TO ASK THAT AT THIS POINT? LET ME HEAR FROM. >> JIM FIRST. >> YEAH, I THINK BRYNN JUST NAILED IT. AND I'M GOING TO I'M GOING TO QUOTE FROM CHRIS VERRONE, A FRIEND OF YOURS ON THE CLOSING BELL, WHO OFTEN SAYS THAT THE NARRATIVE FOLLOWS PRICE. AND THAT'S WHAT HAPPENED WITH SOFTWARE STOCKS EARLIER THIS YEAR. THAT'S WHERE THE SAAS APOCALYPSE CAME FROM. THE IDEA THAT ALL OF THESE COMPANIES WERE GOING TO BASICALLY GO TO ZERO, THEIR PROFIT PICTURE WAS GOING TO GO TO ZERO. AND I'M NOT I'M NOT USING HYPERBOLE HERE. I MEAN, THESE STOCKS WERE TRADING AS IF THEY WERE GOING OUT OF BUSINESS. WHAT WE'VE FOUND SINCE, AND BRYNN WAS JUST SAYING THIS, IS THAT IF YOU ACTUALLY TRACK WHAT WAS CAUSING THE PRICE TO DECLINE, IF YOU ACTUALLY LOOKED AT THE CAUSE, IT WAS SITUATIONAL AWARENESS WITH HUGE LEVERAGE AND OTHER PEOPLE PILING ON THAT BET. NOW, WHAT WE'RE SEEING IN THE EARNINGS REPORT IS FRANKLY, WHAT WE WERE SEEING ALL ALONG, WHICH IS THAT THESE COMPANIES WERE DOING JUST FINE. AND THIS THING GOT SO CRAZY THAT EVEN MICROSOFT WAS CAUGHT UP IN THIS. I MEAN, IF WE CAN REMEMBER THAT MICROSOFT WAS BELOW $400 FOR A LOT OF THE FIRST HALF OF THIS YEAR, I THINK WHAT WE'RE SEEING NOW IS IF YOU ACTUALLY THINK ABOUT WHAT'S DRIVING PRICE, I.E. THE FUNDAMENTALS, THERE'S A LOT OF REASONS TO BE IN THESE SPACES. >> WELL, IF I TOLD YOU NOW, RIGHT, YOU WOULDN'T HAVE THOUGHT THIS MAY BE POSSIBLE. BY THIS TIME. THE YEAR TO DATE IS NOW POSITIVE. OKAY. IT USES THE MOVE TODAY THAT IT'S MADE AND IT BECAUSE THE SECTOR ITSELF IS UP QUITE NICELY AS I AS I RAN THROUGH THE LIST OF INDIVIDUAL NAMES, WE'RE POSITIVE YEAR TO DATE BY A LITTLE MORE THAN 1%. I DON'T THINK PEOPLE HAVE THAT ON THEIR BINGO CARDS. IN THE MID SPRING WHEN IT LOOKED LIKE THIS WAS A DISASTER. >> SO I WAS FORCED TO AVERAGE DOWN INTO TOAST. I WAS FORCED TO AVERAGE DOWN INTO SERVICE TITAN. I BOUGHT INTO SNOWFLAKE. I DID MY BEST TO LOOK FOR THE SITUATIONS WHERE THE MARKET NARRATIVE HAD IT BACKWARDS. AND THIS IS WHAT I MEAN BY THAT. THE DISCONNECT BETWEEN SILICON VALLEY AND ACTUAL BUSINESSES AND ACTUAL PEOPLE WHO ARE RUNNING BUSINESSES. THERE'S THIS ASSUMPTION AND THE HEDGE FUNDS BOUGHT INTO THE SILICON VALLEY STORY. THE SILICON VALLEY STORY WAS, THESE COMPANIES ARE GOING TO OBVIATE THE NEED FOR ALL OF THESE QUOTE UNQUOTE MIDDLEMEN. THEY'RE GOING TO RIP THAT LAYER OUT. EVERYONE'S GOING TO GO DIRECT TO ANTHROPIC TO DO ALL OF THESE WORKFLOWS, AND THEY'RE GOING TO HAVE IT. PEOPLE WORKING AT FORTUNE 500 COMPANIES, ACTIVELY RIPPING WIRES OUT AND CUTTING COSTS. IT'S A GREAT STORY. THE PROBLEM IS IT'S NOT ACTUALLY HOW THE WORLD WORKS. NUMBER ONE, I WAS REMINDED RECENTLY ONE OF THE BENEFITS OF SAAS SOFTWARE IS NOT JUST THAT IT DOES THE THING THAT YOU NEED IT TO DO, IT ALSO GIVES YOU SOMEBODY TO YELL AT AND SOMEBODY POTENTIALLY TO SUE WHEN THINGS GO WRONG. THIS IS A VERY UNDERRATED PART OF WHY PEOPLE WANT TO WORK WITH FORTUNE 500 SOFTWARE COMPANIES. THE OTHER THING IS MOST BUSINESS CUSTOMERS ARE NOT THEMSELVES EQUIPPED TO CODE THEIR OWN SOLUTIONS, AND THEY NEED 100% UPTIME TO RUN THEIR BUSINESSES. SO WHEN I LOOKED AT TOAST AND I LOOKED AT SERVICETITAN, I SAID, WHO ARE THE VERTICALS? ONE IS BAR AND RESTAURANT OWNERS. IS THAT WHO WE THINK IS GOING TO GET INTO THE SOFTWARE CREATION PROCESS? PROBABLY NOT. THAT'S A BUY. AND OF COURSE, TOAST WILL BE THE COMPANY THAT SELLS AI TO THOSE CUSTOMERS. THE OTHER ONE, SERVICETITAN DO WE THINK HOUSE PAINTERS AND CONTRACTORS AND LANDSCAPERS ARE VERY EXCITED TO START CREATING THEIR OWN SOFTWARE SOLUTIONS? I'D SAY PROBABLY NOT. AND IN FACT, SERVICETITAN IS NOW SELLING AI SERVICES TO THAT CUSTOMER BASE. THIS WAS THE DISCONNECT THAT THE HEDGE FUNDS GOT WRONG AND THAT SILICON VALLEY GETS WRONG. BUT INVESTORS WHO KNOW THESE COMPANIES AND KNOW THE END MARKETS REALIZED THIS IS A NO BRAINER. SCOTT. >> YEAH. >> GO AHEAD. YEAH, I JUST. >> WE. >> CAN CONTINUE TO CYCLE THROUGH TITAN SEE INTRADAY ON THAT GUYS. PLEASE GO AHEAD. >> IF WE'RE GOING TO DEBUNK. AND I THINK WE SHOULD DEBUNK THE SAAS APOCALYPSE NARRATIVE. I THINK THERE'S ANOTHER NARRATIVE THAT WENT HAND IN GLOVE WITH IT CAN'T BE SEPARATED FROM IT, WHICH IS THE PRIVATE CREDIT THAT THIS WAS GOING TO BE A SYSTEMIC RISK. NOW, LOOK, YOU LOOK AT THESE STOCKS THAT WERE AT THE EPICENTER, BLUE OWL, APOLLO. THEY'RE UP 30% AS