Citi maintains its bullishness on cloud stock Snowflake ahead of second-quarter earnings

Citi analyst Tyler Radke raised his price target on Snowflake (SNOW) and reiterated a 'buy' rating ahead of its upcoming F2Q earnings, citing strong uptake of the company's AI features, particularly Cortex, and positive momentum from its OpenAI partnership. This increased optimism, supported by positive channel checks and multi-product adoption, suggests a potential 28% upside, with Radke forecasting a 3-4% F2Q beat and a larger FY26 guidance raise due to accelerating AI and CRPO, though profitability may remain flat given AI innovation investments.

Analysis

Ahead of Snowflake's (SNOW) earnings report on August 27, Citigroup has raised its price target and reiterated a 'buy' rating, signaling strong confidence in the company's near-term trajectory. The analyst, Tyler Radke, projects a 28% potential upside, building on the stock's 26% year-to-date surge. This optimism is primarily fueled by accelerating momentum in Snowflake's artificial intelligence initiatives, particularly the Cortex suite, which has seen strong uptake in both usage and pipeline according to recent channel checks and feedback from the SNOW Summit. The analyst also highlights the company's partnership with OpenAI as a significant driver of pipeline strength. Based on these factors, Citi anticipates Snowflake will beat F2Q26 estimates by 3-4% and, more significantly, issue a full-year FY26 guidance raise that outpaces the quarterly beat, driven by ramping AI adoption and accelerating Current Remaining Performance Obligations (CRPO). However, profitability is expected to remain flat due to reinvestment in AI innovation, with Q3 guidance forecast to be around 25-26%.

Key Decisions for Investors

• Investors should view this analyst upgrade as a strong bullish signal, primarily centered on the monetization of Snowflake's AI products and accelerating growth metrics expected in the second half of the fiscal year.
• Pay close attention to the upcoming F2Q26 earnings call for confirmation of these trends, specifically focusing on a revenue beat in the 3-4% range, the growth rate of CRPO, and management's commentary on Cortex adoption.
• While the top-line outlook is positive, be mindful that profitability is expected to remain unchanged due to AI investments, meaning the market will likely prioritize revenue growth and forward guidance over near-term margin expansion.