Squaring Databricks’ 2021 valuation as it crosses a $1B annual run rate

Databricks, an enterprise software company focused on data and analytics, announced this morning that it has surpassed a $1 billion annual revenue run rate. The Wall Street Journal first reported news of the financial result.

The milestone comes after the company raised a mammoth $1.6 billion round last August at a $38 billion valuation. At the time, Databricks announced that it had cleared the $600 million annual recurring revenue (ARR) mark.

By the end of 2021, Databricks said that it crossed $800 million in ARR. As a result of the company’s well-known recent private-market valuation and its regular disclosures of revenue numbers, we’ve been able to track its growth and resulting revenue multiples as the company grows and the market changes.

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The timing of the new number is somewhat vague. TechCrunch confirmed with Databricks spokesperson Keyana Corliss that it surpassed the 10-figure revenue run rate milestone in recent months but was not able to nail down a more precise timeline.

You already know our task today: With $1 billion or more worth of annualized revenue, what can we learn about Databricks’ growth rate, and how well does its valuation slot into current market pricing? Let’s have a little fun, yeah?

0.6, 0.8, 1.0 and 38

Databricks is disclosure-heavy for a private company, but even an above-average level of performance sharing from a unicorn pales in comparison to what we get from public companies. So when we take historical markers from Databricks’ disclosed revenue results, we’re not able to determine precise growth rates.

The company’s $600 million ARR marker from the time of its Series H is somewhat squishy regarding timing. Similarly, while Databricks disclosed that it passed the $800 million ARR milestone by the end of 2021, we don’t know precisely when it did so. (The company did disclose a greater than 80% pace of revenue growth in 2021, however.)

Update: After publication, Databricks reached out to TechCrunch to share more information, including that its annual revenue run rate was growing at around the 80% mark when it reached the $1 billion threshold.

Our original work worked to compare the company’s prior ARR numbers with its new annualized revenue run rate numbers that it most recently disclosed; it appears that Databricks is moving toward more traditional revenue reporting, as ARR is still a somewhat software-specific metric and one that startups tend to favor more than large companies.

Given that the company’s annualized revenue run rate growth today is close to the pace at which it posted ARR growth last year, it’s growing more quickly than we initially thought. As such, we need to re-run the math. In very brief terms:

  • If Databricks can keep up its 80% growth rate this year, and presuming that its annualized revenue run rate was roughly equivalent to its ARR around the end of 2021, we can infer that it could reach around $1.44 billion in annual run rate terms by the end of 2022 by simply applying its present-day run rate growth rate to the ARR figure that was disclosed around the end of 2021.
  • At that revenue pace, the company’s top-line multiple would decline to 26.4x at the end of 2022.
  • As we noted in the original text that we are now leaving behind us, that’s around the same price that Snowflake sports today in revenue multiple terms, a company that is growing at a similar pace to Databricks today (taking into account our new knowledge of its growth rate).
  • By this math, if we are willing to award Databricks the same revenue multiple as the most richly valued cloud company today, it could grow into its 2021 valuation by the end of the year.
  • Of course, we are still using partial data to try to get our hands around the state of the market, so be liberal with your skepticism regarding the precision of our estimates.
  • Looking back at our prior efforts, we could have been hard-nosed about the swap from ARR to annualized revenue run rate.
  • The main difference between our new work above and our prior work is a two-quarter differential in when Databricks will have grown into its 2021 valuation; now by the end of Q4 if our estimates hold up versus around the midpoint of 2023. Not that big of a change given that we don’t expect Databricks to go public before the middle of next year, but all the same it’s good to be as accurate as possible.

Update: I previously included the full text of the original post that went out before we got more information, but frankly the formatting was a mess and readers were confused. I’ve excised it — just imagine another 500 words of me getting things wrong.