Summary: Investing in Databricks Stock: What You Need to Know
Explore the potential of investing in Databricks stock, a leader in AI-driven data management with its innovative Lakehouse platform. While Databricks isn’t publicly traded yet, investors can gain exposure through secondary platforms or consider competitors like Snowflake. Stay informed as Databricks approaches its highly anticipated IPO.
How to Invest in Databricks Stock
Databricks is one of the most closely watched and highly valued start-ups. Its Lakehouse platform, which simplifies data access and analysis for businesses, drives its impressive growth.
Data scientists and analysts widely use the Lakehouse platform, a cloud-based solution. Companies use it to store data on third-party cloud servers like Amazon (AMZN 0.69%) Web Services, making it easier to leverage artificial intelligence (AI) technologies. As AI evolves rapidly, Databricks stock has significant growth potential, attracting many eager investors.
Here’s a comprehensive guide on how to invest in Databricks stock and crucial factors to consider when evaluating the company.
Is Databricks Stock Publicly Traded?
As of mid-2024, Databricks remains a private company. Investors cannot currently purchase Databricks stock on a stock exchange using their brokerage accounts.
Will Databricks Have an IPO?
Databricks has not announced an initial public offering (IPO) as of mid-2024. According to a Wall Street Journal article published earlier in 2024, Databricks is waiting for favorable market conditions before going public. However, the company’s CEO noted that “the markets seem pretty shut.”
Databricks previously considered going public. The company was on track to complete an IPO in 2021 following its last private funding round. That period would have been ideal for an IPO due to high investor interest in tech start-ups. However, with investor enthusiasm for IPO stocks cooling since then, Databricks may stay private until the IPO market heats up again.
How to Invest in Databricks Stock
Although Databricks stock isn’t publicly traded, investors can still gain exposure to its potential through secondary platforms like EquityBee or Forge Global (FRGE -5.15%). These online platforms let accredited investors (those with a high net worth or income) invest directly in venture capital-backed start-ups like Databricks.
Accredited investors using EquityBee fund employee stock options and receive a percentage of the option’s sale price when the company undergoes a liquidity event, such as a sale or an IPO. Investors on the EquityBee platform rank Databricks as one of the most sought-after start-ups.
For those who aren’t accredited investors, the Fundrise Innovation Fund provides another way to invest in Databricks. This venture capital fund is open to all investors and requires a low minimum investment (around $10 per share). Databricks is one of several pre-IPO companies in the fund’s portfolio, along with other notable names like Canva, Anyscale, Anthropic, and OpenAI.
Databricks Stock Overview
| Aspect | Details |
|---|---|
| Company Overview | Databricks is a leading company in the data analytics and artificial intelligence space, known for its Lakehouse platform. |
| Public Status | As of mid-2024, Databricks is not publicly traded. It remains a private company. |
| IPO Status | No IPO announced yet. The company is waiting for favorable market conditions. |
| Investment Opportunities | Investors can use platforms like EquityBee and Fundrise Innovation Fund to gain exposure to Databricks. |
| Revenue | Annual recurring revenue (ARR) exceeded $1.6 billion in 2023, with a growth rate of 50% year-over-year. |
| Valuation | Valuation reached $43 billion in September 2023, following a $500 million funding round. |
| Competitors | Notable competitors include Snowflake (SNOW) and MongoDB (MDB). |
| ETFs for Exposure | Consider ETFs like Spear Alpha ETF (SPRX) and TrueShares Technology, AI & Deep Learning ETF (LRNZ) for indirect exposure. |
Alternative Options to Investing in Databricks Stock
Investors who aren’t accredited but want exposure to the fast-growing cloud data sector before Databricks’ IPO can explore alternative options. Consider investing in publicly traded companies that compete with Databricks in the database sector. Here are a couple of alternatives:
Snowflake (SNOW 2.31%): Snowflake’s data cloud enables customers to store, process, and analyze data faster, more efficiently, and with greater flexibility than legacy solutions.
MongoDB (MDB 0.18%): MongoDB offers a flexible document database, allowing clients to build applications without extensive database configuration.
Should I Invest in Databricks Stock?
Most investors can’t yet invest directly in Databricks stock, but they should consider several factors if the company eventually launches an IPO.
Is Databricks Profitable?
As a private company, Databricks doesn’t disclose its profitability. As of mid-2024, the company hasn’t revealed any information regarding its profitability. However, a late 2023 article by The Stack reported that Databricks had not yet reached profitability. At that time, the company was generating $1.5 billion in annualized revenue and growing rapidly, with revenue increasing by 50% year over year. The company was also investing heavily in scaling its business. If revenue growth continues at this pace, Databricks could eventually become profitable.
Databricks’ Revenue Growth
In 2023, Databricks’ annual recurring revenue (ARR) run rate exceeded $1.6 billion. The company’s revenue growth has been impressive, surging by 50% over the past year. Several significant deals, including a $1.3 billion sales contract with generative AI start-up MosaicML, are likely to drive Databricks’ revenue growth.
Databricks’ Valuation
In September 2023, Databricks raised $500 million from private investors, increasing its valuation to $43 billion—up by $5 billion since its previous funding round in 2021.
| Aspect | Details |
|---|---|
| Current Valuation | $43 billion (as of September 2023) |
| Annual Recurring Revenue (ARR) | Over $1.6 billion (as of 2023) |
| Recent Funding Round | $500 million raised in September 2023 |
| Previous Valuation | $38 billion (prior to September 2023 funding) |
| Projected Revenue Growth | 50% year-over-year increase |
| Notable Contracts | $1.3 billion contract with MosaicML |
| IPO Status | Not yet publicly traded; IPO pending market conditions |
| Potential Investment Platforms | EquityBee, Forge Global, Fundrise Innovation Fund (for indirect exposure) |
ETFs with Exposure to Databricks Stock
Exchange-traded funds (ETFs) are a great way to gain passive exposure to a company without directly owning its shares. However, since Databricks stock isn’t publicly traded, investors can’t use an ETF to gain direct exposure to it. Nevertheless, they can invest in ETFs that capitalize on similar market trends. Here are two ETFs to consider:
- Spear Alpha ETF (NYSEMKT): This ETF invests in companies benefiting from breakthrough technology trends, such as AI. Notable holdings include Snowflake and Nvidia (NVDA -0.21%), the latter of which is an investor in Databricks. The fund has a 0.75% expense ratio.
- TrueShares Technology, AI & Deep Learning ETF (LRNZ 0.6%): This ETF focuses on companies believed to possess innovative AI and deep learning solutions. Snowflake and Nvidia are among its largest holdings, and the ETF has a 0.69% expense ratio.
The Bottom Line on Investing in Databricks Stock
Databricks stands out as one of the most exciting up-and-coming companies. Its revenue grows rapidly as more businesses use Lakehouse to manage their data, especially for AI applications. Investors eagerly anticipate its IPO, but since it is not yet public, they have time to fully evaluate the company before buying shares.
Investors should also consider Databricks’ publicly traded competitors, such as Snowflake and MongoDB, which are experiencing rapid growth and are closer to achieving profitability. These companies might offer better long-term investments, especially if Databricks launches at a high valuation.
FAQ: Investing in Databricks Stock
What is Databricks, and why is it so highly valued?
Databricks is a leading start-up known for its Lakehouse platform, which simplifies data access and analysis for businesses. This platform drives Databricks’ impressive growth, making it one of the most closely watched and highly valued companies in the start-up world.
Is Databricks stock publicly traded?
No, as of mid-2024, Databricks remains a private company. You cannot currently purchase Databricks stock on a public stock exchange.
When will Databricks have its IPO?
Databricks has not announced an initial public offering (IPO) date as of mid-2024. The company is waiting for favorable market conditions before going public, as stated by its CEO earlier in the year.
How can I invest in Databricks if it’s not publicly traded?
You can invest in Databricks through secondary platforms like EquityBee or Forge Global if you are an accredited investor. For non-accredited investors, the Fundrise Innovation Fund offers exposure to Databricks with a low minimum investment.
Are there alternative ways to gain exposure to Databricks?
Yes, you can invest in publicly traded companies that compete with Databricks, such as Snowflake or MongoDB. These companies operate in the same cloud data sector and offer a way to gain exposure to similar market trends.
Is Databricks Profitable?
Databricks, as a private company, hasn’t disclosed its profitability. However, reports indicate that as of late 2023, the company hadn’t yet reached profitability, despite generating $1.5 billion in annualized revenue.
How Fast Is Databricks Growing?
Databricks is growing rapidly, with its annual recurring revenue (ARR) run rate surpassing $1.6 billion in 2023. The company’s revenue surged by 50% over the past year, showing strong growth momentum.
What Is Databricks’ Current Valuation?
In September 2023, Databricks reached a valuation of $43 billion after a $500 million funding round. This marked a $5 billion increase from its previous valuation in 2021.
Can I gain exposure to Databricks through ETFs?
Although Databricks stock isn’t directly accessible through ETFs, you can invest in ETFs that capitalize on similar technology trends. Notable options include the Spear Alpha ETF and the TrueShares Technology, AI & Deep Learning ETF, which hold shares of companies like Snowflake and Nvidia.
Should I wait for the Databricks IPO or invest in alternatives?
Databricks has strong growth potential, but consider its publicly traded competitors like Snowflake and MongoDB. These companies are growing rapidly and are closer to profitability. They might be better long-term investments, especially if Databricks launches with a high valuation.
