Palantir Stock Soars as Blowout Q2 Earnings Silence the Bears

For years, Palantir Technologies (PLTR) has been the most controversial stock on Wall Street. Bears argued that the company’s valuation skyrocketed on hype rather than sustainable growth. Bulls, meanwhile, insisted that Palantir was building an AI business unlike any other software company. With its recent second quarter report, the argument appears to favor the bulls. Revenue surged at the fastest pace in company history, U.S. commercial demand continued to accelerate, profitability reached new highs, and management provided its most aggressive projection yet.

The numbers were so strong that the market rewarded the stock, which climbed 29.5% yesterday, despite falling 10% year-to-date (YTD). While bears seem to have run out of arguments, the focus has shifted to just how much runway Palantir still has ahead of it.

The Numbers Justify the Optimism

Palantir develops AI-powered software platforms, namely the Gotham, Foundry, and the Artificial Intelligence Platform (AIP.) These platforms help governments and businesses organize massive amounts of data, analyze it, and use AI to make faster, better operational decisions. Investors didn’t just reward Palantir for a single quarter. They rewarded a business that continues to execute well ahead of expectations while still predicting dramatic growth ahead. 

In the second quarter, revenue surged 93% year-over-year (YoY) to $1.9 billion. Notably, U.S. revenue climbed 115% to $1.573 billion, reflecting the continued strength of its largest market. Palantir also revealed that its biggest customers are spending more, with revenue from its top 20 customers up 67% over the past year. Furthermore, Palantir’s backlog is building in response to the surging demand. The company ended Q2 with $13.1 billion in total remaining deal value and remaining performance obligations of $4.9 billion. Net dollar retention reached 157%, showing that existing customers continue expanding their spending. 

A few quarters ago, Palantir’s government business dominated its story. However, now its commercial business momentum is equally impressive. Total commercial revenue grew 110% YoY to $945 million, while U.S. commercial revenue jumped 149% to $764 million. The company generated $2.33 billion in commercial TCV bookings in Q1, including $2.13 billion from U.S. commercial customers alone. But its government business isn’t standing still either. Government revenue increased 79% YoY to $990 million, led by 90% growth in U.S. government revenue and 42% growth in International government revenue. Total government TCV bookings reached $3.4 billion in the quarter.

Palantir’s bottom-line growth was as impressive as its top line. The company reported an adjusted earnings per share increase of 156% to $0.41. Meanwhile, adjusted gross margin stood at 86%. Operating cash flow totaled $1.21 billion, while adjusted free cash flow (FCF) came in at $1.22 billion. The company ended the quarter with $9.2 billion in cash, cash equivalents, and short-term U.S. Treasury securities, giving it substantial financial flexibility.

Palantir’s Bold Outlook Impressed Investors

More than the strong quarter, CEO Alex Karp’s bold predictions and plans for the future appear to have impressed investors. Karp believes businesses don't want to rely entirely on external AI models. Instead, they want AI systems based on their own data, which they can completely manage and trust.

Therefore, Palantir is expanding its partnership with Nvidia (NVDA) to help customers develop customized AI models that perform better for specific business tasks without giving up ownership of their data or intellectual property. For the full year, management expects an 82% YoY increase to around $8.15 billion, with operating income between $4.88 billion and $4.89 billion. The company also expects to generate $4.5 billion to $4.7 billion in adjusted FCF in 2026. Karp even made a bold prediction that he expects the business to grow at a rate equal to, if not greater than, the current pace of the U.S. commercial business over the next 18 months. Given that the U.S. commercial revenue just expanded 149% in Q2 and is expected to grow 134% for the full year, that is an extraordinarily ambitious target.

The PLTR Bears May Be Running Out of Arguments

For years it was assumed that Palantir’s lofty valuation reflected a future that the company may never reach. Although valuation still remains a concern as PLTR stock still trades at a lofty multiple of 79x forward earnings, which are estimated to increase by 110.4% to $1.58 per share in fiscal 2026. But after this quarter, investors can see why the market is willing to pay a premium. Analysts also expect earnings to increase further by 43% to $2.26 in fiscal 2027. Palantir’s Q2 proved that its business is growing fast enough to deserve serious attention.

On Wall Street, PLTR stock maintains an overall “Moderate Buy” rating. Of the 29 analysts covering PLTR stock, 21 rate it as a “Strong Buy,” six have a “Hold” rating, one analyst has a “Moderate Sell” rating, and one analyst has a "Strong Sell" rating. Based on the average price target of $188.85, analysts see PLTR climbing as much as 16% from current levels. The high price estimate of $255 suggests a potential upside of 58% over the next 12 months.