Valuation Doubles in a Year: Data Analytics Firm Databricks Seeks $5 Billion in Funding

Today, The Information learned from investor filings and people familiar with the matter that the AI data analytics platformDatabricksCurrently in negotiationsThe scale reaches as high as $5 billion (approximately RMB 35.4 billion).newfinancingIn this funding round, Databricks' valuation has soared to$134 billion (approximately RMB 948.1 billion).

Notably, as recently as August 19 this year, Databricks completed a $1 billion (approximately RMB 7.1 billion) Series K funding round, with its valuation already surpassing the $100 billion (approximately RMB 707.5 billion) threshold. This signifies that in just the past103 daysIts valuation has been realized.A staggering increase of nearly $34 billion (approximately RMB 240.6 billion)The rapid pace of growth is remarkable.

Among U.S. private tech companies, Databricks ranks fifth in valuation, trailing only OpenAI, SpaceX, Anthropic, and xAI. Databricks is also the world's fourth-highest valued AI unicorn. The company achieved a $134 billion valuation in this funding round.Approximately 32 times Databricks' projected sales of $4.1 billion this yearLast year, Databricks' valuation during its funding round was 24 times its annual sales, while the year before that it was 26 times.

Insight Partners is expected to lead this new financing round, investing at least $500 million. Databricks will use the funds from this new financing round to repurchase employee shares while covering taxes and fees associated with the share sale.

Databricks boasts an impressive roster of investors, including prominent firms such as a16z, Blackstone Group, and Thrive. NVIDIA is also among Databricks' investors, having led the company's $500 million Series I funding round. However, NVIDIA did not participate in this latest funding round.

Following reports of this funding round, Reuters sought confirmation from Databricks, but the company declined to comment.

▲The Information's coverage of this funding round (Image source)

Founded in 2013, Databricks primarily provides unified data and AI platform services, helping enterprises integrate and process large-scale data for data engineering, data science, machine learning, and AI applications. It also delivers data services to businesses in sectors such as e-commerce, finance, and healthcare.

As the pioneer of the unique “lakehouse” database architecture, Databricks isLeading companies in the field of data intelligenceIt is also crucial in the AI era.Data Infrastructure ProviderTo date, over 601 Fortune 500 companies have adopted Databricks' data intelligence platform to manage their data and integrate it with AI.

Recently, Databricks has been exploring new growth opportunities in the AI sector. The company aims to persuade customers to leverage its platform.AI AgentAutomate tasks such as human resources and IT service management to replace traditional software. According to Databricks,The company currently generates approximately $251 million in revenue from AI products.At the same time, it maintains a close partnership with its key client OpenAI.

▲Current solutions offered by Databricks (Image source: Databricks official website)

For a mature company that has already reached the Series K round and is initiating its next funding round, such a high valuation multiple is particularly rare.So why are investors still willing to assign Databricks a higher valuation?

Investor documents and information from people familiar with the matter indicate that Databricks hasMaintained a growth rate exceeding 501% for several consecutive yearsThis pace is exceptionally fast for a mature software company. The company has raised its sales forecast at least twice this year. In September, it revised its sales projection from $3.8 billion to $4 billion, and subsequently made another modest upward adjustment. It now expects sales to grow by 55% this year.

However, at the same time, Ali Ghodsi, co-founder and CEO of Databricks, sounded the alarm about an AI bubble, arguing that executives at other AI companies are overly optimistic about the technology's capabilities in the near term. In an interview with Goldman Sachs CEO David Solomon this past September, Ghodsi stated:“The industry is still in its early stages. That's why we're in a bubble, right?"

He added that many customers are moving quickly to automate more of their operations, which could benefit Databricks. The only uncertainty is that a significant market pullback could drag Databricks down.

▲Ali Ghodsi (Image source: The Wall Street Journal)

Databricks also informed investors thatIts gross profit margin is declining at a faster-than-expected pace.Databricks reduced its revenue forecast to $741 million from the previously projected $771 million, attributing the adjustment to increased usage of its AI products.

Databricks is expanding its cloud storage offerings for customers and purchasing GPUs to run small AI models. These initiatives have driven up costs. Public software companies with similar data infrastructure businesses, such as Snowflake, have also reported declining gross margins in recent quarters.

Overall, Databricks is broadly at breakeven, with projected free cash flow of approximately $10 million this year. This represents a significant improvement compared to 2023, when the company was still burning hundreds of millions of dollars in cash annually. However, measured by free cash flow margin,Its profitability falls far short of that of comparable publicly traded companies such as Palantir and Snowflake.

Compared to other companies, Databricks' valuation sits in the middle range. Snowflake and Datadog trade at 21 times and 16 times their expected sales, respectively; while Palantir, a stock favored by retail investors, has reached a market capitalization exceeding 90 times its projected sales for this year.

Conclusion: Despite soaring performance and valuation, Databricks still faces a major test.

Databricks' $10 billion funding round completed last December ranks among the largest ever for a private company. The Information's latest report on its $5 billion funding round, with its unprecedented valuation, illustrates the risks and rewards of this AI boom: while sales growth has exceeded expectations, AI development costs are squeezing gross margins.

As one of the most anticipated tech IPOs in years, Databricks' future listing plans have consistently drawn market attention. However, CEO Goldschmidt appears to favor raising capital through private markets and has repeatedly delayed the company's public offering. Whether Databricks can strike a balance between expansion and profitability warrants continued observation.