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Snowflake Inc. - Quarter Report: 2022 October (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to
Commission File Number: 001-39504
snow-20221031_g1.jpg
SNOWFLAKE INC.
(Exact name of registrant as specified in its charter)
Delaware
46-0636374
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Suite 3A, 106 East Babcock Street
Bozeman, MT 59715
(Address of principal executive offices and zip code)1
(844) 766-9355
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par valueSNOWThe New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmall reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 18, 2022, there were 321.6 million shares of the registrant’s Class A common stock, par value of $0.0001 per share, outstanding.
1 We are a Delaware corporation with a globally distributed workforce and no corporate headquarters. Under the Securities and Exchange Commission's rules, we are required to designate a “principal executive office.” For purposes of this report, we have designated our office in Bozeman, Montana as our principal executive office, as that is where our Chief Executive Officer and Chief Financial Officer are based.


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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our revenue, expenses, and other operating results, including statements relating to the portion of our remaining performance obligations that we expect to recognize as revenue in future periods;
our ability to acquire new customers and successfully retain existing customers;
our ability to increase consumption on our platform;
our ability to continue to innovate and make new features generally available to customers;
our ability to achieve or sustain our profitability;
future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
the costs and success of our sales and marketing efforts, and our ability to promote our brand;
our growth strategies for, and market acceptance of, our platform and the Data Cloud, as well as our ability to execute such strategies;
our ability to successfully integrate and realize the benefits of strategic acquisitions;
our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;
our ability to effectively manage our growth, including any international expansion;
our ability to protect our intellectual property rights and any costs associated therewith;
our expectations regarding general market conditions and the effects of those conditions, including on customer and partner activity;
our ability to compete effectively with existing competitors and new market entrants;
the growth rates of the markets in which we compete; and
the effects of the COVID-19 pandemic or other public health crises and their related public health measures on our business, the business of our customers and partners, and the economy.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

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You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.snowflake.com), our filings with the Securities and Exchange Commission (SEC), webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.


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SELECTED RISKS AFFECTING OUR BUSINESS
Investing in our common stock involves numerous risks, including those set forth below. This summary does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of risks and uncertainties set forth in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. Below are summaries of some of these risks, any one of which could materially adversely affect our business, results of operations, and financial condition. In that event, the market price of our common stock could decline, and you could lose part or all of your investment. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized.

We have experienced rapid revenue growth, which may not be indicative of our future performance, and we have a limited operating history, both of which make it difficult to forecast our future results of operations.
We may not have visibility into our future financial position and results of operations.
We have a history of operating losses and may not achieve or sustain profitability in the future.
General market conditions, volatility, or disruptions, including higher inflation, higher interest rates, and fluctuations or volatility in capital markets or foreign currency exchange rates, could have an adverse impact on our or our customers’ or partners’ businesses, which could negatively impact our financial condition or results of operations.
The markets in which we operate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed.
If we fail to innovate in response to changing customer needs, new technologies, or other market requirements, our business, financial condition, and results of operations could be harmed.
If we or our third-party service providers experience an actual or perceived security breach or unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform, our platform may be perceived as not being secure, our reputation may be harmed, demand for our platform may be reduced, and we may incur significant liabilities.
We could suffer disruptions, outages, defects, and other performance and quality problems with our platform or with the public cloud and internet infrastructure on which it relies.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price could decline.
Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products and platform.
Sales efforts to large customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller organizations.
Unfavorable conditions in our industry or the global economy, or reductions in cloud spending, could limit our ability to grow our business and negatively affect our results of operations.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SNOWFLAKE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
October 31, 2022January 31, 2022
Assets
Current assets:
Cash and cash equivalents$819,003 $1,085,729 
Short-term investments3,123,879 2,766,364 
Accounts receivable, net394,063 545,629 
Deferred commissions, current61,738 51,398 
Prepaid expenses and other current assets160,221 149,523 
Total current assets4,558,904 4,598,643 
Long-term investments943,081 1,256,207 
Property and equipment, net145,974 105,079 
Operating lease right-of-use assets234,678 190,356 
Goodwill649,092 8,449 
Intangible assets, net196,165 37,141 
Deferred commissions, non-current133,939 124,517 
Other assets293,855 329,306 
Total assets$7,155,688 $6,649,698 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$24,757 $13,441 
Accrued expenses and other current liabilities225,321 200,664 
Operating lease liabilities, current29,263 25,101 
Deferred revenue, current1,199,701 1,157,887 
Total current liabilities1,479,042 1,397,093 
Operating lease liabilities, non-current225,013 181,196 
Deferred revenue, non-current7,333 11,180 
Other liabilities21,029 11,184 
Total liabilities1,732,417 1,600,653 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock; $0.0001 par value per share; 200,000 shares authorized, zero shares issued and outstanding as of October 31, 2022 and January 31, 2022
— — 
Common stock; $0.0001 par value per share; 2,500,000 Class A shares authorized, 321,497 and 312,377 shares issued and outstanding as of October 31, 2022 and January 31, 2022, respectively; 185,461 Class B shares authorized, zero shares issued and outstanding as of each October 31, 2022 and January 31, 2022
32 31 
Additional paid-in capital7,988,829 6,984,669 
Accumulated other comprehensive loss(69,179)(16,286)
Accumulated deficit(2,508,905)(1,919,369)
Total Snowflake Inc. stockholders’ equity5,410,777 5,049,045 
Noncontrolling interest12,494 — 
Total stockholders’ equity5,423,271 5,049,045 
Total liabilities and stockholders’ equity$7,155,688 $6,649,698 

See accompanying notes to condensed consolidated financial statements.
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SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Revenue$557,028 $334,441 $1,476,647 $835,553 
Cost of revenue190,721 120,786 511,883 324,253 
Gross profit366,307 213,655 964,764 511,300 
Operating expenses:
Sales and marketing284,477 190,971 803,034 540,678 
Research and development211,387 115,900 545,933 343,783 
General and administrative76,462 64,055 218,314 189,846 
Total operating expenses572,326 370,926 1,567,281 1,074,307 
Operating loss(206,019)(157,271)(602,517)(563,007)
Interest income21,857 1,985 38,308 6,787 
Other income (expense), net(13,271)1,609 (44,672)9,867 
Loss before income taxes(197,433)(153,677)(608,881)(546,353)
Provision for (benefit from) income taxes4,009 1,179 (18,839)1,442 
Net loss(201,442)(154,856)(590,042)(547,795)
Less: net loss attributable to noncontrolling interest(506)— (506)— 
Net loss attributable to Snowflake Inc.$(200,936)$(154,856)$(589,536)$(547,795)
Net loss per share attributable to Snowflake Inc. Class A and Class B common stockholders—basic and diluted(1)
$(0.63)$(0.51)$(1.86)$(1.84)
Weighted-average shares used in computing net loss per share attributable to Snowflake Inc. Class A and Class B common stockholders—basic and diluted(1)
320,135 303,007 317,653 297,436 
________________
(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 10 for further details.

See accompanying notes to condensed consolidated financial statements.
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SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Net loss$(201,442)$(154,856)$(590,042)$(547,795)
Other comprehensive loss:
Foreign currency translation adjustments(1,108)(361)(4,158)(63)
Net change in unrealized gains (losses) on available-for-sale debt securities(20,214)(4,266)(48,735)(3,862)
Total other comprehensive loss(21,322)(4,627)(52,893)(3,925)
Comprehensive loss attributable to Snowflake Inc.$(222,764)$(159,483)$(642,935)$(551,720)

See accompanying notes to condensed consolidated financial statements.
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SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended October 31, 2022
Class A Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total Snowflake Inc. Stockholders’ EquityNoncontrolling InterestTotal
Stockholders’
Equity
SharesAmount
BALANCE—July 31, 2022
319,897 $32 $7,782,117 $(47,857)$(2,307,969)$5,426,323 $$5,426,323 
Issuance of common stock upon exercise of stock options984 — 7,366 — — 7,366 — 7,366 
Issuance of common stock under employee stock purchase plan102 — 14,837 — — 14,837 — 14,837 
Issuance of common stock in connection with a business combination— — — — — — — 
Vesting of early exercised stock options— — 61 — — 61 — 61 
Vesting of restricted stock units786 — — — — — — — 
Shares withheld related to net share settlement of equity awards(274)— (52,507)— — (52,507)— (52,507)
Stock-based compensation— — 236,955 — — 236,955 — 236,955 
Capital contributions from noncontrolling interest holders— — — — — — 13,000 13,000 
Other comprehensive loss— — — (21,322)— (21,322)— (21,322)
Net loss— — — — (200,936)(200,936)(506)(201,442)
BALANCE—October 31, 2022
321,497 $32 $7,988,829 $(69,179)$(2,508,905)$5,410,777 $12,494 $5,423,271 

Three Months Ended October 31, 2021
Class A Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total Snowflake Inc. Stockholders’ EquityNoncontrolling InterestTotal
Stockholders’
Equity
SharesAmount
BALANCE—July 31, 2021
300,585 $30 $6,596,154 $1,141 $(1,632,360)$4,964,965 $$4,964,965 
Issuance of common stock upon exercise of stock options4,222 — 24,708 — — 24,708 24,708 
Issuance of common stock under employee stock purchase plan111 — 25,829 — — 25,829 25,829 
Vesting of early exercised stock options— — 191 — — 191 191 
Vesting of restricted stock units981 — — — — — — 
Stock-based compensation— — 150,472 — — 150,472 150,472 
Other comprehensive loss— — — (4,627)— (4,627)(4,627)
Net loss— — — — (154,856)(154,856)(154,856)
BALANCE—October 31, 2021
305,899 $30 $6,797,354 $(3,486)$(1,787,216)$5,006,682 $— $5,006,682 


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SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(in thousands)
(unaudited)
Nine Months Ended October 31, 2022
Class A Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total Snowflake Inc. Stockholders’ EquityNoncontrolling InterestTotal
Stockholders’
Equity
SharesAmount
BALANCE—January 31, 2022
312,377 $31 $6,984,669 $(16,286)$(1,919,369)$5,049,045 $— $5,049,045 
Issuance of common stock upon exercise of stock options4,926 30,932 — — 30,933 — 30,933 
Issuance of common stock under employee stock purchase plan286 — 40,931 — — 40,931 — 40,931 
Issuance of common stock in connection with a business combination1,916 — 438,916 — — 438,916 — 438,916 
Issuance of common stock in connection with a business combination subject to future vesting409 — — — — — — — 
Vesting of early exercised stock options— — 183 — — 183 — 183 
Vesting of restricted stock units2,409 — — — — — — — 
Shares withheld related to net share settlement of equity awards(826)— (138,641)— — (138,641)— (138,641)
Stock-based compensation— — 631,839 — — 631,839 — 631,839 
Capital contributions from noncontrolling interest holders— — — — — — 13,000 13,000 
Other comprehensive loss— — — (52,893)— (52,893)— (52,893)
Net loss— — — — (589,536)(589,536)(506)(590,042)
BALANCE—October 31, 2022
321,497 $32 $7,988,829 $(69,179)$(2,508,905)$5,410,777 $12,494 $5,423,271 

Nine Months Ended October 31, 2021
Class A and Class B
Common Stock(1)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total Snowflake Inc. Stockholders’ EquityNoncontrolling InterestTotal
Stockholders’
Equity
SharesAmount
BALANCE—January 31, 2021
287,918 $28 $6,175,425 $439 $(1,239,421)$4,936,471 $— $4,936,471 
Issuance of common stock upon exercise of stock options15,279 90,374 — — 90,376 — 90,376 
Issuance of common stock under employee stock purchase plan370 — 52,227 — — 52,227 — 52,227 
Vesting of early exercised stock options— — 614 — — 614 — 614 
Vesting of restricted stock units2,332 — — — — — — — 
Stock-based compensation— — 478,714 — — 478,714 — 478,714 
Other comprehensive loss— — — (3,925)— (3,925)— (3,925)
Net loss— — — — (547,795)(547,795)— (547,795)
BALANCE—October 31, 2021
305,899 $30 $6,797,354 $(3,486)$(1,787,216)$5,006,682 $— $5,006,682 
________________
(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 10 for further details.
See accompanying notes to condensed consolidated financial statements.
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SNOWFLAKE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended October 31,
20222021
Cash flows from operating activities:
Net loss$(590,042)$(547,795)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization43,809 15,586 
Non-cash operating lease costs33,579 25,895 
Amortization of deferred commissions41,525 26,824 
Stock-based compensation, net of amounts capitalized610,837 459,392 
Net amortization of premiums on investments
12,331 36,938 
Net unrealized losses (gains) on strategic investments in equity securities45,096 (8,515)
Deferred income tax(25,277)— 
Other678 2,535 
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable150,723 39,142 
Deferred commissions(63,627)(52,892)
Prepaid expenses and other assets13,169 (112,798)
Accounts payable10,304 4,591 
Accrued expenses and other liabilities27,727 43,106 
Operating lease liabilities(29,176)(24,758)
Deferred revenue46,667 124,030 
Net cash provided by operating activities328,323 31,281 
Cash flows from investing activities:
Purchases of property and equipment(19,766)(12,209)
Capitalized internal-use software development costs(17,319)(8,612)
Cash paid for business combinations, net of cash and cash equivalents acquired(352,555)— 
Purchases of intangible assets(700)(11,182)
Purchases of investments(2,796,167)(3,042,396)
Sales of investments58,813 407,003 
Maturities and redemptions of investments2,594,593 2,610,429 
Net cash used in investing activities(533,101)(56,967)
Cash flows from financing activities:
Proceeds from exercise of stock options31,095 90,444 
Proceeds from issuance of common stock under employee stock purchase plan40,931 52,227 
Taxes paid related to net share settlement of equity awards(135,766)— 
Capital contributions from noncontrolling interest holders13,000 — 
Payments of deferred purchase consideration for a business combination(1,800)— 
Net cash provided by (used in) financing activities(52,540)142,671 
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Nine Months Ended October 31,
20222021
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(9,390)21 
Net increase (decrease) in cash, cash equivalents, and restricted cash(266,708)117,006 
Cash, cash equivalents, and restricted cash—beginning of period1,102,534 835,193 
Cash, cash equivalents, and restricted cash—end of period$835,826 $952,199 
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued expenses$5,841 $3,115 
Stock-based compensation included in capitalized software development costs$20,295 $18,923 
Issuance of common stock in connection with a business combination$438,916 $— 
Purchases of intangible assets included in accrued expenses and other liabilities$— $4,544 
Unpaid taxes related to net share settlement of equity awards included in accrued expenses and other current liabilities$2,874 $— 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$819,003 $935,217 
Restricted cash—included in other assets and prepaid expenses and other current assets16,823 16,982 
Total cash, cash equivalents, and restricted cash$835,826 $952,199 

See accompanying notes to condensed consolidated financial statements.
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SNOWFLAKE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Organization and Description of Business

Snowflake Inc. (Snowflake or the Company) provides a cloud-based data platform, which enables customers to consolidate data to drive meaningful business insights, build data-driven applications, and share data. The Company provides its platform through a customer-centric, consumption-based business model, only charging customers for the resources they use. Through its platform, the Company delivers the Data Cloud, a network where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways. Snowflake was incorporated in the state of Delaware on July 23, 2012.

2. Basis of Presentation and Summary of Significant Accounting Policies

Fiscal Year

The Company’s fiscal year ends on January 31. For example, references to fiscal 2023 refer to the fiscal year ended January 31, 2023.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022, which was filed with the SEC on March 30, 2022.

In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of October 31, 2022 and the results of operations for the three and nine months ended October 31, 2022 and 2021, and cash flows for the nine months ended October 31, 2022 and 2021. The condensed balance sheet as of January 31, 2022 was derived from the audited financial statements but does not include all disclosures required by GAAP. The results of operations for the three and nine months ended October 31, 2022 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Snowflake Inc., its wholly-owned subsidiaries, and a majority-owned subsidiary in which the Company has a controlling financial interest. All intercompany transactions and balances have been eliminated in consolidation. The Company records noncontrolling interest in its condensed consolidated financial statements to recognize the minority ownership interest in its majority-owned subsidiary. Profits and losses of the majority-owned subsidiary are attributed to controlling and noncontrolling interests using the hypothetical liquidation at book value method.

Segment Information

The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For information regarding the Company’s revenue by geographic area, see Note 3.

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The following table presents the Company’s long-lived assets, comprising property and equipment, net and operating lease right-of-use assets, by geographic area (in thousands):
October 31, 2022January 31, 2022
United States$322,199 $272,895 
Other(1)
58,453 22,540 
Total$380,652 $295,435 
________________
(1)No individual country outside of the United States accounted for more than 10% of the Company’s long-lived assets as of October 31, 2022 and January 31, 2022.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, stand-alone selling prices (SSP) for each distinct performance obligation, internal-use software development costs, the expected period of benefit for deferred commissions, the fair value of intangible assets acquired in business combinations, the useful lives of long-lived assets, the carrying value of operating lease right-of-use assets, stock-based compensation, accounting for income taxes, and the fair value of investments in marketable and non-marketable securities.

The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. These estimates are assessed on a regular basis; however, actual results could differ from these estimates.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Note 2 – Basis of Presentation and Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022, which was filed with the SEC on March 30, 2022. There have been no significant changes to these policies during the nine months ended October 31, 2022, except for the addition of the derivative financial instruments accounting policy with respect to the Company’s foreign currency forward contracts entered into during the nine months ended October 31, 2022.

Derivative Financial Instruments

During the nine months ended October 31, 2022, the Company began using derivative financial instruments to manage its exposure to certain foreign currency exchange risks associated with certain intercompany balances denominated in currencies other than the U.S. dollar. These derivative financial instruments consist of deliverable foreign currency forward contracts entered into with high-quality financial institutions that have investment-grade ratings with maturities of one month or less and are not designated as hedging instruments. As such, all changes in the fair value of these derivative instruments are recorded in other income (expense), net on the condensed consolidated statements of operations, and are intended to offset the foreign currency transaction gains or losses associated with the underlying intercompany balances. The resulting derivative assets and liabilities are measured at fair value using Level 2 inputs and presented as prepaid expenses and other current assets and accrued expenses and other current liabilities, as applicable, on the condensed consolidated balance sheets. Cash flows at settlement of such foreign currency forward contracts are classified as operating activities in the condensed consolidated statement of cash flows.

As of October 31, 2022, all of the Company’s derivative assets and liabilities were settled, and the related realized gains (losses) were not material for the three and nine months ended October 31, 2022.

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3. Revenue, Accounts Receivable, Deferred Revenue, and Remaining Performance Obligations

Disaggregation of Revenue

Revenue consists of the following (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Product revenue$522,752 $312,458 $1,383,454 $780,911 
Professional services and other revenue34,276 21,983 93,193 54,642 
Total$557,028 $334,441 $1,476,647 $835,553 

Revenue by geographic area, based on the location of the Company’s customers (or end-customers under reseller arrangements), was as follows (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Americas:
United States$441,432 $265,605 $1,171,641 $669,172 
Other Americas(1)
11,637 7,703 31,316 18,860 
EMEA(1)(2)
79,326 47,671 207,010 117,149 
Asia-Pacific and Japan(1)
24,633 13,462 66,680 30,372 
Total$557,028 $334,441 $1,476,647 $835,553 
________________
(1)No individual country in these areas represented more than 10% of the Company’s revenue for all periods presented.
(2)Includes Europe, the Middle East, and Africa.

Accounts Receivable, Net

As of October 31, 2022 and January 31, 2022, allowance for credit losses of $2.2 million and $1.3 million, was included in the Company’s accounts receivable, net balance, respectively.

Significant Customers

For purposes of assessing the concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer. As of October 31, 2022 and January 31, 2022, there were no customers that represented 10% or more of the Company’s accounts receivable, net balance. Additionally, there were no customers that represented 10% or more of the Company’s revenue for each of the three and nine months ended October 31, 2022 and 2021.

Deferred Revenue

Revenue recognized for the three months ended October 31, 2022 from amounts included in deferred revenue as of July 31, 2022 was $427.4 million. Revenue recognized for the three months ended October 31, 2021 from amounts included in deferred revenue as of July 31, 2021 was $255.0 million.

Revenue recognized for the nine months ended October 31, 2022 from amounts included in deferred revenue as of January 31, 2022 was $841.8 million. Revenue recognized for the nine months ended October 31, 2021 from amounts included in deferred revenue as of January 31, 2021 was $464.0 million.

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Remaining Performance Obligations

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. The Company’s RPO excludes performance obligations from on-demand arrangements as there are no minimum purchase commitments associated with these arrangements, and certain time and materials contracts that are billed in arrears. Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into U.S. dollars each period based on the applicable period-end exchange rates.

As of October 31, 2022, the Company’s RPO was $3.0 billion, of which the Company expects approximately 55% to be recognized as revenue in the twelve months ending October 31, 2023 based on historical customer consumption patterns. However, the amount and timing of revenue recognition are generally dependent upon customers’ future consumption, which is inherently variable at customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally on the purchase of additional capacity at renewal.

4. Cash Equivalents and Investments

The following is a summary of the Company’s cash equivalents, short-term investments, and long-term investments on the condensed consolidated balance sheets (in thousands):

October 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash equivalents:
Money market funds$425,221 $— $— $425,221 
Commercial paper89,834 — (27)89,807 
Corporate notes and bonds1,600 — — 1,600 
Total cash equivalents516,655 — (27)516,628 
Investments:
Corporate notes and bonds2,340,262 11 (40,916)2,299,357 
Commercial paper784,220 18 (5,121)779,117 
U.S. government and agency securities598,365 (15,722)582,647 
Certificates of deposit408,197 15 (2,373)405,839 
Total investments4,131,044 48 (64,132)4,066,960 
Total cash equivalents and investments$4,647,699 $48 $(64,159)$4,583,588 

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January 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cash equivalents:
Money market funds$722,492 $— $— $722,492 
Commercial paper77,795 (2)77,794 
U.S. government securities36,997 — (2)36,995 
Corporate notes and bonds7,950 — (1)7,949 
Total cash equivalents845,234 (5)845,230 
Investments:
Corporate notes and bonds2,610,010 91 (12,062)2,598,039 
Commercial paper884,376 81 (821)883,636 
U.S. government and agency securities439,449 28 (2,558)436,919 
Certificates of deposit104,108 (135)103,977 
Total investments4,037,943 204 (15,576)4,022,571 
Total cash equivalents and investments$4,883,177 $205 $(15,581)$4,867,801 

The Company included $17.0 million and $14.1 million of interest receivable in prepaid expenses and other current assets on the condensed consolidated balance sheets as of October 31, 2022 and January 31, 2022, respectively. The Company did not recognize an allowance for credit losses against interest receivable as of October 31, 2022 and January 31, 2022 because such potential losses were not material.

As of October 31, 2022, the contractual maturities of the Company’s available-for-sale marketable debt securities did not exceed 36 months. The estimated fair values of available-for-sale marketable debt securities, by remaining contractual maturity, are as follows (in thousands):

October 31, 2022
Estimated
Fair Value
Due within 1 year$3,215,286 
Due in 1 year to 3 years943,081 
Total$4,158,367 

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The following tables show the fair values of, and the gross unrealized losses on, the Company’s available-for-sale marketable debt securities, classified by the length of time that the securities have been in a continuous unrealized loss position and aggregated by investment type, on the condensed consolidated balance sheets (in thousands):

October 31, 2022
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Cash equivalents:
Commercial paper$89,807 $(27)$— $— $89,807 $(27)
Total cash equivalents89,807 (27)— — 89,807 (27)
Investments:
Corporate notes and bonds1,541,456 (25,874)710,475 (15,042)2,251,931 (40,916)
Commercial paper738,280 (5,121)— — 738,280 (5,121)
U.S. government and agency securities455,945 (10,440)120,697 (5,282)576,642 (15,722)
Certificates of deposit320,894 (2,368)8,996 (5)329,890 (2,373)
Total investments3,056,575 (43,803)840,168 (20,329)3,896,743 (64,132)
Total cash equivalents and investments$3,146,382 $(43,830)$840,168 $(20,329)$3,986,550 $(64,159)

January 31, 2022
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Fair ValueGross
Unrealized
Losses
Cash equivalents:
Commercial paper$55,819 $(2)$— $— $55,819 $(2)
U.S. government securities36,995 (2)— — 36,995 (2)
Corporate notes and bonds7,629 (1)— — 7,629 (1)
Total cash equivalents100,443 (5)— — 100,443 (5)
Investments:
Corporate notes and bonds2,378,956 (12,044)8,935 (18)2,387,891 (12,062)
Commercial paper653,827 (821)— — 653,827 (821)
U.S. government and agency securities334,980 (2,558)— — 334,980 (2,558)
Certificates of deposit49,118 (135)— — 49,118 (135)
Total investments3,416,881 (15,558)8,935 (18)3,425,816 (15,576)
Total cash equivalents and investments$3,517,324 $(15,563)$8,935 $(18)$3,526,259 $(15,581)

For available-for-sale marketable debt securities with unrealized loss positions, the Company does not intend to sell these securities and it is more likely than not that the Company will hold these securities until maturity or a recovery of the cost basis. The decline in fair value of these securities due to credit related factors was not material as of October 31, 2022 and January 31, 2022.

See Note 5 for information regarding the Company’s strategic investments.

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5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of October 31, 2022 (in thousands):

Level 1
Level 2
Total
Cash equivalents:
Money market funds$425,221 $— $425,221 
Commercial paper— 89,807 89,807 
Corporate notes and bonds— 1,600 1,600 
Short-term investments:
Corporate notes and bonds— 1,715,493 1,715,493 
Commercial paper— 779,117 779,117 
Certificates of deposit— 405,839 405,839 
U.S. government and agency securities— 223,430 223,430 
Long-term investments:
Corporate notes and bonds— 583,864 583,864 
U.S. government and agency securities— 359,217 359,217 
Total
$425,221 $4,158,367 $4,583,588 
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The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of January 31, 2022 (in thousands):

Level 1
Level 2
Total
Cash equivalents:
Money market funds$722,492 $— $722,492 
Commercial paper— 77,794 77,794 
U.S. government securities— 36,995 36,995 
Corporate notes and bonds— 7,949 7,949 
Short-term investments:
Corporate notes and bonds— 1,662,436 1,662,436 
Commercial paper— 883,636 883,636 
U.S. government and agency securities— 116,712 116,712 
Certificates of deposit— 103,580 103,580 
Long-term investments:
Corporate notes and bonds— 935,603 935,603 
U.S. government and agency securities— 320,207 320,207 
Certificates of deposit— 397 397 
Total
$722,492 $4,145,309 $4,867,801 

The Company determines the fair value of its security holdings based on pricing from the Company’s service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

Strategic Investments

The tables above do not include the Company’s strategic investments, which consist primarily of (i) non-marketable equity securities recorded at cost minus impairment, if any, and adjusted for observable transactions for the same or similar investments of the same issuer (referred to as the Measurement Alternative), and (ii) marketable equity securities.

The Company’s non-marketable equity securities accounted for using the Measurement Alternative are recorded at fair value on a non-recurring basis and classified within Level 3 of the fair value hierarchy because significant unobservable inputs or data in an inactive market are used in estimating their fair value. The estimation of fair value for these assets requires the use of an observable transaction price or other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The Company’s marketable equity securities are recorded at fair value on a recurring basis and classified within Level 1 of the fair value hierarchy because they are valued using the quoted market price.

The following table presents the Company’s strategic investments by type (in thousands):

October 31, 2022January 31, 2022
Equity securities:
Non-marketable equity securities under Measurement Alternative$170,446 $170,860 
Non-marketable equity securities under equity method5,000 — 
Marketable equity securities22,462 34,646 
Debt securities:
Non-marketable debt securities1,500 2,250 
Total strategic investments—included in other assets$199,408 $207,756 

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The following table summarizes the unrealized gains and losses included in the carrying value of the Company’s strategic investments in equity securities held as of October 31, 2022 (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Non-marketable equity securities under Measurement Alternative:
Upward adjustments$1,124 $— $1,124 $8,060 
Impairments(7,482)— (34,037)— 
Marketable equity securities:
Net unrealized gains (losses)(6,706)455 (12,183)455 
Total—included in other income (expense), net$(13,064)$455 $(45,096)$8,515 

No realized gains or losses were recognized on the Company’s strategic investments in equity securities during any of periods presented. The cumulative upward adjustments and the cumulative impairments to the carrying value of the non-marketable equity securities accounted for using the Measurement Alternative that the Company held as of October 31, 2022 were $34.1 million and $34.0 million, respectively.

6. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

October 31, 2022January 31, 2022
Leasehold improvements$54,336 $51,801 
Computers, equipment, and software17,265 8,735 
Furniture and fixtures12,068 8,488 
Capitalized internal-use software development costs39,435 17,154 
Construction in progress—capitalized internal-use software development costs51,296 36,163 
Construction in progress—other10,845 6,185 
Total property and equipment, gross185,245 128,526 
Less: accumulated depreciation and amortization(1)
(39,271)(23,447)
Total property and equipment, net$145,974 $105,079 
________________
(1)Includes $16.5 million and $9.7 million of accumulated amortization related to capitalized internal-use software development costs as of October 31, 2022 and January 31, 2022, respectively.

Depreciation and amortization expense was $6.6 million and $17.1 million for the three and nine months ended October 31, 2022, respectively. Included in these amounts were the amortization of capitalized internal-use software development costs of $2.9 million and $6.8 million for the three and nine months ended October 31, 2022, respectively.

Depreciation and amortization expense was $3.6 million and $9.9 million for the three and nine months ended October 31, 2021, respectively. Included in these amounts were the amortization of capitalized internal-use software development costs of $1.1 million and $3.1 million for the three and nine months ended October 31, 2021, respectively.
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7. Business Combinations, Intangible Assets, and Goodwill

Business Combinations

Applica Sp. z.o.o.

On September 23, 2022, the Company acquired all outstanding stock of Applica Sp. z.o.o. (Applica), a privately-held company which provides an artificial intelligence platform for document understanding, for $174.7 million in cash. The Company acquired Applica primarily for its talent and developed technology. The Company has accounted for this transaction as a business combination.

The following table summarizes the preliminary allocation of purchase consideration to assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition:

Estimated Fair Value
(in thousands)
Estimated Useful Life
(in years)
Cash$61 
Goodwill(1)
146,478 
Developed technology intangible asset35,000 
5
Other net tangible liabilities(612)
Deferred tax liabilities, net(2)
(6,236)
Total$174,691 
________________
(1)The excess of purchase consideration over the preliminary fair value of identifiable net assets acquired was recorded as goodwill, which is generally not deductible for income tax purposes.
(2)Deferred tax liabilities, net primarily relates to the intangible asset acquired and the amount presented is net of deferred tax assets.

The fair value of the developed technology intangible asset was estimated using the replacement cost method, which utilizes assumptions for the cost to replace it, such as time and resources required, as well as a theoretical profit margin and opportunity cost.

Acquisition-related costs of $3.4 million associated with this business combination were recorded as a general and administrative expense during the nine months ended October 31, 2022.

The results of operations of Applica from the date of acquisition, which were not material, have been included in the Company’s condensed consolidated statements of operations for the three and nine months ended October 31, 2022.

Streamlit, Inc.

On March 31, 2022, the Company acquired all outstanding stock of Streamlit, Inc. (Streamlit), a privately-held company which provides an open-source framework for creating and deploying data applications. The Company acquired Streamlit primarily for its talent and developer community. The Company has accounted for this transaction as a business combination. The acquisition date fair value of the purchase consideration was $650.8 million, which was comprised of the following (in thousands):

Estimated Fair Value
Cash$211,839 
Common stock(1)
438,916 
Total
$650,755 
________________
(1)Approximately 1.9 million shares of the Company’s Class A common stock were included in the purchase consideration and the fair values of these shares were determined based on the closing market price of $229.13 per share on the acquisition date.

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In addition, in connection with this business combination, the Company issued to Streamlit’s three founders a total of 0.4 million shares of the Company’s Class A common stock in exchange for a portion of their Streamlit stock. These shares are subject to vesting agreements pursuant to which the shares will vest over three years, subject to each founder’s continued employment with the Company or its affiliates. The $93.7 million fair value of these shares are accounted for as post-combination stock-based compensation over the requisite service period of three years. See Note 10 for further discussion.

The following table summarizes the preliminary allocation of purchase consideration to assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition:

Estimated Fair Value
(in thousands)
Estimated Useful Life
(in years)
Cash and cash equivalents$33,914 
Goodwill(1)
494,165 
Developer community intangible asset150,000 
5
Other net tangible liabilities(660)
Deferred tax liabilities, net(2)
(26,664)
Total$650,755 
________________
(1)The excess of purchase consideration over the preliminary fair value of identifiable net assets acquired was recorded as goodwill, which is not deductible for income tax purposes.
(2)Deferred tax liabilities, net primarily relates to the intangible asset acquired and the amount presented is net of deferred tax assets.

The fair value of the developer community intangible asset was estimated using the replacement cost method which utilizes assumptions for the cost to replace it, such as time and resources required, as well as a theoretical profit margin and opportunity cost.

Acquisition-related costs of $2.0 million associated with this business combination were recorded as a general and administrative expense during the nine months ended October 31, 2022.

From the date of acquisition through October 31, 2022, revenue attributable to Streamlit was not material. It was impracticable to determine the effect on the Company's net loss attributable to Streamlit as its operations have been integrated into the Company's ongoing operations since the date of acquisition.

During the measurement period of up to one year from the acquisition date, the Company may record adjustments to the preliminary fair value of the assets acquired and liabilities assumed with a corresponding offset to goodwill for these business combinations. The excess of purchase consideration over the preliminary fair value of identifiable net assets acquired was recorded as goodwill. The Company believes the goodwill balances associated with these business combinations represent the synergies expected from expanded market opportunities when integrating the acquired developed technologies with the Company’s offerings.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information summarizes the combined results of operations of the Company and both of Applica and Streamlit, as if each had been acquired as of February 1, 2021 (in thousands):

Pro Forma
Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
(unaudited)
Revenue$557,116 $334,839 $1,477,232 $836,607 
Net loss$(201,510)$(191,273)$(650,406)$(640,111)

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The pro forma financial information for all periods presented above has been calculated after adjusting the results of operations of Applica and Streamlit to reflect certain business combination effects, including the amortization of the acquired intangible asset, stock-based compensation, income tax impact, and acquisition-related costs incurred by the Company, Applica, and Streamlit as though these business combinations occurred as of February 1, 2021, the beginning of the Company’s fiscal 2022. The historical condensed consolidated financial information in the unaudited pro forma tables above has been adjusted in the pro forma combined financial results to give effect to pro forma events that are directly attributable to these business combinations, reasonably estimable, and factually supportable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the business combinations had taken place as of February 1, 2021.

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

October 31, 2022
GrossAccumulated AmortizationNet
Finite-lived intangible assets:
Developer community$150,000 $(17,653)$132,347 
Developed technology46,332 (7,244)39,088 
Assembled workforce28,252 (9,252)19,000 
Patents8,874 (3,970)4,904 
Other47 (47)— 
Total finite-lived intangible assets$233,505 $(38,166)$195,339 
Indefinite-lived intangible assets—trademarks826 
Total intangible assets, net$196,165 

January 31, 2022
GrossAccumulated AmortizationNet
Finite-lived intangible assets:
Assembled workforce$28,252 $(3,941)$24,311 
Developed technology11,332 (4,812)6,520 
Patents8,174 (2,690)5,484 
Other47 (47)— 
Total finite-lived intangible assets$47,805 $(11,490)$36,315 
Indefinite-lived intangible assets—trademarks826 
Total intangible assets, net$37,141 

Amortization expense of intangible assets was $11.1 million and $26.7 million for the three and nine months ended October 31, 2022, respectively, and $1.9 million and $5.7 million for the three and nine months ended October 31, 2021, respectively.

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As of October 31, 2022, future amortization expense is expected to be as follows (in thousands):

Amount
Fiscal Year Ending January 31,
Reminder of 2023$12,124 
202448,101 
202547,379 
202641,249 
202737,097 
Thereafter9,389 
Total$195,339 

Goodwill

Changes in goodwill were as follows (in thousands):

Amount
Balance—January 31, 2022
$8,449 
Additions640,643 
Balance—October 31, 2022
$649,092 

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

October 31, 2022January 31, 2022
Accrued compensation$109,406 $98,916 
Accrued third-party cloud infrastructure expenses26,851 13,341 
Liabilities associated with marketing and business development programs20,956 16,284 
Employee contributions under employee stock purchase plan14,730 28,497 
Accrued taxes12,543 12,709 
Accrued professional services8,779 7,068 
Accrued purchases of property and equipment4,096 4,204 
Other27,960 19,645 
Total accrued expenses and other current liabilities$225,321 $200,664 

9. Commitments and Contingencies

Operating Leases

The Company leases its facilities for office space under non-cancelable operating leases with various expiration dates through fiscal 2035. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments.

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In May 2022, the Company entered into an agreement related to the expansion and lease term extension of an existing office facility located in the United States, which is considered a lease modification not accounted for as a separate contract. Total commitment, net of tenant incentives expected to be received, under the modified lease is $68.0 million. The modified lease commenced during the nine months ended October 31, 2022, with an expiration date in fiscal 2035, and resulted in an increase in the Company’s operating lease right-of-use assets and operating lease liabilities in the amount of approximately $30 million.

In addition, the Company subleases certain of its unoccupied facilities to third parties with various expiration dates through fiscal 2030. Such subleases have all been classified as operating leases. Sublease income is recorded as a reduction to the Company’s operating lease costs. Sublease income was $3.0 million and $9.7 million for the three and nine months ended October 31, 2022, respectively, and $3.4 million and $9.8 million for the three and nine months ended October 31, 2021, respectively.

Other Contractual Commitments—Other contractual commitments relate mainly to third-party cloud infrastructure agreements and subscription arrangements used to facilitate the Company’s operations at the enterprise level. There were no material contractual obligations that were entered into during the nine months ended October 31, 2022 that were outside the ordinary course of business.

401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company did not make any matching contributions to the 401(k) plan for each of the three and nine months ended October 31, 2022 and 2021.

Legal Matters—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position, results of operations, or cash flows for each of the three and nine months ended October 31, 2022 and 2021.

Letters of Credit—As of October 31, 2022, the Company had a total of $16.8 million in cash collateralized letters of credit outstanding, substantially in favor of certain landlords for the Company’s leased facilities. These letters of credit renew annually and expire at various dates through fiscal 2033.

Indemnification—The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers, and the Company’s officers, directors, and certain employees. The Company has agreed to indemnify and defend the indemnified party for claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims due to the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. For each of the three and nine months ended October 31, 2022 and 2021, losses recorded in the consolidated statements of operations in connection with the indemnification provisions were not material.

10. Equity

Preferred Stock—In connection with its Initial Public Offering (IPO), the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 200.0 million shares of undesignated preferred stock with a par value of $0.0001 per share and with rights and preferences, including voting rights, designated from time to time by the board of directors.

Common Stock and Elimination of Dual-Class Structure—The Company has two classes of common stock authorized: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 2,500.0 million shares of Class A common stock and 355.0 million shares of Class B common stock. On March 1, 2021, all 169.5 million shares of the Company's then-outstanding Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion.

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The shares of Class A common stock and Class B common stock were identical prior to the conversion, except with respect to voting, converting, and transfer rights. Prior to the conversion, each share of Class B common stock was entitled to cast ten votes per share on any matter submitted to a vote of the Company’s stockholders. As a result of the conversion, all former holders of shares of Class B common stock are now holders of shares of Class A common stock, which is entitled to only one vote per share on all matters subject to a stockholder vote. Class A and Class B common stock are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise indicated. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.

Prior to the conversion, shares of Class B common stock were convertible to Class A common stock at any time at the option of the stockholder, and shares of Class B common stock would automatically convert to Class A common stock upon the following: (i) sale or transfer of such share of Class B common stock; (ii) the death of the Class B common stockholder (or nine months after the date of death if the stockholder is one of the Company’s founders); and (iii) on the final conversion date, defined as the earlier to occur following an IPO of (a) the first trading day on or after the date on which the outstanding shares of Class B common stock represented less than 10% of the then outstanding Class A and Class B common stock; (b) September 15, 2027, which is the seventh anniversary of the effectiveness of the registration statement filed in connection with the IPO; or (c) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a single class.

In addition, on March 3, 2021, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the conversion. Upon the effectiveness of the certificate, the Company’s total number of authorized shares of capital stock was reduced by the retirement of 169.5 million shares of Class B common stock.

The Company had reserved shares of common stock for future issuance as follows (in thousands):

October 31, 2022January 31, 2022
2012 Equity Incentive Plan:
Options outstanding36,464 42,043 
Restricted stock units outstanding3,003 4,530 
2020 Equity Incentive Plan:
Options outstanding642 — 
Restricted stock units outstanding12,558 5,082 
Shares available for future grants53,544 45,446 
2020 Employee Stock Purchase Plan:
Shares available for future grants11,046 8,209 
Total shares of common stock reserved for future issuance117,257 105,310 

Equity Incentive Plans—The Company’s 2020 Equity Incentive Plan (2020 Plan), which became effective in connection with the IPO, provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards (RSUs), performance awards and other forms of equity compensation (collectively, equity awards). All shares that remain available for future grants are under the 2020 Plan.

The Company’s 2012 Equity Incentive Plan (2012 Plan) provided for the grant of equity awards to employees, non-employee directors, and other service providers of the Company. The 2012 Plan was terminated in September 2020 in connection with the IPO but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2012 Plan. Upon the expiration, forfeiture, cancellation, or reacquisition of any shares of common stock underlying outstanding equity awards granted under the 2012 Plan, an equal number of shares of Class A common stock will become available for grant under the 2020 Plan. No further equity awards will be granted under the 2012 Plan.

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The Company’s 2020 Employee Stock Purchase Plan (2020 ESPP), which became effective in connection with the IPO, authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. Offering periods are generally six months long and begin on March 15 and September 15 of each year, except for the first two offering periods. The initial offering period began on September 15, 2020 and ended on February 26, 2021. The second offering period began on March 1, 2021 and ended on September 14, 2021.

On February 1, 2022, the shares available for grant under the 2020 Plan and the 2020 ESPP were automatically increased by 15.6 million shares and 3.1 million shares, respectively, pursuant to the annual evergreen increase provisions under the 2020 Plan and the 2020 ESPP.

Stock Options—Stock options granted under the 2012 Plan and the 2020 Plan (collectively, the Plans) generally vest based on continued service over four years and expire ten years from the date of grant. Certain stock options granted under the 2012 Plan are exercisable at any time following the date of grant and expire ten years from the date of grant.

A summary of stock option activity and activity regarding shares available for grant under the Plans during the nine months ended October 31, 2022 is as follows:

Shares
Available for Grant
(in thousands)
Number of Options Outstanding
(in thousands)
Weighted-
Average
Exercise Price
Weighted-Average Remaining Contractual Life
(in years)
Aggregate
Intrinsic
Value
(in thousands)
Balance—January 31, 2022
45,446 42,043 $7.53 6.9$11,283,299 
Shares authorized15,619 — $— 
Options granted(642)642 $207.56 
Options exercised— (2,448)$6.18 
Options canceled400 (400)$6.98 
RSUs granted(5,763)— 
Shares withheld related to net share settlement of RSUs292 — 
RSUs forfeited327 — 
Balance—April 30, 2022
55,679 39,837 $10.84 6.7$6,421,133 
Options exercised— (1,494)$5.65 
Options canceled180 (180)$7.32 
RSUs granted(1,374)— 
Shares withheld related to net share settlement of RSUs260 — 
RSUs forfeited462 — 
Balance—July 31, 2022
55,207 38,163 $11.06 6.5$5,336,155 
Options exercised(984)$7.49 
Options canceled73(73)$8.32 
RSUs granted(2,361)— 
Shares withheld related to net share settlement of RSUs274— 
RSUs forfeited351— 
Balance—October 31, 2022
53,544 37,106 $11.16 6.2$5,564,360 
Vested and exercisable as of October 31, 2022
28,513 $7.81 6.0$4,352,427 

The weighted-average grant-date fair value of options granted during the nine months ended October 31, 2022 was $101.66 per share. No options were granted during the nine months ended October 31, 2021. The intrinsic value of options exercised in the nine months ended October 31, 2022 and 2021 was $875.0 million and $3.8 billion, respectively. The aggregate grant-date fair value of options that vested during the nine months ended October 31, 2022 and 2021 was $60.7 million and $62.7 million, respectively.

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RSUs—RSUs granted prior to the IPO had both service-based and performance-based vesting conditions, of which the performance-based vesting condition was satisfied upon the effectiveness of the IPO in September 2020. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. Stock-based compensation associated with RSUs granted prior to the IPO was recognized using an accelerated attribution method from the time it was deemed probable that the vesting condition was met through the time the service-based vesting condition had been achieved. RSUs granted after the IPO only contain the service-based vesting condition and the related stock-based compensation for such RSUs is recognized on a straight-line basis over the requisite service period.

During the nine months ended October 31, 2022, the Company began funding withholding taxes due upon the vesting of employee RSUs in certain jurisdictions by net share settlement, rather than its previous approach of selling shares of the Company’s common stock. The amount of withholding taxes related to net share settlement of employee RSUs is reflected as (i) a reduction to additional paid-in-capital, and (ii) cash outflows for financing activities when the payments are made. The shares withheld by the Company as a result of the net share settlement of RSUs are not considered issued and outstanding, and do not impact the calculation of basic net income (loss) per share attributable to Snowflake Inc. common stockholders.

A summary of RSU activity during the nine months ended October 31, 2022 is as follows:

Number of Shares
(in thousands)
Weighted-Average Grant Date
Fair Value
per Share
Unvested Balance—January 31, 2022
9,612 $180.08 
Granted5,763 $201.89 
Vested(848)$161.90 
Forfeited(327)$202.80 
Unvested Balance—April 30, 2022
14,200 $189.50 
Granted1,374 $145.19 
Vested(775)$156.97 
Forfeited(462)$196.87 
Unvested Balance—July 31, 2022
14,337 $186.77 
Granted2,361 $172.86 
Vested(786)$165.42 
Forfeited(351)$218.21 
Unvested Balance—October 31, 2022
15,561 $185.03 

Early Exercised Stock Options—Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded in other liabilities on the condensed consolidated balance sheets. The shares issued upon the early exercise of these unvested stock option awards, which are reflected as exercises in the stock option activity table above, are considered to be legally issued and outstanding on the date of exercise. Upon termination of service, the Company may repurchase unvested shares acquired through the early exercise of stock options at a price equal to the price per share paid upon the exercise of such options. As of October 31, 2022 and January 31, 2022, shares subject to repurchase as a result of early exercised options were not material.

Restricted Common Stock—Restricted common stock is not deemed to be outstanding for accounting purposes until it vests.

As discussed in Note 7, during the nine months ended October 31, 2022, in connection with the Streamlit business combination, the Company issued to Streamlit’s three founders a total of 0.4 million shares of the Company’s common stock outside of the Plans in exchange for a portion of their Streamlit stock. These shares are subject to vesting agreements pursuant to which the shares will vest over three years, subject to each founder’s continued employment with the Company or its affiliates. The $93.7 million fair value of these shares are accounted for as post-combination stock-based compensation over the requisite service period of three years. As of October 31, 2022, all 0.4 million shares remained unvested.
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A summary of restricted common stock activity during the nine months ended October 31, 2022 is as follows:

Outside of the Plans
Number of Shares
(in thousands)
Weighted-Average Grant Date
Fair Value
per Share
Unvested Balance—January 31, 2022
380 $2.11 
Granted409 $229.13 
Vested(90)$2.10 
Unvested Balance—April 30, 2022
699 $134.99 
Vested(90)$2.10 
Unvested Balance—July 31, 2022
609 $154.73 
Vested(91)$2.10 
Unvested Balance—October 31, 2022
518 $181.37 

Stock-Based CompensationThe following table summarizes the assumptions used in estimating the fair value of stock options granted to employees during the nine months ended October 31, 2022:

Nine Months Ended October 31, 2022
Expected term (in years)6.0
Expected volatility50.0 %
Risk-free interest rate1.8 %
Expected dividend yield— %

No stock options were granted during the three months ended October 31, 2022 or each of the three and nine months ended October 31, 2021.

Expected term—For stock options considered to be “plain vanilla” options, the Company estimates the expected term based on the simplified method, which is essentially the weighted average of the vesting period and contractual term, as the Company’s historical option exercise experience does not provide a reasonable basis upon which to estimate the expected term. 

Expected volatility—Prior to fiscal 2023, the Company performed an analysis of using the average volatility of a peer group of representative public companies with sufficient trading history over the expected term to develop an expected volatility assumption. During the nine months ended October 31, 2022, the Company began using the average volatility of its Class A common stock and the stocks of a peer group of representative public companies to develop an expected volatility assumption.

Risk-free interest rate—Risk-free rate is estimated based upon quoted market yields for the United States Treasury debt securities for a term consistent with the expected life of the awards in effect at the time of grant.

Expected dividend yield—Because the Company has never paid and has no intention to pay cash dividends on common stock, the expected dividend yield is zero.

Fair value of underlying common stock—Since the completion of the IPO, the fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the New York Stock Exchange.

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The following table summarizes the assumptions used in estimating the fair value of employee stock purchase rights granted under the 2020 ESPP during the three and nine months ended October 31, 2022 and 2021:

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Expected term (in years)0.50.50.50.5
Expected volatility74.8 %37.3 %
58.9% - 74.8%
37.3% - 49.5%
Risk-free interest rate3.8 %0.1 %
0.9% - 3.8%
0.1 %
Expected dividend yield— %— %— %— %

Stock-based compensation included in the condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Cost of revenue$27,794 $21,163 $76,499 $66,380 
Sales and marketing65,010 43,074 177,641 141,463 
Research and development110,231 56,142 280,721 174,788 
General and administrative26,128 24,008 75,976 76,761 
Stock-based compensation, net of amounts capitalized229,163 144,387 610,837 459,392 
Capitalized stock-based compensation7,792 6,085 21,002 19,322 
Total stock-based compensation$236,955 $150,472 $631,839 $478,714 

As of October 31, 2022, total compensation cost related to unvested stock-based awards not yet recognized was $2.5 billion, which will be recognized over a weighted-average period of 3.0 years.

11. Income Taxes

The Company computes its tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date pre-tax income from recurring operations and adjusting for discrete tax items arising in that quarter.

The Company had an effective tax rate of (2.0%) and 3.1% for the three and nine months ended October 31, 2022, respectively, and (0.8%) and (0.3%) for the three and nine months ended October 31, 2021, respectively. The Company has incurred U.S. operating losses and has minimal profits in foreign jurisdictions.

The Company has evaluated all available evidence, both positive and negative, including historical levels of income and expectations and risks associated with estimates of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States and the United Kingdom. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against its net deferred tax assets.

The Company is subject to income taxes in the United States and numerous foreign jurisdictions. As of October 31, 2022, tax years 2012 and forward generally remain open for examination for U.S. federal and state tax purposes, and tax years 2017 and forward generally remain open for examination for foreign tax purposes.

The Company has applied ASC 740 and determined that it has uncertain tax positions giving rise to unrecognized tax benefits for each of the three and nine months ended October 31, 2022 and 2021. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. None of the unrecognized tax benefits are currently expected to impact the Company’s effective tax rate, if realized, as a result of the full valuation allowance.

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On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock buy-backs. The Company is currently evaluating the various provisions of the Inflation Act and does not anticipate the impact, if any, will be material to the Company.

12. Net Loss per Share

Basic and diluted net loss per share attributable to Snowflake Inc. common stockholders is computed in conformity with the two-class method required for participating securities. The Company considers unvested common stock to be participating securities, as the holders of such stock have the right to receive nonforfeitable dividends on a pari passu basis in the event that a dividend is declared on common stock.

Basic net loss per share attributable to Snowflake Inc. common stockholders is computed by dividing net loss attributable to Snowflake Inc. common stockholders by the weighted-average number of shares of Snowflake Inc. common stock outstanding during the period. Diluted net loss per share attributable to Snowflake Inc. common stockholders is computed by giving effect to all potentially dilutive Snowflake Inc. common stock equivalents to the extent they are dilutive. For purposes of this calculation, stock options, RSUs, restricted common stock, early exercised stock options, and employee stock purchase rights under the 2020 ESPP are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to Snowflake Inc. common stockholders as their effect is anti-dilutive for all periods presented.

As discussed above in Note 10, on March 1, 2021, all 169.5 million shares of the Company's then-outstanding Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. In addition, on March 3, 2021, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the conversion. The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical prior to the conversion, except with respect to voting, converting, and transfer rights. As the liquidation and dividend rights were identical, the undistributed earnings were allocated on a proportionate basis to each class of common stock, and the resulting basic and diluted net loss per share attributable to common stockholders were, therefore, the same for both Class A and Class B common stock on both an individual and a combined basis.

The following table presents the calculation of basic and diluted net loss per share attributable to Snowflake Inc. common stockholders (in thousands, except per share data):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Numerator:
Net loss$(201,442)$(154,856)$(590,042)$(547,795)
Less: net loss attributable to noncontrolling interest(506)— (506)— 
Net loss attributable to Snowflake Inc. Class A and Class B common stockholders$(200,936)$(154,856)$(589,536)$(547,795)
Denominator:
Weighted-average shares used in computing net loss per share attributable to Snowflake Inc. Class A and Class B common stockholders—basic and diluted320,135 303,007 317,653 297,436 
Net loss per share attributable to Snowflake Inc. Class A and Class B common stockholders—basic and diluted$(0.63)$(0.51)$(1.86)$(1.84)
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The following potentially dilutive securities were excluded from the calculation of diluted net loss per share attributable to Snowflake Inc. common stockholders for the periods presented because the impact of including them would have been anti-dilutive (in thousands):

Three and Nine Months Ended October 31,
20222021
Stock options37,106 47,782 
RSUs15,561 10,116 
Unvested restricted common stock and early exercised stock options543 537 
Employee stock purchase rights under the 2020 ESPP107 40 
Total53,317 58,475 

13. Subsequent Event
On November 25, 2022 (the Agreement Date), the Company entered into an agreement to acquire all outstanding stock of a privately-held company for approximately $75 million in cash, subject to customary purchase price adjustments. The acquisition is expected to close within six months of the Agreement Date, subject to certain closing conditions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, and (2) our audited consolidated financial statements and the related notes and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended January 31, 2022 included in the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on March 30, 2022. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note About Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), free cash flow, a non-GAAP financial measure, is included in the section titled “Key Business Metrics.” This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for, or superior to, comparable GAAP financial measures and should be read only in conjunction with our unaudited condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of this non-GAAP financial measure may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the GAAP-to-non-GAAP reconciliation included in the section titled “Key Business Metrics—Free Cash Flow,” to more fully understand our business.

Unless the context otherwise requires, all references in this report to “Snowflake,” the “Company,” “we,” “our,” “us,” or similar terms refer to Snowflake Inc. and its consolidated subsidiaries.

Overview

We believe in a data connected world where organizations have seamless access to explore, share, and unlock the value of data. To realize this vision, we deliver the Data Cloud, a network where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways.

Our platform is the innovative technology that powers the Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. We provide our platform through a customer-centric, consumption-based business model, only charging customers for the resources they use.

Our cloud-native architecture consists of three independently scalable but logically integrated layers across storage, compute, and cloud services. The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record. The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency. The cloud services layer intelligently optimizes each use case’s performance requirements with no administration. This architecture is built on three major public clouds across 37 regional deployments around the world. These deployments are generally interconnected to deliver the Data Cloud, enabling a consistent, global user experience.

We generate the substantial majority of our revenue from fees charged to our customers based on the storage, compute, and data transfer resources consumed on our platform as a single, integrated offering. For storage resources, consumption fees are based on the average terabytes per month of all of the customer’s data stored in our platform. For compute resources, consumption fees are based on the type of compute resource used and the duration of use or, for some features, the volume of data processed. For data transfer resources, consumption fees are based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

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Our customers typically enter into capacity arrangements with a term of one to four years, or consume our platform under on-demand arrangements in which we charge for use of our platform monthly in arrears. Consumption for most customers accelerates from the beginning of their usage to the end of their contract terms and often exceeds their initial capacity commitment amounts. When this occurs, our customers have the option to amend their existing agreement with us to purchase additional capacity or request early renewals. When a customer’s consumption during the contract term does not exceed its capacity commitment amount, it may have the option to roll over any unused capacity to future periods, generally upon the purchase of additional capacity. For these reasons, we believe our deferred revenue is not a meaningful indicator of future revenue that will be recognized in any given time period.

Our go-to-market strategy is focused on acquiring new customers and driving continued use of our platform for existing customers. We primarily focus our selling efforts on large organizations and primarily sell our platform through a direct sales force, which targets technical and business leaders who are adopting a cloud strategy and leveraging data to improve their business performance. Our sales force is comprised of sales development, inside sales, and field sales personnel and is segmented by the industry, size, and region of prospective customers. Once our platform has been adopted, we focus on increasing the migration of additional customer workloads to our platform to drive increased consumption, as evidenced by our net revenue retention rate of 165% and 177% as of October 31, 2022 and January 31, 2022, respectively. See the section titled “Key Business Metrics” for a definition of net revenue retention rate.

Our platform is used globally by organizations of all sizes across a broad range of industries. As of October 31, 2022, we had 7,292 total customers, increasing from 5,966 customers as of January 31, 2022. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments. Our platform has been adopted by many of the world’s largest organizations that view Snowflake as a key strategic partner in their cloud and data transformation initiatives. As of October 31, 2022, our customers included 543 of the Forbes Global 2000, based on the 2022 Forbes Global 2000 list, and those customers contributed approximately 41% of our revenue for the nine months ended October 31, 2022. Our Forbes Global 2000 customer count is subject to adjustments for annual updates to the Global 2000 list by Forbes, as well as acquisitions, consolidations, spin-offs, and other market activity with respect to such customers, and we present our Forbes Global 2000 customer count for historical periods reflecting these adjustments.

Business Combinations

On September 23, 2022, we acquired all outstanding stock of Applica Sp. z.o.o. (Applica), a privately-held company which provides an artificial intelligence platform for document understanding, for $174.7 million in cash.

On March 31, 2022, we acquired all outstanding stock of Streamlit, Inc. (Streamlit), a privately-held company which provides an open-source framework for creating and deploying data applications. The acquisition date fair value of the purchase consideration was $650.8 million, which was comprised of $211.8 million in cash and 1.9 million shares of our Class A common stock valued at $438.9 million as of the acquisition date. In addition, we issued to Streamlit’s three founders a total of 0.4 million shares of our Class A common stock in exchange for a portion of their Streamlit stock. These shares are subject to vesting agreements pursuant to which the shares will vest over three years, subject to each founder’s continued employment with us. The $93.7 million fair value of these shares are accounted for as post-combination stock-based compensation over the requisite service period of three years.

The results of operations of these business combinations have been included in our condensed consolidated financial statements from the respective dates of acquisition. See Note 7, “Business Combinations, Intangible Assets, and Goodwill,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for details regarding these business combinations.

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Impact of Macroeconomic Conditions and COVID-19

Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions, including higher inflation, higher interest rates, and fluctuations or volatility in capital markets or foreign currency exchange rates, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.

In addition, the ongoing COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The full extent to which the COVID-19 pandemic, including any new variants, may continue to directly or indirectly impact general market conditions or our business, results of operations, cash flows, and financial condition remains uncertain. In response to the COVID-19 pandemic, we required virtually all of our employees to work remotely and we canceled certain of our marketing events or adjusted those events to be virtual or include both an in-person and virtual experience. As our offices reopen and we resume in-person events, we expect to continue to incur incremental expenses in connection with onsite services, incur related in-office and event costs, and manage fluctuating in-person regulations and restrictions.

We are continuing to monitor the actual and potential effects of general macroeconomic conditions and the COVID-19 pandemic across our business. For additional details, see the section titled “Risk Factors.”

Key Factors Affecting Our Performance

Adoption of our Platform and Expansion of the Data Cloud

Our future success depends in large part on the market adoption of our platform. While we see growing demand for our platform, particularly from large enterprises, many of these organizations have invested substantial technical, financial, and personnel resources in their legacy database products or big data offerings, despite their inherent limitations. While this makes it difficult to predict customer adoption rates and future demand, we believe that the benefits of our platform put us in a strong position to capture the significant market opportunity ahead.

Our platform powers the Data Cloud, a network of data providers, data consumers, and data application developers that enables our customers to securely share, connect, collaborate with, monetize, and acquire live data sets. The Data Cloud includes access to Snowflake Marketplace, through which customers can access or acquire third-party data sets and other data products. Our future growth will be increasingly dependent on our ability to increase consumption of our platform by building and expanding the Data Cloud.

Expanding Within our Existing Customer Base

Our large base of customers represents a significant opportunity for further consumption of our platform. While we have seen an increase in the number of customers that have contributed more than $1 million in product revenue in the trailing 12 months, we believe that there is a substantial opportunity to continue growing these customers further, as well as continuing to expand the usage of our platform within our other existing customers. We plan to continue investing to encourage increased consumption and adoption of new use cases among our existing customers.

Once deployed, our customers often expand their use of our platform more broadly within the enterprise and across their ecosystem of customers and partners as they migrate more data to the public cloud, identify new use cases, and realize the benefits of our platform and the Data Cloud. However, because we generally recognize product revenue on consumption and not ratably over the term of the contract, we do not have visibility into the timing of revenue recognition from any particular customer. In any given period, there is a risk that customer consumption of our platform will be slower than we expect, including in response to macroeconomic conditions, which may cause fluctuations in our revenue and results of operations. New software releases or hardware improvements, like better storage compression and cloud infrastructure processor improvements, may make our platform more efficient, enabling customers to consume fewer compute, storage, and data transfer resources to accomplish the same workloads. To the extent these improvements do not result in an offsetting increase in new workloads, we may experience lower revenue. Our ability to increase usage of our platform by, and sell additional contracted capacity to, existing customers, and, in particular, large enterprise customers, will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing, general economic conditions, overall changes in our customers’ spending levels, the effectiveness of our and our partners’ efforts to help our customers realize the benefits of our platform, and the extent to which customers migrate new workloads to our platform over time.
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Acquiring New Customers

We believe there is a substantial opportunity to further grow our customer base by continuing to make significant investments in sales and marketing and brand awareness. Our ability to attract new customers will depend on a number of factors, including our success in recruiting and scaling our sales and marketing organization, competitive dynamics in our target markets, and our ability to build and maintain partner relationships, including with global system integrators, resellers, and technology partners. We intend to continue expanding our direct sales force, with a focus on specific industries and increasing sales to large organizations. While our platform is built for organizations of all sizes, we focus our selling efforts on large enterprise customers and customers with vast amounts of data, and providing industry-specific solutions. We may not achieve anticipated revenue growth from expanding our sales force to focus on large enterprises and specific industries if we are unable to hire, develop, integrate, and retain talented and effective sales personnel; if our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time; or if our sales and marketing programs are not effective.

Investing in Growth and Scaling our Business

We are focused on our long-term revenue potential. We believe that our market opportunity is large, and we will continue to invest significantly in scaling across all organizational functions in order to grow our operations both domestically and internationally. We have a history of introducing successful new features and capabilities on our platform, and we intend to continue to invest heavily to grow our business to take advantage of our expansive market opportunity while also focusing on profitability and cash flow.

Key Business Metrics

We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

The following tables present a summary of key business metrics for the periods presented:

Three Months Ended
October 31, 2022July 31, 2022April 30, 2022January 31, 2022October 31, 2021
Product revenue (in millions)$522.8$466.3$394.4$359.6$312.5
Free cash flow (non-GAAP) (in millions)(1)(2)
$65.0$53.8$172.4$70.7$9.5

October 31, 2022July 31, 2022April 30, 2022January 31, 2022October 31, 2021
Remaining performance obligations (in millions)(3)
$3,003.1$2,715.7$2,610.0$2,646.5$1,804.0
Total customers(4)
7,292 6,818 6,333 5,966 5,432 
Net revenue retention rate(4)
165 %171 %174 %177 %172 %
Customers with trailing 12-month product revenue greater than $1 million(4)
287 246 206 184 148 
________________
(1)Includes net cash paid on payroll tax-related items on employee stock transactions as follows (in millions):
Three Months Ended
October 31, 2022July 31, 2022April 30, 2022January 31, 2022October 31, 2021
 Net cash paid on payroll tax-related items on employee stock transactions
$0.1$4.8$9.0$31.4$12.1

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(2)Cash outflows for employee payroll tax items related to the net share settlement of equity awards, which were $51.7 million and $135.8 million for the three and nine months ended October 31, 2022, respectively, are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow. No equity awards were net settled prior to the nine months ended October 31, 2022. See the section titled “Free Cash Flow” for a reconciliation of free cash flow to the most directly comparable financial measure calculated in accordance with GAAP.
(3)As of October 31, 2022, our remaining performance obligations were approximately $3.0 billion, of which we expect approximately 55% to be recognized as revenue in the twelve months ending October 31, 2023 based on historical customer consumption patterns. The weighted-average remaining life of our capacity contracts was 2.0 years as of October 31, 2022. However, the amount and timing of revenue recognition are generally dependent upon customers’ future consumption, which is inherently variable at our customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. In addition, our historical customer consumption patterns are not necessarily indicative of future results.
(4)Historical total customer count, net revenue retention rate, and number of customers with trailing 12-month product revenue greater than $1 million reflect any adjustments for acquisitions, consolidations, spin-offs, and other market activity.

Product Revenue

Product revenue is a key metric for us because we recognize revenue based on platform consumption, which is inherently variable at our customers’ discretion, and not based on the amount and duration of contract terms. Product revenue is primarily derived from the consumption of compute, storage, and data transfer resources, which are consumed by customers on our platform as a single, integrated offering. Customers have the flexibility to consume more than their contracted capacity during the contract term and may have the ability to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Our consumption-based business model distinguishes us from subscription-based software companies that generally recognize revenue ratably over the contract term and may not permit rollover. Because customers have flexibility in the timing of their consumption, which can exceed their contracted capacity or extend beyond the original contract term in many cases, the amount of product revenue recognized in a given period is an important indicator of customer satisfaction and the value derived from our platform. While customer use of our platform in any period is not necessarily indicative of future use, we estimate future revenue using predictive models based on customers’ historical usage to plan and determine financial forecasts. Product revenue excludes our professional services and other revenue, which has been less than 10% of revenue for each of the periods presented.

Remaining Performance Obligations

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including (i) deferred revenue and (ii) non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. RPO excludes performance obligations from on-demand arrangements and certain time and materials contracts that are billed in arrears. Portions of RPO that are not yet invoiced and are denominated in foreign currencies are revalued into U.S. dollars each period based on the applicable period-end exchange rates. RPO is not necessarily indicative of future product revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity. Moreover, RPO is influenced by a number of factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, seasonality, changes in foreign currency exchange rates, and the extent to which customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Due to these factors, it is important to review RPO in conjunction with product revenue and other financial metrics disclosed elsewhere herein.

Total Customers

We count the total number of customers at the end of each period. For purposes of determining our customer count, we treat each customer account, including accounts for end-customers under a reseller arrangement, that has at least one corresponding capacity contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. For purposes of determining our customer count, we do not include customers that consume our platform only under on-demand arrangements. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments. We believe that the number of customers is an important indicator of the growth of our business and future revenue trends.

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Net Revenue Retention Rate

We believe the growth in use of our platform by our existing customers is an important measure of the health of our business and our future growth prospects. We monitor our dollar-based net revenue retention rate to measure this growth. To calculate this metric, we first specify a measurement period consisting of the trailing two years from our current period end. Next, we define as our measurement cohort the population of customers under capacity contracts that used our platform at any point in the first month of the first year of the measurement period. Starting with the fiscal quarter ended October 31, 2021, the cohorts used to calculate net revenue retention rate include end-customers under a reseller arrangement. Although the impact is not material, we have adjusted all prior periods presented to reflect this inclusion. We then calculate our net revenue retention rate as the quotient obtained by dividing our product revenue from this cohort in the second year of the measurement period by our product revenue from this cohort in the first year of the measurement period. Any customer in the cohort that did not use our platform in the second year remains in the calculation and contributes zero product revenue in the second year. Our net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our net revenue retention rate for historical periods reflecting these adjustments. Since we will continue to attribute the historical product revenue to the consolidated contract, consolidation of capacity contracts within a customer’s organization typically will not impact our net revenue retention rate unless one of those customers was not a customer at any point in the first month of the first year of the measurement period. We expect our net revenue retention rate to decrease over the long-term as customers that have consumed our platform for an extended period of time become a larger portion of both our overall customer base and our product revenue that we use to calculate net revenue retention rate, and as their consumption growth primarily relates to existing use cases rather than new use cases.

Customers with Trailing 12-Month Product Revenue Greater than $1 Million

Large customer relationships lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they have larger budgets, a wider range of potential use cases, and greater potential for migrating new workloads to our platform over time. As a measure of our ability to scale with our customers and attract large enterprises to our platform, we count the number of customers under capacity arrangements that contributed more than $1 million in product revenue in the trailing 12 months. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our customer count for historical periods reflecting these adjustments.

Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalized internal-use software development costs. Cash outflows for employee payroll tax items related to the net share settlement of equity awards are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow. We believe information regarding free cash flow provides useful supplemental information to investors because it is an indicator of the strength and performance of our core business operations.

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The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, for the periods presented (in thousands):

Three Months Ended
October 31, 2022July 31, 2022April 30, 2022January 31, 2022October 31, 2021
Net cash provided by operating activities$79,277 $64,433 $184,613 $78,898 $15,538 
Less: purchases of property and equipment(8,505)(3,848)(7,413)(4,012)(2,282)
Less: capitalized internal-use software development costs(5,779)(6,736)(4,804)(4,160)(3,788)
Free cash flow (non-GAAP)(1)(2)
$64,993 $53,849 $172,396 $70,726 $9,468 
________________
(1)Includes net cash paid on payroll tax-related items on employee stock transactions as follows (in thousands):
Three Months Ended
October 31, 2022July 31, 2022April 30, 2022January 31, 2022October 31, 2021
 Net cash paid on payroll tax-related items on employee stock transactions
$52 $4,796 $9,045 $31,378 $12,058 
(2)Cash outflows for employee payroll tax items related to the net share settlement of equity awards, which were $51.7 million and $135.8 million for the three and nine months ended October 31, 2022, respectively, are included in cash flow for financing activities and, as a result, do not have an effect on the calculation of free cash flow. No equity awards were net settled prior to the nine months ended October 31, 2022.

Historically, we have received a higher volume of orders from new and existing customers in the fourth fiscal quarter of each year. As a result, we have historically seen higher free cash flow in the first and fourth fiscal quarters of each year.

Components of Results of Operations

Revenue

We deliver our platform over the internet as a service. Customers choose to consume our platform under either capacity arrangements, in which they commit to a certain amount of consumption at specified prices, or under on-demand arrangements, in which we charge for use of our platform monthly in arrears. Under capacity arrangements, from which a majority of our revenue is derived, we typically bill our customers annually in advance of their consumption. However, in future periods, we expect to see an increase in capacity contracts providing for quarterly upfront billings and monthly in arrears billings as our customers increasingly want to align consumption and timing of payments. Revenue from on-demand arrangements typically relates to initial consumption as part of customer onboarding and, to a lesser extent, overage consumption beyond a customer’s contracted usage amount or following the expiration of a customer’s contract. Revenue from on-demand arrangements represented less than 3% of our revenue for each of the three and nine months ended October 31, 2022 and 2021.

We recognize revenue as customers consume compute, storage, and data transfer resources under either of these arrangements. In limited instances, customers pay an annual deployment fee to gain access to a dedicated instance of a virtual private deployment. We recognize the deployment fee ratably over the contract term. Such deployment revenue represented less than 1% of our revenue for each of the three and nine months ended October 31, 2022 and 2021.

Our customer contracts for capacity typically have a term of one to four years. The weighted-average term of capacity contracts entered into during the three and nine months ended October 31, 2022 is 2.5 years and 2.2 years, respectively. To the extent our customers enter into such contracts and either consume our platform in excess of their capacity commitments or continue to use our platform after expiration of the contract term, they are charged for their incremental consumption. In many cases, our customer contracts permit customers to roll over any unused capacity to a subsequent order, generally upon the purchase of additional capacity. For those customers who do not have a capacity arrangement, our on-demand arrangements generally have a monthly stated contract term and can be terminated at any time by either the customer or us.

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We generate the substantial majority of our revenue from fees charged to our customers based on the storage, compute, and data transfer resources consumed on our platform as a single, integrated offering. We do not make any one of these resources available for consumption without the others. Instead, each of compute, storage, and data transfer work together to drive consumption on our platform. For storage resources, consumption for a given customer is based on the average terabytes per month of all of such customer’s data stored in our platform. For compute resources, consumption is based on the type of compute resource used and the duration of use or, for some features, the volume of data processed. For data transfer resources, consumption is based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

Because customers have flexibility in their consumption, and we generally recognize revenue on consumption and not ratably over the term of the contract, we do not have the visibility into the timing of revenue recognition from any particular customer contract that typical subscription-based software companies may have. As our customer base grows, we expect our ability to forecast customer consumption in the aggregate to improve. However, in any given period, there is a risk that customers will consume our platform more slowly than we expect, including in response to macroeconomic conditions, which may cause fluctuations in our revenue and results of operations. In addition, new software releases or hardware improvements, like better storage compression and cloud infrastructure processor improvements, may make our platform more efficient, enabling customers to consume fewer compute, storage, and data transfer resources to accomplish the same workloads. To the extent these improvements do not result in an offsetting increase in new workloads, we may experience lower revenue.

Our revenue also includes professional services and other revenue, which consists primarily of consulting, on-site technical solution services, and training related to our platform. Our professional services revenue is recognized over time based on input measures, including time and materials costs incurred relative to total costs, with consideration given to output measures, such as contract deliverables, when applicable. Other revenue consists primarily of fees from customer training delivered on-site or through publicly available classes.

Allocation of Overhead Costs

Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount. Such costs include costs associated with office facilities, depreciation of property and equipment, and information technology (IT) related personnel and other expenses, such as software and subscription services.

Cost of Revenue

Cost of revenue consists of cost of product revenue and cost of professional services and other revenue. Cost of revenue also includes allocated overhead costs.

Cost of product revenue. Cost of product revenue consists primarily of (i) third-party cloud infrastructure expenses incurred in connection with our customers’ use of our platform and the deployment and maintenance of our platform on public clouds, including different regional deployments, and (ii) personnel-related costs associated with customer support and maintaining service availability and security of our platform, including salaries, benefits, bonuses, and stock-based compensation. We periodically receive credits from third-party cloud providers that are recorded as a reduction to the third-party cloud infrastructure expenses. Cost of product revenue also includes amortization of internal-use software development costs, amortization of acquired developed technology intangible assets, and expenses associated with software and subscription services dedicated for use by our customer support team and our engineering team responsible for maintaining our platform.

Cost of professional services and other revenue. Cost of professional services and other revenue consists primarily of personnel-related costs associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation, and costs of contracted third-party partners and software tools.

We intend to continue to invest additional resources in our platform infrastructure and our customer support and professional services organizations to support the growth of our business. Some of these investments, including certain support costs and costs of expanding our business internationally, are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period.

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Operating Expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated overhead costs.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing staff, including salaries, benefits, bonuses, and stock-based compensation. Sales and marketing expenses also include sales commissions and draws paid to our sales force and certain referral fees paid to third parties, including amortization of deferred commissions. A portion of the sales commissions paid to the sales force is earned based on the rate of the customers’ consumption of our platform, and a portion of the commissions paid to the sales force is earned upon the origination of the customer contracts. Sales commissions tied to customers’ consumption are expensed in the same period as they are earned. Sales commissions and referral fees earned upon the origination of the new customer or customer expansion contracts are deferred and then amortized over a period of benefit that we determined to be five years. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs, including Summit, our annual user conference, offset by proceeds from such conferences and programs. In addition, sales and marketing expenses are comprised of travel-related expenses, software and subscription services dedicated for use by our sales and marketing organizations, amortization of acquired developer community intangible asset, and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future as we grow our business. However, we expect that our sales and marketing expenses will decrease as a percentage of our revenue over time.

Research and Development

Research and development expenses consist primarily of personnel-related expenses associated with our research and development staff, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include contractor or professional services fees, third-party cloud infrastructure expenses incurred in developing our platform, and expenses associated with computer equipment, software and subscription services dedicated for use by our research and development organization. We expect that our research and development expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform. However, we expect that our research and development expenses will decrease as a percentage of our revenue over time. In addition, research and development expenses that qualify as internal-use software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation. General and administrative expenses also include external legal, accounting, and other professional services fees, software and subscription services dedicated for use by our general and administrative functions, insurance, unallocated lease costs associated with unused office facilities to accommodate planned headcount growth, and other corporate expenses. We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time.

Interest Income

Interest income consists primarily of interest income earned on our cash equivalents and short-term and long-term investments, including amortization of premiums and accretion of discounts related to our available-for-sale marketable debt securities, net of associated fees.

Other Income (Expense), Net

Other income (expense), net consists primarily of (i) unrealized gains (losses) on our strategic investments in equity securities, and (ii) the effect of exchange rates on our foreign currency-denominated asset and liability balances.
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Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and U.S. state jurisdictions in which we conduct business. We maintain a full valuation allowance against our U.S. and U.K. deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Net Income (Loss) Attributable to Noncontrolling Interest
Our condensed consolidated financial statements include the accounts of Snowflake Inc., our wholly-owned subsidiaries, and a majority-owned subsidiary in which we have a controlling financial interest. Net income (loss) attributable to noncontrolling interest represents the net income (loss) of our majority-owned subsidiary attributed to noncontrolling interest using the hypothetical liquidation at book value method. See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods indicated (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Revenue$557,028 $334,441 $1,476,647 $835,553 
Cost of revenue(1)
190,721 120,786 511,883 324,253 
Gross profit366,307 213,655 964,764 511,300 
Operating expenses(1):
Sales and marketing284,477 190,971 803,034 540,678 
Research and development211,387 115,900 545,933 343,783 
General and administrative76,462 64,055 218,314 189,846 
Total operating expenses572,326 370,926 1,567,281 1,074,307 
Operating loss(206,019)(157,271)(602,517)(563,007)
Interest income21,857 1,985 38,308 6,787 
Other income (expense), net(13,271)1,609 (44,672)9,867 
Loss before income taxes(197,433)(153,677)(608,881)(546,353)
Provision for (benefit from) income taxes4,009 1,179 (18,839)1,442 
Net loss(201,442)(154,856)(590,042)(547,795)
Less: net loss attributable to noncontrolling interest(506)— (506)— 
Net loss attributable to Snowflake Inc.$(200,936)$(154,856)$(589,536)$(547,795)
________________
(1)Includes stock-based compensation as follows (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Cost of revenue$27,794 $21,163 $76,499 $66,380 
Sales and marketing65,010 43,074 177,641 141,463 
Research and development110,231 56,142 280,721 174,788 
General and administrative26,128 24,008 75,976 76,761 
Total stock-based compensation$229,163 $144,387 $610,837 $459,392 

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The overall increase in stock-based compensation for the three and nine months ended October 31, 2022, compared to the three and nine months ended October 31, 2021, was primarily attributable to additional equity awards granted to current and new employees, partially offset by a decrease in stock-based compensation associated with restricted stock unit awards (RSUs) granted prior to our Initial Public Offering (IPO). RSUs granted prior to our IPO have both a service-based and a performance-based vesting condition and, as a result, we recognized stock-based compensation associated with such RSUs using an accelerated attribution method.

As of October 31, 2022, total compensation cost related to unvested stock-based awards not yet recognized was $2.5 billion, which will be recognized over a weighted-average period of 3.0 years. See Note 10, “Equity,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

Three Months Ended October 31,Nine Months Ended October 31,
2022202120222021
Revenue100 %100 %100 %100 %
Cost of revenue(1)
34 36 35 39 
Gross profit66 64 65 61 
Operating expenses(1):
Sales and marketing51 57 54 65 
Research and development38 35 37 40 
General and administrative14 19 15 23 
Total operating expenses103 111 106 128 
Operating loss(37)(47)(41)(67)
Interest income
Other income (expense), net(2)