Databricks Stock Defies Software Selloff with Massive $5 Billion Raise

TLDR

• Databricks raised $5 billion in funding at a $134 billion valuation plus $2 billion in debt capacity from JPMorgan Chase
• The data analytics company reported $5.4 billion in annualized revenue for Q4, up 65% year-over-year with positive free cash flow
• AI products now generate $1.4 billion in annualized revenue as the company focuses on enterprise database and conversational assistant tools
• CEO Ali Ghodsi confirmed Databricks will go public “when the time is right” but staying private lets them avoid public market volatility
• The funding round was oversubscribed despite software stocks dropping 13% last week on fears AI tools could disrupt the industry

Databricks closed a $5 billion funding round Monday at a $134 billion valuation. The company also secured $2 billion in new debt capacity.

The data analytics software firm reported annualized revenue of $5.4 billion for the January quarter. That marks a 65% increase from the prior year.

The company generated positive free cash flow over the past year. This performance comes as software stocks face pressure from AI-related concerns.

CEO Ali Ghodsi told CNBC the round was oversubscribed. Investors see Databricks as an AI beneficiary rather than a victim.

Goldman Sachs, Glade Brook Capital, Morgan Stanley, Neuberger Berman and the Qatar Investment Authority participated in the equity round. JPMorgan Chase led the debt financing.

The $7 billion capital injection gives Databricks substantial reserves. Ghodsi said this makes the company “really well capitalized, in case there’s a winter coming.”

Revenue Growth Accelerates

Databricks helps clients connect data with AI models to launch custom agents. The platform also provides tools for storing, processing and querying data.

AI products now contribute $1.4 billion to annualized revenue. This represents a growing portion of the company’s business.

The overall growth rate is accelerating. In June, Databricks forecast 50% growth for the year.

The company will use the new capital to develop Lakebase, its AI-focused database. Funds will also support Genie, its conversational assistant.

Databricks now exceeds rival Snowflake in size. Snowflake reported $1.21 billion in revenue for the October quarter.

IPO Plans Remain Flexible

Oracle and Snowflake shares both dropped about 13% last week. Software stocks declined on concerns that AI tools from companies like Anthropic could create new competition.

Ghodsi called the market correction an overreaction. He said established software companies will remain relevant but their competitive advantages are shrinking.

By staying private, Databricks avoids quarterly reporting pressures. The company can continue investing in growth without public market distractions.

Databricks plans to offer liquidity options for employees later this year using its balance sheet. The company is among the most valuable privately held firms.

Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors, said private capital at a $134 billion valuation lets Databricks “stay private and preserve control” without quarterly pressures.

The company competes with Snowflake and is seen as a potential IPO candidate along with SpaceX, OpenAI and Anthropic. With the recent launch of Lakebase database, Databricks now challenges incumbents like Oracle and SAP in the enterprise database market.

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