On Monday, Databricks unveiled that it has achieved a remarkable revenue run-rate of $5.4 billion, reflecting a year-over-year growth of 65%. Notably, over $1.4 billion of this figure comes from its AI offerings.
Founder and CEO Ali Ghodsi took the opportunity to highlight these growth metrics amid prevalent speculation regarding the potential threat AI poses to the SaaS landscape, as he discussed with TechCrunch.
“There’s a lot of talk about the future of SaaS and the impact of AI on these companies. For us, it’s about increased usage,” he remarked.
He also emphasized his intention to distance Databricks from the SaaS label, as the company is viewed in private markets primarily as an AI-driven entity. Furthermore, Databricks finalized its substantial $5 billion funding round at a valuation of $134 billion and secured an additional $2 billion loan facility.
Although the company operates in both realms, it continues to be widely recognized as a cloud data warehouse provider—essentially a repository for enterprises to store vast amounts of data for analytical insights.
Ghodsi pointed to a specific AI product driving the utilization of its data warehouse: the LLM user interface known as Genie.
Genie exemplifies how a SaaS business can modernize its user interface through natural language. For instance, he utilizes it to inquire about fluctuations in warehouse usage and revenue on certain days.
Just a few years back, fulfilling such a request would have necessitated a specific query language or a specially programmed report. Today, any product equipped with an LLM interface can be leveraged by a broader audience, Ghodsi highlighted. Genie is a significant contributor to this growth trajectory, he noted.
The perceived threat of AI to traditional SaaS, contrary to a recent lighthearted tweet from an AI venture capitalist, isn’t about enterprises abandoning their existing SaaS “systems of record” in favor of improvised, homegrown solutions. These systems are crucial for managing critical business data relating to sales, customer service, and finance.
“Why would one relocate their system of record? It’s quite a cumbersome process,” Ghodsi commented.
Moreover, the current model makers are not positioning themselves to offer databases for storing this critical data. Instead, they aim to revolutionize the user interfaces with natural language for ease of human interaction, alongside APIs or various plug-ins for agents.
Ghodsi indicates that the genuine risk to SaaS entities lies in the diminishing need for individuals to specialize within specific products, such as Salesforce or SAP. Once the interface revolves around natural language, the applications become nearly invisible, akin to plumbing.
“Countless individuals worldwide have been trained on those specific user interfaces. This was the strongest competitive advantage those businesses had,” he cautioned.
SaaS companies willing to adopt new LLM interfaces may find growth opportunities, as evidenced by Databricks’ trajectory. However, it also paves the way for AI-native competitors to provide offerings that may outperform traditional systems.
To address this, Databricks has developed its Lakebase database aimed at agents and is witnessing early success. “In the eight months since its release, it has generated double the revenue that our data warehouse produced in its first eight months. Sure, it’s like comparing toddlers, but this toddler is twice the size,” Ghodsi quipped.
Now that Databricks has secured its substantial funding round, Ghodsi mentioned that the company is not currently planning another fundraising round or gearing up for an IPO.
“The timing for going public isn’t favorable right now,” Ghodsi explained. “My goal was to ensure we’re well-capitalized to weather any downturns, as we experienced post-ZIRP in 2022. A robust financial cushion provides us with ample runway moving forward,” he added.
### Hustle Verdict
Our take is that Databricks’ significant growth, especially in AI, signals a transformative shift in the SaaS landscape. We believe that companies willing to adapt to these evolving interfaces will not only sustain growth but also redefine their competitive edges. The bottom line is that this trend emphasizes the importance of innovation, and organizations that fail to embrace these changes could find themselves at a considerable disadvantage in the future.
