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How to invest in Databricks IPO: buy Databricks stock

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Franklin Silva
Updated
Jun 13, 2024

An official date for the Databricks IPO remains to be announced, yet CEO Ali Ghodsi did imply a possibly forthcoming IPO in his August 2021 comment concerning their most Series H funding round: that it “does not push out the IPO.” Also, considering the current S&P 500 price levels, this suggests further news of an IPO by 2024.

Databricks currently touts a solid 43 billion USD valuation as of this Series I round, which raised $500M. This is an increase to the latest funding, which raised a massive 1.6 billion and gave a 38 billion USD valuation. In other words, a 13% jump.

Likely, its IPO will be listed on the New York Stock Exchange (NYSE) or Nasdaq exchange. The latter exchange, in particular, caters to technology-focused investors who may want to invest in Databricks’ IPO.

In this article, we will help clarify all the information about the Databricks IPO: its date, how to buy Databricks’ IPO, and the stock itself.

What is Databricks?

Founded in 2013 and headquartered in San Francisco, Databricks is an analytics company utilizing artificial intelligence, commonly known as AI. It’s responsible for spearheading the “lakehouse” architecture to organize data on “the cloud.”

Lakes refer to large amounts of data, while warehouses refer to organized structures or sets of processed data. This works akin to well-tuned factories but online. And this factory is essentially a leasable and digital powerhouse made by Databricks.

The company operates in 12 different countries, with some countries having multiple offices. It lists world-leading firms such as Amazon, Google, Microsoft, and Alibaba as a few of its partners.

CNBC recently upgraded its position to number 34 (of 50; one being best) from number 37 in 2021 on its list, “CNBC Disruptor 50.”

In August 2021, Databricks announced that it generated 600 million USD in annual recurring revenue (ARR), an increase of 75% year-over-year. By February 2022, TechCrunch reported an ARR of 800 million, on track for 1 billion.

In October 2021, the company purchased German no-code company 8080 Labs for an undisclosed amount. This places it as a top contender for producing no-code or low-code solutions, enabling non-computer science professionals to work with its technology and realize the benefits of AI-powered data management.

When Is Databricks’ IPO date?

The company has not yet provided an IPO date (despite the rebound in 2023). However, a reasonable market estimation is by 2024. This could change pursuant to the status of the S&P 500’s current bear market. IPOs are unlikely to occur during a prolonged bear market.

The company’s meteoric rise from launch to43 billion USD in eight years make it a hotly anticipated IPO. Yet investors must continue to wait as the private startup navigates “six months at a time.”

Its major investors include:

  • Counterpoint Global (of Morgan Stanley)
  • Baillie Gifford
  • ClearBridge Investments
  • Andreessen Horowitz
  • BlackRock
  • Canada Pension Plan
  • Fidelity
  • Franklin Templeton

A top-tier list such as the above suggests that it receives substantial advice and guidance. Further, it has no urgent need for cash, particularly as it also has also received support from all four leading cloud providers: Amazon, Google, Microsoft, and Salesforce.

Is Databricks IPO a good investment?

Generally, investing in an IPO is riskier than investing in a stock already known to the public market, either through an American exchange like the NYSE or a European exchange like the LSE.

However, a few essential items remain on your analytical checklist, no matter the stock or sector:

  1. Gross revenue (“top line”)
  2. The revenue drivers, such as active user or member growth
  3. Profit margins, often EBITDA as a percentage of top line; EBITDA means “earnings before interest, tax, depreciation, and amortization”
  4. Its private valuation growth, earned whenever a private capital raising with major investors, hedge funds, or banks occurs
  5. Cumulative funding and current (pre-IPO) investors
  6. The management team
  7. Its competitors

If an “IPO Filing” has already occurred, a great place to start is taking the time to read through any stock’s original prospectus available on SEC. This helps cut through the noise and hype typically surrounding an IPO.

Finding such information prior to an IPO filing remains difficult, yet reputable trade journals such as Forbes, WSJ, Crunchbase, or TechCrunch provide meaningful estimates.

With respect to Databricks’ IPO, the below estimates are currently available, noting it is in USD:

  1. Revenue in 2022: +1.6 billion, a 23% increase over 2022’s 1.3 billion
  2. Customer count: over 530
  3. Private valuation: 43 billion, a 13% increase over the last founding round
  4. Total cumulative funding: 3.5 billion
  5. Investors include: substantial; please see above
  6. Management: CEO Ali Ghodsi was one of the creators behind Apache Spark, and also serves as an adjunct professor for UC Berkeley
  7. A close parallel is Snowflake, which already went public in September 2020

And there you have a quick snapshot of Databricks. It’s important to remember that you want to see consistent growth over several years (at least three) without any breaks in momentum.

In this scenario, where a company reveals limited information, particularly concerning their income statement and balance sheet, tracking their customer growth and investor base is vital. If multiple independent trade journals or conferences also rate their products highly, the company could be a winner.

However, a clear hesitation to reveal financials suggests an inordinate amount of spending, which almost always draws intense scrutiny. This data becomes available in an IPO filing.

Bottom Line

We’re excited about Databricks’ IPO. It has garnered an incredible valuation at 43 billion USD in eight years and is earning almost a billion a year in top-line revenue.

It’s clear the company tapped into a new market, captivating the likes of Amazon and Microsoft. While the “smart money” follows Databricks, investors should never turn complacent. Any growth story needs consistency and solid financials.

FAQs

What is an IPO, and how does it work?

An “IPO” is an initial public offering. As it sounds, it marks a stock’s first trading day on a relevant and public exchange.

Is Databricks a public company?

No, Databricks is currently a private company.

How Do Databricks make money?

Please see our more detailed review of Databricks IPO above. Databricks earns revenue through providing subscriptions to its AI-powered data management tools.

How can I find Databricks’s IPO prospectus?

After an IPO filing occurs, the prospectus is available to the public through the US SEC for stocks trading on an American exchange.

When will the Databricks IPO happen?

While this remains the decision of Databricks, we expect to receive further clarity on its IPO date by 2024.

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About the author
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Conor Scott, CFA
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Conor is a CFA charterholder who has been active in the wealth management industry since 2012, continuously researching the latest developments affecting portfolio management and cryptocurrency.

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