Workday Q1 solid, names VMware alum Rowe as CFO

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Workday reported better-than-expected fiscal first quarter results and named Zane Rowe, formerly of VMware, as CFO effective June 12.

The finance and HR software provider reported a breakeven first quarter on revenue of $1.68 billion, up 17.4% from a year ago. Non-GAAP earnings were $1.31 a share.

Wall Street was expecting Workday to report non-GAAP earnings of $1.12 a share on revenue of $1.58 billion.

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In a statement, Workday co-CEO Aneel Bhusri said the company intends to build on the AI and machine learning capabilities in its platform. Carl Eschenbach, co-CEO, Workday, said the company will continue to take an industry-first approach with its ecosystem.

Bhusri said on an earnings conference call:

"We have the quantity and quality of data that further differentiates us, meaning that we not only have access to an enormous amount of data due to the more than 60 million users representing more than 600 billion transactions over the last year. But we also have a unified data model that allows us to build and train models"

He said that Workday has been leveraging AI and large language models for years. "We believe we need to look past the hype cycle and identify the real ways our customers can extract business value from LLMs," said Bhusri. 

Bhusri added that Workday is looking at generative AI for content generation, perhaps performance reviews. 

"There are other SKUs coming down the road. There's content generation. You could think about the one that everybody talks about, performance reviews as an example. There are ways to monetize it, but we want to make sure it's a brand-new product that couldn't be built without it. And I would just say stay tuned. You'll see us start rolling things out, but we're doing things around generative AI very carefully to make sure that we follow our path on ethics and security and doing it the right way."

As for the outlook, Workday projected fiscal 2024 subscription revenue to be between $6.55 billion and $6.57 billion. In a nutshell, Workday raised the lower end of its previous guidance range. For the second quarter, Workday projected subscription revenue to be between $1.611 billion and $1.613 billion. Non-GAAP operating margin for fiscal 2024 will be 23%.

Rowe will take over for current Workday CFO Barbara Larson, who is leaving to spend more time with his family. Rowe was most recently CFO of VMware. Before VMware, Rowe was CFO at EMC and CFO at United Airlines.

Here's what Snowflake's Q1 is telling us about IT spending

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Snowflake's first quarter earnings results were solid, but the company's outlook fell short of expectations. What followed were questions about demand vs. cost optimization. Snowflake's responses highlighted the moving parts in IT spending at the moment.

The company projected fiscal year revenue to be about $2.6 billion, below Wall Street estimates of $2.71 billion. Snowflake cut its outlook last quarter too.

Here's a look at the takeaways.

The CFOs are in charge. Chief financial officers watch CNBC too and are just as unsettled about the economy as everyone else. First, there was optimization (also known as cost cutting), but now there's also rationalization. Snowflake CEO Frank Slootman said on Snowflake's earnings conference call:

"One of the things that we've seen happen over the last couple of quarters is that the CFO is in the business. And this is sort of an expression that we use in enterprise that they're selling is that there is a level of oversight scrutiny that's normally not there. And this is not a frequent occurrence. You only see this happening in fairly severe episodes.

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In the beginning it's like, "Hey, we do smaller contracts, short-term contracts," but then it's like, "Hey, you're going to live within your means. Here's the amount of money you're going to spend and you're going to make it work. And you can figure out where you're going to cut to fit into our box." So that's really dynamics that we've seen playing out there."

Economic sentiment needs to improve. Slootman added that sentiment needs to improve before data consumption does.

"The number one issue is sentiment out there, just the lack of visibility, the anxiety. Watching CNBC all day doesn't give you any hope. That's absolutely number one. And -- because what we're seeing is that when we're dealing with CTOs and the Chief Data Officers, these people are chomping at the bit, but they are now literally getting stomped."

Data retention policies are seen as cost saving measures. Mike Scarpelli, Snowflake's CFO, said consumption on the company's platform fell after Easter. Enterprise customers are scrutinizing Snowflake's cost and their storage bills. Scarpelli noted:

"Some organizations have re-evaluated their data retention policies to delete stale and less valuable data. This lowers their storage bill and reduces compute cost. We've worked with a few large customers more recently on these efforts and expect these trends to continue. History has shown that price performance benefits long-term consumption."

Scarpelli added that one customer changed data retention from 5 years to 3 years and that equates to petabytes of data. He also said that Snowflake's hyperscale partners are seeing similar moves from customers.

Older Snowflake customers, also known as more cloud mature, are optimizing the most. Scarpelli said older customers are spending less reversing what happened in the prior quarter. What Snowflake is seeing from its legacy customers may be similar to what AWS is also facing.

Slootman said Amazon is a large percentage of overall Snowflake deployments.

Enterprises are pulling back on their data strategies for now. Snowflake's business model is based on consumption and customers using less data. "In a consumption model, customers have the ability to dial it back and they can increase it as well too when they get more confidence in their business," said Scarpelli.

Vendors like Snowflake will also become more efficient. Scarpelli said Snowflake moved customers to AWS Graviton 2 instances to become more efficient. As a result, the amount of storage used is down even though queries are growing.

AI needs will grow IT spending as soon as sentiment improves. "There's plenty of demand out there, absolutely. And with AI right now it's going to drive a whole other vector in terms of workload development. It's going to be hard to stop, CFOs or no CFO," said Slootman.

Nvidia data center revenue, outlook strong due to AI infrastructure boom

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Nvidia, which is considered one of the primary infrastructure plays for artificial intelligence, reported a better-than-expected first quarter and raised its outlook.

The company reported first quarter earnings of 82 cents a share on revenue of $7.19 billion, down 13% from a year ago. Non-GAAP earnings were $1.09 a share. Wall Street was expecting Nvidia to report first quarter non-GAAP earnings of 92 cents a share on revenue of $6.53 billion.

Nvidia's second quarter outlook also reflected a boom in AI infrastructure investment. Nvidia projected revenue in the second quarter of $11 billion. For the second quarter, Nvidia was expected to report earnings of $1.07 a share on revenue of $7.17 billion.

Jensen Huang, founder and CEO of Nvidia, said:

"The computer industry is going through two simultaneous transitions — accelerated computing and generative AI. When generative AI came along it triggered a killer app for accelerated computing. In the future, it's clear now that generative AI will be primary workload and that the budget of a data center will shift toward accelerated computing. We're seeing incredible orders to retool the world's data centers. It's a 10-year transition to reclaim the world's data centers."

Add it up and Nvidia is seeing a data center surge in spending and racing to provide supply of its H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU lineup.

Speaking on an analyst conference call, CFO Colette Kress said "generative AI is driving exponential growth for our accelerated computing." She said visibility into demand goes out a few quarters and Nvidia has been busy procuring supplies to meet it. 

Specifically she noted: 

• Cloud service providers are driving strong demand/
• Consumer Internet companies are investing in generative AI and infrastructure.
• Enterprise demand for AI infrastructure is strong from industries such as automotive and financial services as companies develop their own models. 

Constellation Research CEO Ray Wang weighed in on the Nvidia results:

"Nvidia is in the right place at the right time. GPU's are the best price/value equation today for Generative AI The future may be TPU’s but the price value equation is not as competitive yet. Both Gaming and Data center markets are entering a new product cycle with H100 GPUs. As we get to Chat GPT 5.0, a trillion parameters won’t be possible without GPUs."

Data center revenue was $4.28 billion in the first quarter, up 14% from a year ago.

In recent months, Nvidia has outlined a series of key enterprise AI partnerships as it plays the long game with generative AI and cloud giants. These partnerships include:

• Nvidia said it will integrate its AI Enterprise software into Microsoft's Azure Machine Learning.
• ServiceNow and Nvidia formed a partnership to develop large language models formed specifically for the ServiceNow Platform, which automates workflows.
• Google Cloud said it would offer new A3 Virtual Machines based on Nvidia's H100 GPUs.

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While AI optimism has been driving Nvidia shares, it has also made a few quantum computing advances. NVIDIA, Rolls-Royce and Classiq, a quantum software company, said they designed and simulated the largest quantum computing circuit for computational fluid dynamics. Nvidia also announced a new system built with Quantum Machines to bring together quantum computing and its accelerated computing platform.

Ray Wang's take

The AI narrative is driving valuations.

"The war for AI mindshare in a post ChatGPT world is what’s driving tech valuations higher. While Microsoft kick started a war with Google, the reality is that Microsoft may not win the war as it’s servers are the oldest and it’s not taking a responsible approach to AI. We've had numerous reports of performance issues on Teams, Office 365, and other Microsoft services."

"Google has the best team, the best tech, but has been too slow to roll out offerings. The recent Google I/O event showed why they have the lead with better language models, higher precision in data, and more modern data centers. They had to create a division to get it all together, so this horse race is now more interesting."

Winners and losers

1. General AI: Big race between Google and Microsoft

2. AI chips: Nvidia’s GPU’s and Google’s TPU’s will play a bigger role over time.

3. Business software:

• Oracle – a lot of capabilities embedded in their offerings.
• C3 – true enterprise AI platform.
• ServiceNow – a platform for building AI offerings.

4. Internet

• Meta – Using AI to drive better offers.
• Amazon – From warehouse to cloud offerings.

Event Report: IBM Quantum Partner Forum 2023 - Quantum is Alive and Well at IBM

Holger Mueller

Vice President and Principal Analyst
Constellation Research

Holger Mueller is VP and Principal Analyst for Constellation Research for the fundamental enablers of the cloud, IaaS, PaaS and next generation Applications, with forays up the tech stack into BigData and Analytics, HR Tech, and sometimes SaaS. Holger provides strategy and counsel to key clients, including Chief Information Officers, Chief Technology Officers, Chief Product Officers, Chief HR Officers, investment analysts, venture capitalists, sell-side firms, and technology buyers.  Coverage Areas: Future of Work Tech Optimization & Innovation  Background: Before joining Constellation Research, Mueller was VP of Products for NorthgateArinso, a KKR company. There, he led the transformation of products to the cloud and laid the foundation for new Business Process as a…...

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IBM invited its partners for three days to the IBM Innovation Lab in Paris, to share progress in quantum as well as provide partners the chance to educate each other, share the progress and state of their projects as well as ample network opportunities.

Here are my four key takeaways from the event:

IBM makes good progress on the innovation of its platform / hardware.

IBM’s VP of Quantum Jay Gambetta was in Paris and re-confirmed that IBM is on track with its goal of reaching 4000+ qubits by 2025, based on the IBM Quantum System Two. For now, the Osprey chip is available with its 433 qubits, later this year Condor (1121 qubits) is slated to become available. At Think 2023 IBM also launched new offerings for quantum, with the IBM Quantum Safe technology getting the most attention.

Figure 1 – The IBM Quantum Development Roadmap

Source: IBM

Most importantly, partners see progress and are confident that IBM is the right partner to provide the underlying hardware platform for their quantum computing projects.

Figure 2 – Jay Gambetta in Paris, May 15^th, 2023

Source: Constellation Research

A wide variety of use cases are happening today.

IBM sees five large use cases where quantum is being implemented today, IBM’s Jamie Garcia walked us through the five use cases:

• Aerospace and automotive. Prominent use cases here are customer experience (CX), materials design, structural design and optimization of processes like in manufacturing.
• Financial Services. The popular use cases are evidently fraud detection, pricing of derivatives and options, portfolio optimization and risk analysis.  
• Hight Tech. IBM sees seismic imaging, catalysts, supply chain planning and manufacturing scheduling as key quantum use cases.
• Energy, environment, and utilities. Portfolio optimization, grid optimization, risk analysis and options pricing as well as battery design are key use cases for quantum in these verticals.
• Healthcare and life sciences. IBM sees the prediction of disease risk, drug discovery and design as well as protein folding predictions as the most prominent uses cases in these industries.

Figure 3 – Jamie Garcia presenting in Paris, May 16^th, 2023.

Source: Constellation Research

Quantum education remains challenging but is making progress.

Education on what quantum computing is, and what its benefits are in academia, government and enterprise is a major challenge. More than one time I heard from attendees referring to the session and saying that they need to explain what quantum is over and over. The challenge is the novelty of quantum and that requires education of executives but also requires education of the workforce. As of today, most attendees held degrees in physics, something not surprising given the nature of quantum. But that needs to change, and other disciplines will have to play a role here. It was also good to see the first quantum education courses coming into place in Canada. The challenge is real and vital for the industry, as for quantum to grow it needs skilled people who can use, explain, and advance quantum technology.

Figure 4 – Rafa-Martin Cuevas presenting in Paris May 17^th, 2023.

Source: Constellation

The partner network approach is delivering.

With over 100+  attendees across the whole partner ecosystem – from clients, prospects, services partners, academic partners, and IBM, it was good to see how the network is delivering value for the attendees. On such an innovative and fast pacing technology like quantum, it is key to bring together users, implementors and makers, so they can align on what is feasible and what needs to be done. The learning across the use cases is substantial, even if they come from very different vertical use cases. This is critical at the relatively early phase quantum is still in its adoption across enterprises, governments, and academia. More than a few times attendees said they learned from other industry use cases, partners, enterprises in other countries and regions, and even from academia. It is good for IBM to bring it all together as synergistic learning is substantial. As quantum grows, this approach may not be feasible anymore but for now and the next years to come this is the right approach and IBM deserves kudos for inviting and hosting the forum. With just around 100 attendees, the event is small-scale enough for a lot of networking to happen, as anyone who wants to speak to another attendee has the chance to do so. Additionally, a unique atmosphere is created at an event where almost every attendee is a moderator or panelist, as it breaks the attendee vs presenter barrier effectively – encouraging networking and information exchange on a peer-to-peer basis.

Also checkout the multimedia deliverables, the Wakelet of the event here, the 1Slide summary here and the event video below (and don't miss the Day #1 and Day #2 (with a bonus on how Arizona State is using quantum) summaries here and here).