The New York Stock Exchange welcomes Snowflake to usher in the first day of winter on Dec. 21, 2021. To honor the occasion, Snowflake the Bear, joined by Chris Taylor, vice president of NYSE Listings and Services, rings the opening bell.
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In 2020, as data analytics software vendor Snowflake was hitting the public market, one of the key stats it was touting to investors was net revenue retention.
Snowflake’s NRR at the time was 158%, meaning its existing customer base from a year earlier had increased its total spend by 58%. The measurement reflects demand from clients for more products and services and is beloved by Wall Street because it signifies added revenue without much additional cost.
However, in the quarter that ended in January of this year, Snowflake’s NRR dipped to 131%, a number that is still high by industry standards yet indicates a slowdown in new spending. It is a trend that is popping up across the cloud software industry, as former fast-growing businesses contend with a more conservative approach from the companies, governments and other entities they serve, whether the buyers are finance, marketing or IT departments.
“The median net retention for the software universe has been steadily declining the last few quarters,” Jamin Ball, a partner at tech-focused investment firm Altimeter Capital, wrote in a post on social media site X on Friday. “More pressure on churn (as companies look to reduce point solutions in favor of platforms) and more difficult upsells have pushed net retention down,” Ball added.
Industrywide, the median net retention rate declined to 111% in the fourth quarter, as the number ticks down a bit each period, Ball’s data shows. According to the four-year chart he posted, NRR peaked at 121% in the first quarter of 2022, which was just after tech stocks reached a record and had started a precipitous decline.
The retrenchment has continued even with interest rates stabilizing, the economy showing signs of strength and the Nasdaq wiping out all of its losses from 2022 to reach fresh highs.
Twilio, which sells cloud-based communications software, reported NRR of 102% in February, with just 5% year-over-year revenue growth. Rewind to the fourth quarter of 2020 and the company’s NRR was 139%.
Almost all of Twilio’s revenue comes from its division that contains technology for sending text messages and emails.
“We are seeing low churn in that business, but relative to historical levels kind of pre-2023, just higher contraction and more muted expansion,” Aidan Viggiano, Twilio’s finance chief, said on the company’s earnings call in February.
At Snowflake, Chief Financial Officer Mike Scarpelli told investors last month that NRR will at some point converge with its revenue growth rate, which slowed to 36% in the latest fiscal year from 69% in fiscal 2023 and 106% the year before that.
The topic didn’t get much discussion on Snowflake’s earnings call, as analysts were focused on the announcement that Sridhar Ramaswamy was replacing CEO Frank Slootman, the veteran Silicon Valley executive who led Snowflake through its 2020 initial public offering, the largest ever for a U.S. software company.
Representatives from Twilio and Snowflake declined to comment.
The story is similar at Zoom, which has seen its enterprise net retention rate slip to 101% from more than 130% three years ago.
Zoom has opted to add artificial intelligence features into its premium video-calling plans at no additional cost. That is different than the approach taken by competitors Google and Microsoft, which are generally forcing companies to pay for new AI capabilities.
“Because customers are also trying to reduce the cost, that’s why we do not charge the customers for those features,” Zoom CEO Eric Yuan said on his company’s earnings call last month.
Zoom did not respond to CNBC’s request for comment.
Even Amazon CEO Andy Jassy said “cost optimization” is having an effect on business. Amazon Web Services doesn’t break out NRR, but the division reported annual revenue growth in the fourth quarter of 13%, down from 20% a year earlier. Jassy said he sees the market starting to show signs of a reacceleration.
“I think that the lion’s share of cost optimization has happened,” Jassy said. “It’s not that there won’t be any more or that we don’t see any more. But it’s just attenuated very significantly.”
An AWS spokesperson told CNBC in a statement that “customers are renewing at larger commitments over longer periods.”
‘Additional down-sell pressure’
ZoomInfo, which sells access to data that companies can use to help drive sales, reported a dramatic drop in NRR to 87% at the end of 2023 from 116% two years earlier. That means existing customers are spending less year over year.
Midsize companies, especially in technology, were the customers feeling the most heat in the fourth quarter, ZoomInfo CFO Cameron Hyzer told analysts on last month’s earnings call. ZoomInfo ended the fourth quarter with 1,820 customers holding at least $100,000 in annual contract value on Dec. 31, down from 1,869 clients at that level on Sept. 30.
“We anticipate additional down-sell pressure in Q1 as we are still lapping a peak of negativity from last year and working through the long tail of multiannual contracts that were most recently transacted in a very different operating environment,” Hyzer said. Management expects the retention rate to return to higher levels this year, he said.
DigitalOcean, which competes with AWS, Microsoft and Google in providing cloud computing and storage services, also saw NRR dip below 100% last year. After hitting 112% in the fourth quarter of 2022, the rate dropped to 107% to start 2023 and then fell to 96% in the third and fourth quarters.
Paddy Srinivasan, who was named CEO of DigitalOcean in January, told CNBC in an interview in February that developers are turning off computing instances that they are not currently using.
Like at AWS, Srinivasan said DigitalOcean is “starting to see stabilization.”
Representatives from ZoomInfo and DigitalOcean did not respond to CNBC’s requests for comment.
TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.
Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.
TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.
“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”
Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.
“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.
But there may a dark side to this growth.
As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.
“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”
Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.
“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”
Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.
While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.
Watch the video to understand how TikTok’s rise sparked a short form video race.
The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)
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Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.
The funding would value the company at over $120 billion, according to the report.
Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.
The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.
Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.
The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
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Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
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Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.