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Snowflake Inc. (SNOW) inventory spiked after the corporate reported robust income progress on August 27 for the Q2 FY26 interval, ending July 27. The inventory is up +19% up to now two days.
SNOW closed at $238.66, up from $200.39 on Aug. 27 earlier than the outcomes have been launched. My goal value is now $337.47, or +41.4% greater. This text will present why.
Administration says income will likely be 27% greater YoY, together with a 25% adjusted free money move (FCF) margin. What’s key right here is that administration forecasted its FCF margin for the 12 months, a projection that nearly no firm does.
That reveals robust confidence in its recurring free money move (FCF).
It additionally permits us to undertaking a goal value for SNOW inventory that’s over 44% greater, even after its latest run-up. Here is how that works out.
Snowflake, a Bozeman, Montana-based firm, supplies information evaluation and information cloud administration merchandise. It has 4 product traces: information engineering, analytics, AI (synthetic intelligence), and purposes/collaboration.
If your online business wants to research a large quantity of information queries on datasets and LLM (giant language fashions) or something near that, Snowflake can in all probability assist. Basically, its progress is being fueled by a convergence of information cloud progress and the necessity for software program to research the information, together with AI information.
For instance, final quarter Snowflake’s income was up +31.8% year-over-year (Y/Y) to $1.145 billion. Furthermore, administration initiatives its FY 2026 income (ending Jan. 31, 2026), will rise at the least 27% (i.e., product income, not together with skilled companies).
Based mostly on this, analysts now estimate that its FY 2026 income will likely be $4.61 billion. Subsequent 12 months, they forecast $5.69 billion, or +23.4% extra.
However right here is the important thing level. Administration now estimates its FCF margin will likely be 25% for FY 2026. (Once more, nearly no firm ever initiatives its FCF margin). This may be seen on web page 25 of its Q2 deck (see beneath):
Because of this, we will estimate that its FCF will likely be over 22% greater than final 12 months:
$4.61 billion income FY26 x 0.25 = $1.1525 billion FCF vs. $941.5 million final FY (i.e., +22.4%)
Which means that its robust FCF progress will proceed. However even when we use the $4.4 billion product income determine from web page 25, the FCF estimate is at the least $1.1 billion. So, on common, we will count on at the least a $1.1263 billion FCF determine for FY 26, or +20% greater than final 12 months.
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