Software company Snowflake overtakes IBM in value just three months after going public

The cloud storage firm Snowflake has overtaken IBM in market value just three months after it first floated on public markets.

A continued surge in Snowflake’s shares, which have risen by 242pc since its debut and by as much as 45pc during the last five days of trading, propelled it to a market capitalisation of $116bn (£87bn) yesterday evening on Tuesday evening.  

That put the youthful Californian data warehousing service above the 109-year-old IBM, worth $112bn, as well as the chipmaker AMD, worth $111bn. 

Although Snowflake does not make a profit, and although its projected annual revenue of $578m is many times lower than IBM’s $74bn, investors were excited by its rapid year on year income growth of 119pc.

Responding to Snowflake’s first financial results last week, Deutsche Bank analyst Patrick Colville told Bloomberg: “This growth is suggestive of a very large total addressable market and clear product market fit."

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Snowflake, which is backed by Warren Buffett and Salesforce chief executive Marc Benioff, enjoyed the biggest ever software company float when it launched on the New York Stock Exchange in September.

Founded in 2012 and based in the Silicon Valley city of San Mateo, it provides flexible, on-demand data storage for business clients, as well as synchronising data from multiple storage systems and sources into one unified interface. 

The company may have benefited from pent-up hunger for safe investments amid the economic gloom of the pandemic and a string of disappointing or aborted public floats such as Uber’s and WeWork’s last year.

Snowflake’s shares initially fell after its first set of financial results, which showed a net loss of $178m for the three months ending in September and predicted less revenue by the end of the year than many analysts had expected.

But other investors were encouraged by the "really big discounts" Snowflake said it had secured on the cloud storage space that it buys from Amazon and Microsoft, as well as extra future income tucked away in its accounting scheme.

IBM, historically known for selling computer mainframes, has also focused on cloud services, announcing in October that it would spin off its ailing IT infrastructure division as a separate company.

The company warned last month that it would cut up to 10,000 jobs across Europe, including 2,000 in the UK in Ireland, in an attempt to lower the unit’s costs before it is jettisoned.