Snowflake Inc. (SNOW) stock spiked after the company reported strong revenue growth on August 27 for the Q2 FY26 period, ending July 27. The stock is up +19% in the past two days.
SNOW closed at $238.66, up from $200.39 on Aug. 27 before the results were released. My target price is now $337.47, or +41.4% higher. This article will show why.
Management says revenue will be 27% higher YoY, along with a 25% adjusted free cash flow (FCF) margin. What’s key here is that management forecasted its FCF margin for the year, a projection that almost no company does.
That shows strong confidence in its recurring free cash flow (FCF).
It also allows us to project a target price for SNOW stock that is over 44% higher, even after its recent run-up. Here’s how that works out.
Snowflake, a Bozeman, Montana-based company, provides data analysis and data cloud management products. It has four product lines: data engineering, analytics, AI (artificial intelligence), and applications/collaboration.
If your business needs to analyze a massive amount of data queries on datasets and LLM (large language models) or anything close to that, Snowflake can probably help. Essentially, its growth is being fueled by a convergence of data cloud growth and the need for software to analyze the data, including AI data.
For example, last quarter Snowflake’s revenue was up +31.8% year-over-year (Y/Y) to $1.145 billion. Moreover, management projects its FY 2026 revenue (ending Jan. 31, 2026), will rise at least 27% (i.e., product revenue, not including professional services).
Based on this, analysts now estimate that its FY 2026 revenue will be $4.61 billion. Next year, they forecast $5.69 billion, or +23.4% more.
But here is the key point. Management now estimates its FCF margin will be 25% for FY 2026. (Again, almost no company ever projects its FCF margin). This can be seen on page 25 of its Q2 deck (see below):
As a result, we can estimate that its FCF will be over 22% higher than last year:
$4.61 billion revenue FY26 x 0.25 = $1.1525 billion FCF vs. $941.5 million last FY (i.e., +22.4%)
This means that its strong FCF growth will continue. But even if we use the $4.4 billion product revenue figure from page 25, the FCF estimate is at least $1.1 billion. So, on average, we can expect at least a $1.1263 billion FCF figure for FY 26, or +20% higher than last year.
