Why Databricks Chose $5B Cash Over IPO at $134B Valuation

$134 billion. That's what investors think Databricks is worth—more than Ford, Nike, or Goldman Sachs. Yet this AI data giant just chose to raise $5 billion in private funding instead of going public. What do they know that we don't?

The $5 Billion Question

Databricks announced Monday it secured $5 billion in new funding plus $2 billion in debt capacity at a $134 billion valuation. The numbers behind this decision are telling: January quarter annualized revenue hit $5.4 billion, up 65% year-over-year, with positive free cash flow over the past year.

CEO Ali Ghodsi admits he wasn't sure they'd raise the full $5 billion. "There was heavy interest in recent weeks," he told CNBC. Goldman Sachs, Morgan Stanley, and Qatar's sovereign wealth fund all piled in. JPMorgan led the debt round.

But here's the kicker: Ghodsi is explicitly keeping IPO options open while betting against current market conditions. "If this correction hasn't bottomed out yet, we're just going to continue as a private company," he said.

David vs. Goliath in the Data Wars

Databricks isn't just another AI company—it's eating Oracle's and SAP's lunch. The company helps businesses connect their proprietary data with AI models to build custom agents. Think of it as the bridge between corporate data warehouses and artificial intelligence.

The competitive landscape is brutal. Snowflake, the previous data darling, reported $1.21 billion in October quarter revenue with a $58 billion market cap. Databricks is already ahead in revenue scale while remaining private. That's either brilliant timing or a massive gamble.

Last week's launch of Lakebase database puts Databricks in direct competition with enterprise software giants. Not coincidentally, Oracle and Snowflake shares both dropped 13% last week as investors worried about AI-powered competition shrinking traditional software moats.

The IPO Timing Game

2026 was supposed to be the year of tech IPOs. Anthropic, OpenAI, and even SpaceX are all considering public offerings. Yet Databricks—with $1.4 billion in AI-specific revenue—is sitting this dance out.

Ghodsi's reasoning reveals a sophisticated read on market psychology: "It can take months for venture capital to reflect major changes in equity markets." Translation: private investors are still paying 2021 prices while public markets have sobered up.

This creates an arbitrage opportunity. Why accept public market valuations when private investors will pay premium prices? Databricks now has billions in cash to weather any storm or fund aggressive expansion without the quarterly earnings pressure.

What This Means for Your Portfolio

If you're invested in enterprise software stocks, Databricks' strategy should worry you. The company is using private capital to undercut public competitors without the constraints of quarterly reporting. Snowflake, Palantir, and traditional database companies face a well-funded private competitor that can afford to play the long game.

For AI investors, this signals that the most valuable AI companies might stay private longer than expected. The traditional venture capital to IPO pipeline is breaking down when companies can raise billions without going public.

Founded in 2013, Databricks ranked No. 3 on CNBC's 2025 Disruptor 50 list.