Security demand and cross-selling support strong growth, but the stock requires a much faster expansion or a persistently exceptional valuation. My twelve-month target allows for rising cash margins and still points to a Sell.
Key points
- 47% fiscal 2028 revenue growth is required at my chosen valuation and cash margin.
- $1.77 billion of fiscal 2026 employee-share costs qualifies the cash-generation story.
- $327.75 a share is my October 2027 target, allowing substantial operating progress.
The call
The market is too optimistic. At my cash margin and share count, today's price requires 47% revenue growth in fiscal 2028 at a 45-times cash-flow multiple. Alternatively, it requires 56 times my fiscal 2028 cash forecast. My fiscal 2027 revenue estimate is $14.15 billion, consistent with management's outlook.
FY26 cash generation after employee-share costs ($ millions)Source: September 10, 2026 10-K. Final bar is an economic proxy, not reported free cash flow.
Growth should remain strong, but acquisition-driven comparisons will become harder. I forecast 19% revenue growth in fiscal 2028, supported by contracted business and cross-selling. The large observability customer migration fades after the current quarter. Subsequent reports should distinguish repeatable demand from acquired growth, while hosting costs limit how quickly cash margins improve.
Valuation
| Driver | My estimate |
|---|
| Fiscal 2028 revenue | $16.80 billion |
| Fiscal 2028 unadjusted cash margin | 37.5% |
| Fiscal 2028 free cash flow | $6.30 billion |
| Fiscal 2028 diluted shares | 865 million |
| Equity value / annual free cash flow | 45 times |
| October 2027 target | $327.75 a share |
Free cash flow means operating cash less capital spending; my forecast excludes management's cash-cost addbacks but retains noncash employee compensation, with dilution reflected in shares. The multiple generously rewards recurring security demand and improving profitability, without adding cash separately to an equity valuation. My stronger-growth scenario reaches about $421 a share, versus about $217 under slower growth and a lower multiple, supporting Sell.
Faster FY28 revenue growth still needs a richer valuationAnalyst scenarios, October 8, 2026. FY28 cash margin 37.5%, 865 million shares, 45 times cash per share.
Risks
- AI demand could accelerate faster than forecast; watch broad-based contract growth after the large migration ends.
- Integration savings could lift cash margins sooner; watch cash conversion rather than adjusted earnings alone.
- Lower interest rates could sustain exceptional valuations; watch whether the multiple stays elevated despite slower growth.
What would change my mind
I would reconsider if fiscal 2027 results support fiscal 2028 revenue above $18 billion with an unadjusted cash margin of at least 40%.