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Published on
May 14, 2025
5 min read
Databricks Confirms Neon Acquisition Plans to Strengthen its AI Agent Strategy
Databricks has confirmed that it will acquire Neon, a cloud-based database startup with a $1 billion valuation. According to Reuters, the Databricks Neon acquisition is aimed at strengthening the company’s analytics unit with technology that can facilitate easy development and utilization of AI agents by businesses.
AI Agent Strategy
AI agents are programs that require minimal human intervention to execute repetitive tasks like sending emails or coding. In recent years, demand for AI agents has been on the rise as businesses embrace AI technology to improve efficiency and automate workflows.
Neon has built its program on the serverless PostgreSQL database. PostgreSQL is an open-source system for managing and organizing information on the internet. Neon’s solution allows developers and AI agents to manage, store, and access their data in real-time. This makes it easier for developers to build AI-powered applications and deploy them.
“The era of AI-native, agent-driven applications is reshaping what a database must do. Neon proves it: four out of every five databases on their platform are spun up by code, not humans. By bringing Neon into Databricks, we’re giving developers a serverless Postgres that can keep up with agentic speed, pay-as-you-go economics and the openness of the Postgres community,” Databricks CEO Ali Ghodsi.
The Databricks Neon merger is the latest mega deal for the data analytics company. In 2023, Databricks acquired MosaicMl, an AI model training startup for $1.3 billion. Last year, Databricks paid more than $1 billion to acquire Tabular, a data optimization company.
Accelerating Neon’s Mission
Once Databricks completes the acquisition process, the team at Neon will be joining the data analytics company. Neon views its $1 billion acquisition by Databricks as a step that will enable it to fulfill its mission faster.
“Four years ago, we set out to build the best Postgres for the cloud that was serverless, highly scalable, and open to everyone. With this acquisition, we plan to accelerate that mission with the support and resources of an AI giant. Databricks was founded by open source pioneers committed to making it easier for developers to work with data and AI at any scale. Together, we are starting a new chapter on an even more ambitious journey,” Neon CEO Nikita Shamgunov said.
Established in 2021, Neon has already partnered with a range of platforms to integrate its PostgreSQL database into developer platforms and tools that are widely used by businesses. Some companies that Neon has worked with include Replit, GitHub, Cloudflare, and Microsoft.
Neon offers managed cloud-based database services. The company bills users based on the computing and storage space they use each month. It also allows them to clone databases and preview changes before production. The platform is designed to scale memory, processor, and storage based on user needs. Supports database development, testing, and recovery.
The startup has a workforce of more than 130 employees. It serves over 18,000 clients, including Adobe, OpenAI, and Boston Consulting Group. Developers have been flocking to its open source platform. The cloud-based database platform is considered an alternative to cloud provider leaders like Amazon Web Services. Its software is compatible with Microsoft and Amazon clouds.
A Strategic Fit
Databricks views Neon’s capabilities are well suited for workloads that AI agents run. The company noted that 80% of databases “provisioned on Neon were created automatically by AI agents rather than by humans.”
Databricks has more than 10,000 corporate clients. These include Rivian, Block, Comcast, and Shell. Databricks customers rely on the company’s Data Intelligence Platform to analyze and manage AI application data from different sources. Founded in 2013,
Databricks’ valuation currently stands at $62 billion after a successful funding round that raised $10 billion in December 2024. The company allocated part of these finances to acquisition. Since its founding, Neon has raised $129.6 million from investors such as Notable Capital, Menlo Venture, Microsoft’s venture unit M12.
