Palantir Delivers Another Blowout Quarter
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Palantir reported an outstanding quarter, with accelerating growth, expanding margins, and a record contract backlog. Management raised its full-year guidance, continuing its recent pattern of upward revisions. The shares are expected to open Tuesday’s session around 15% higher. Palantir remains on our Equity Top Picks List.
Palantir shares remain on our Equity Top pick List.
Quarterly Report
Palantir reported revenue of $1.935 billion in the second quarter, representing a 93% year-over-year increase. Expectations were approximately $1.80–1.81 billion, so the company exceeded the consensus by about $125 million. Adjusted EPS came in at $0.41, compared to expectations of $0.34–$0.35. Even as the company’s revenue continues to grow, the pace of growth is accelerating. In Q2 2025, growth was “only” 48%, now it is nearly double that.
Adjusted operating income rose to $1.2 billion, representing a 62% margin. Free cash flow is also roughly the same, meaning the company is generating cash at a staggering rate. U.S. commercial revenue (revenue from businesses) jumped 149% (year-over-year), and management now expects it to exceed $3.42 billion this year.
In the commercial division, both the value of new contracts and the number of clients have grown steadily. The Palantir Bootcamp sales model, meanwhile, can generate significant revenue very quickly. The key to this approach is that they begin the collaboration with a pilot project focused on a specific problem, which they can complete relatively quickly and whose impact is immediately apparent. These pilot projects can then lead to longer-term contracts worth several million dollars.
The retention rate for existing customers is also high. Rolling 12-month average revenue from the top 20 customers increased by 67% to $124 million per customer during the quarter. The total remaining contract value rose by 83% to $13.1 billion.
Revenue in the government segment jumped 79% to $990 million. The key product in this segment is Maven, a software platform for military use. It is an AI-powered reconnaissance and decision-support system that integrates many different military data sources into a single, real-time operational picture. It’s positive that growth is outstanding in both of the company’s segments, and we think it’s even better that the commercial division is performing more strongly.
Management is increasingly emphasizing that customers can use Palantir’s software while retaining control over their own data, workflows, and security policies, and that the system is model-neutral — meaning any LLM can be integrated into it. This is important because it does not favor any one major foundational model, and it also allows companies to keep their important and sensitive data in-house.
Given the strong quarterly results, it’s no surprise that management has raised its 2026 forecasts as well. It now expects revenue of around $8.15 billion (previously: $7.65 billion) and operating income of around $4.89 billion. In fact, this was the largest annual forecast increase in Palantir’s history.
As the latest figures show, the company is posting impressive results quarter after quarter, but this is accompanied by a very high valuation, which is why the stock hasn’t performed as well this year. In any case, the fundamentals remain strong, so the stock remains on our Equity Top Pick List.
Investment story
- Palantir offers a direct way to gain exposure to the AI momentum. Over the next four years, consensus expectations point to 30–40% average annual growth in both revenue and profits. The company operates with net margins above 40%, generates strong free cash flow, and holds a net cash position.
- If Palantir can retain its dominant position in the government sector while continuing to scale meaningfully in the commercial space — something it has demonstrated so far — elevated valuation multiples could persist for an extended period. In an optimistic scenario, rapid earnings growth could quickly compress valuation metrics even without a share price correction.
- Key risks: The primary risk remains valuation. The stock is priced at extremely high multiples, meaning that any shortfall versus growth expectations could trigger a sharp correction. In a broader risk-off environment, a 40–50% drawdown cannot be ruled out.
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