Palantir's Stock Soars on AI-Driven Growth, Sparking Valuation Debate

Should You Sell Palantir Stock After Its Post-Earnings Pop? The Answer May Surprise You. | The Motley Fool

Palantir Technologies (PLTR 2.53%) stock impressed investors yet again with its latest quarterly results. Revenue growth accelerated and profit margins expanded all while the company signed larger and larger deals with customers. The stock is up 28% in the last month. It is up close to 600% in the last year. The software provider has produced phenomenal gains for shareholders and is now one of the most valuable companies in the world with a market cap surpassing $400 billion. But now, with this earnings pop behind us, is it finally time to sell your Palantir shares? Or are there more gains to be had for long-term shareholders? The answer is clear when you dig into the numbers. The reason for Palantir's stock price appreciation is a miraculous comeback in its growth. In 2023, the company's revenue growth had slowed to around 12% year over year, even though it was barely generating $2 billion in revenue. Selling analytics and monitoring software is not a limitless addressable market, but Palantir clearly had a lot more potential if it could execute. Then, the artificial intelligence (AI) revolution began. Palantir was perfectly preparing for the present moment with its AI-focused software, which has led to steady acceleration in revenue growth at greater scale. Last quarter, revenue grew 48% year over year and hit an annualized run rate of $4 billion, Profit margins have also shown steady progress, hitting 27% last quarter when the company was unprofitable just a few years ago. A turnaround such as this is why Palantir shares are up 600% in the last year. It has reaccelerated revenue growth and looks to be building huge momentum with contract wins at businesses and the United States government. Last quarter alone, it closed 42 deals worth $10 million or more. This should lead to strong future revenue growth in the next few years. After this recent run, Palantir now has a market cap of $425 billion. That makes it the 22nd most valuable company in the world by market capitalization. And yet, it has only hit a run rate of $4 billion in annual revenue. This puts Palantir's valuation at the extreme level, even for fast-growing software businesses. For context, one stock with a premium valuation in software is Shopify, and it has a price-to-sales ratio (P/S) of just over 20. Palantir's is 132. This gap -- where Palantir is valued at 5x or even more than a group of software stocks already with premium valuations -- should be front of mind for investors. Even though Palantir has fantastic profit margins that may grow even more in the coming years, there is only so much margin expansion you can achieve. Profits cannot be higher than revenue, and Palantir is valued at an extreme level of revenue at the moment. The stock's only path forward to meet these high expectations are many years of strong double-digit revenue growth close to the levels it is at today. I believe it is possible that Palantir can keep up its revenue growth of approximately 50% for the next few years. Its United States commercial revenue is growing at 93% year over year, which is propelling consolidated revenue to keep accelerating. However, eventually you run out of enterprises and government agencies to sell software to. Software budgets are not infinite, and growth is bound to slow down once the AI boom tempers out. This should be a warning sign for Palantir shareholders, because the stock may need a bunch of years of huge revenue growth to warrant buying the stock at its current market cap. Even if revenue grows by 10x over the next decade, the stock will still be trading at a premium price-to-sales ratio (P/S) of above 10, and that is assuming the stock price doesn't move for a decade. If you buy a stock, you want it to be likely that the share price will rise over a decade. Expectations are much too high on Palantir stock, and it is likely to greatly underperform the broad market indexes moving forward. It is time to sell, or at least trim, your Palantir position after this recent earnings pop.

Is Palantir a Buy, Sell, or Hold After Its Most Recent Earnings Report?

Palantir is hitting all-time highs and has a long runway of future growth. Palantir Technologies (PLTR 3.55%) just keeps steaming along. The company had another great earnings report for the third quarter, sending the stock higher again. The year's best-performing stock in the S&P 500 is up 128% just this year, and by an incredible 600% in the last 12 months. Before Palantir's earnings, I noted three of the most important metrics that investors should consider when evaluating the results -- revenue growth, customer growth and the company's backlog. In all three cases, Palantir managed to exceed expectations, which is why the stock is setting new all-time highs. Now that the dust has settled, it's time to take a fresh look at Palantir in the wake of its earnings report. Should investors still be bullish, or is it time to start taking profits? Or perhaps investors would do well to sit back and wait. Here's a peek behind the curtain of Palantir stock. Palantir's earnings dominance Palantir operates dominant artificial intelligence (AI) platforms that specialize in pulling information from multiple sources to allow users to make real-time decisions. Its Gotham platform is used by governments and militaries to tap into satellites and scour other sources of information to help commanders position their troops and achieve objectives. The company's work came to light when it was credited for helping the U.S. military track down 9/11 mastermind Osama bin Laden. Under the Trump administration, it's greatly expanding its work to include Homeland Security, the State Department, the Federal Aviation Administration, and the Centers for Disease Control and Prevention. Meanwhile, Palantir's Foundry platform is used by commercial customers to help manage a range of activities from hospital records to supply chains and reduce manufacturing costs. Both platforms operate in coordination with Palantir's Artificial Intelligence Platform (AIP), which allows users to type in detailed prompts to get recommendations and insights that are delivered through generative AI. When Palantir unveiled its AIP more than a year ago, its stock really took off. The momentum continued in the second quarter, when Palantir's quarterly revenue topped the $1 billion mark for the first time, up 48% from a year ago. Income was $269.3 million, up 27% from last year. Breaking it down further, Palantir saw U.S. commercial revenue jump 93% to reach $306 million and U.S. government revenue rise 53% to $426 million. The company's customer count also jumped, rising 43% from a year ago and 10% from the first quarter. Palantir closed 157 deals in the quarter valued at at least $1 million, and 42 that were valued at at least $10 million. In addition, Palantir has a long runway of additional growth. The company says it has $2.42 billion in total remaining performance obligations, up from $1.37 billion in the second quarter of last year and up from $1.9 billion in the first quarter. When I analyzed Palantir before its most recent earnings report, I said I would consider anything over $2.15 billion to be a strong number -- and Palantir blew that out of the water. So where do we go from here -- buy, sell, or hold? The argument to buy Simply put, Palantir is a world-changing company that has exploded to become one of the most consequential of our time. With a market cap of more than $400 billion now, Palantir is bigger than Home Depot and Procter & Gamble. At the time of this writing, it ranks as No. 23 in the world in size. With the U.S. government eager to expand Palantir's role and dozens of commercial clients lining up to take advantage of the company's unique abilities, I'm firmly convinced that it's just getting started. CEO Alex Karp has the same vision. In his most recent letter to shareholders, he boldly states: "With continued execution, and a focus on what matters and a near complete disinterest in what does not, we believe that Palantir will become the dominant software company of the future. And the market is now waking up to this reality." The argument to sell I'm a Palantir bull but recognize that the valuation of this stock is out of control. For instance, the company has a price-to-earnings ratio (P/E) of 777 and a forward price-to earnings ratio of 307. That's more than a nosebleed level that's overly inflated because Palantir is reinvesting a lot of its profits. But it would also be ridiculous for anyone to assume that the company will keep that same rate of growth. Instead of P/E, let's use the price-to-sales ratio (P/S) to forecast reasonable growth. Assume that Palantir generates 40% revenue growth in the next year -- a number that would actually be slowing from its current pace. With that growth, it would have annual revenue of roughly $4.4 billion. As the company has a forward price-to-sales valuation of 108, this would give it a projected market cap in a year of $471 billion -- which would give it roughly the same market cap as Netflix. That's fine growth, but the market isn't going to keep paying this multiple if the market cap upside is only 18% in the next year -- especially when you consider how dynamic its growth has been so far. PLTR Market Cap data by YCharts. Either the valuation begins to return to Earth or the stock remains overly inflated. But I can't think of a reasonable argument based on math instead of momentum for Palantir to sustain its current valuation. With the stock price up 600% in the last 12 months, I couldn't blame anyone for a little profit-taking here. The argument to hold This is a simple play -- sit back and wait for more information. If you're not day trading, then it's often wrong to overreact to the news of the day because timing the market is virtually impossible. You'll tend to lose out on opportunities and rack up way too many fees by buying and selling too much. As long as you're confident in the quality of the company, there's nothing wrong with emulating the master of buy-and-hold investing, Warren Buffett. The final call While the momentum is all for buying Palantir and the math says to sell, I'm bridging the middle and holding. I think that the opportunity surrounding Palantir is too valuable to discard, but I'm not eager to buy more of the stock at this valuation. I think that's the right play -- particularly if you have Palantir as part of a well-balanced portfolio. However, if the company is one of a few holdings or it makes up an overly large percentage of your overall holdings, then this is the ideal time to rebalance and reduce your overall exposure.

Palantir Stock Has Gone Parabolic. Time to Sell? | The Motley Fool

Palantir just delivered its first billion-dollar quarter and sent its stock to record highs. What should investors do? Data analytics company Palantir Technologies (PLTR 1.38%) has been on a tear recently, aided in part by yet another mind-boggling earnings report. In its second quarter, revenue growth surged, profit margin expanded, and guidance was given a big bump. The stock responded with a near-vertical move, rising about 7% in the trading day following the report and moving steadily higher in the days since. With shares now up more than 130% year to date and 930% since the beginning of last year, Palantir has reached a valuation that simply looks unsustainable. Yes, the business is firing on all cylinders. But the stock may now be too hot to touch. Going further, it may even be time for shareholders to take some profits. The artificial intelligence (AI)-focused data analytics specialist's second-quarter revenue jumped 48% year over year to just over $1 billion, marking Palantir's first-ever billion-dollar quarter. Adjusted earnings per share rose 78% to $0.16, beating analysts' consensus forecast for $0.14. U.S. government contracts grew 53% to $426 million, while U.S. commercial revenue soared 93%, reflecting explosive demand for its AI platforms. Palantir's remaining performance obligations, a measure of booked but not yet recognized revenue, also climbed sharply. The metric, which helps highlight continued demand for the platform, was up 77% year over year to $2.4 billion. Notably, this was a 27% sequential increase -- faster than the company's 14% quarter-to-quarter increase in revenue. Also worth noting, Palantir's net dollar retention reached nearly 128% in Q2, 400 basis points higher than last quarter, signaling strong expansion from existing customers. "This was a phenomenal quarter," said Palantir co-founder and CEO Alex Karp in the company's second-quarter earnings release. "We continue to see the astonishing impact of AI leverage." Overall, Karp cast the quarter as a breakthrough driven by AI tailwinds and strong government contracts, including a recently announced 10-year enterprise agreement with the Army, worth up to $10 billion in future spend. The Palantir CEO's optimism isn't just marketing talk. Contracts with major enterprises and government agencies show Palantir's AI-driven solutions are becoming mission-critical. With so much momentum, it wasn't surprising to see management raise its full-year guidance. The company now expects 2025 revenue to total $4.142 to $4.150 billion. In addition, Palantir said it now expects its full-year U.S. commercial revenue to surpass $1.3 billion, translating to a year-over-year growth rate of 85%. Importantly, management expects to achieve this growth while continuing to report net income each quarter of the year. But rapid growth has a way of attracting not just new customers, but also sky-high expectations. Here's the tension caused by the high stock price: Palantir now trades at more than 300 times forward earnings and about 127 times trailing-12-month sales. That's multiples higher than Nvidia's lofty valuation ratios and well beyond most other software companies. Such valuations leave almost no room for execution missteps. Palantir is indisputably delivering. Its AI platform's accelerating adoption, particularly in government and enterprise, underpins strong contract momentum and sticky customer relationships. But at these valuations, even minor stumbles could trigger sharp downside. For long-term holders, therefore, reducing exposure could make sense. Investors who choose to do this would take some chips off the table at a time in which they can lock in enormous gains -- and they could still benefit from their remaining shares if the company somehow continues to blow away expectations. For investors who have been on the sidelines, waiting for a pullback in the stock price is probably the best course of action. Buying a stock that trades at more than 300 times forward earnings estimates essentially leaves no room for error.

Meet the Monster Stock that Continues to Crush the Market | The Motley Fool

Palantir continues to defy gravity, but can it maintain that momentum? Palantir (PLTR 2.53%), the data mining and analytics firm named after the all-seeing orbs from The Lord of the Rings, has been one of the market's hottest growth stocks. It went public via a direct listing on Sept. 30, 2020, and began trading at $10. Today, it trades at nearly $180. During the same period, the S&P 500 rose by about 90%. Let's see why Palantir's stock outperformed the market by such a wide margin -- and if it still has more upside potential. Palantir operates two main platforms: Gotham, for its government customers, and Foundry, for its commercial customers. Both of these platforms gather data from disparate sources, analyze all of that information to spot trends, and help their clients make faster data-driven decisions. Most U.S. government agencies already use Gotham to aggregate and analyze data. The high switching costs keep those agencies locked in, while giving Palantir plenty of opportunities to secure new contracts. Meanwhile, Foundry is gaining many commercial customers -- especially in the U.S. -- who want to accumulate and organize their data for AI applications. It also provides tools that help those clients build their own AI applications. In the first half of 2025, Palantir generated 55% of its revenue from its government business and the remaining 45% from its commercial business. Here's how those two businesses fared over the past five and a half years. Data source: Palantir. YOY = Year-over-year. When Palantir went public, it claimed it could grow its revenue by at least 30% annually through 2025. But in 2022 and 2023, its growth decelerated as it struggled with the uneven timing of its government contracts and gained fewer commercial customers in a challenging macro environment. But over the past two years, Palantir's growth accelerated again. The intensifying geopolitical conflicts drove the U.S. and other countries to use Gotham to fortify their intelligence and military operations. Stable inflation, declining interest rates, and the rapid growth of the AI market also drove more companies to ramp up their spending on Foundry's services. For the full year, it expects its revenue to rise about 45% as it maintains that momentum. Palantir also turned profitable on a generally accepted accounting principles (GAAP) basis in 2023 and 2024 as economies of scale kicked in, it streamlined its spending, and it reined in its stock-based compensation. Those stable profits led to its inclusion in the S&P 500 last September and the Nasdaq-100 last December. It expects to stay profitable in every quarter of 2025, and analysts expect its EPS to jump 132% for the full year. Palantir enjoys an early mover's advantage in the government market, and it's leveraging that battle-hardened reputation to grow its commercial business. Those strengths should widen its moat against smaller AI companies like C3.ai and BigBear.ai, data aggregation companies like Databricks, and diversified tech giants like Salesforce and Microsoft. From 2024 to 2027, analysts expect Palantir's revenue and EPS to grow at a CAGR of 37% and 63%, respectively. However, a lot of that growth trajectory is already baked into its current valuations. It already trades at 298 times forward earnings and 74 times next year's sales -- so it could be cut in half and still be considered expensive relative to its growth potential. That might be why its insiders sold nearly 60% as many shares as they bought over the past 12 months. Palantir's business is growing at a healthy rate, but investors shouldn't pay the wrong price for the right stock. Its valuations are hitting meme stock levels, and it could underperform the market in the future if it faces any unexpected macro, competitive, or regulatory headwinds.

Think Palantir Stock Is Too Expensive? Here Are 10 Billion Reasons to Reconsider. | The Motley Fool

Palantir's valuation is a major stumbling block for bears, but there are reasons to be bullish. The advent of artificial intelligence (AI) in late 2022 marked a paradigm shift in technology. These next-generation algorithms can streamline tasks like never before, create original content, and increase productivity -- saving time and money in the process. Most experts believe it's still early days for the adoption of the technology, but its impact is already being felt across a broad cross-section of processes. One of the primary beneficiaries of these vast secular tailwinds is Palantir Technologies (PLTR 4.18%). The company boasts more than two decades of expertise in data analytics and AI, and quickly developed a cutting-edge generative AI tool that could soon become the company's principal breadwinner. Palantir's valuation represents a significant obstacle for some investors, but recent developments help illustrate why the stock isn't nearly as expensive as it might seem. Before we address the elephant in the room, it's worth taking a moment to understand how Palantir fits into the expanding AI ecosystem before addressing why the stock's multiple has become so divisive. Palantir recognized the vast potential of AI and established an early foothold. Thanks to its decades of expertise, the company quickly developed its Artificial Intelligence Platform (AIP). The system consolidates information from various software systems for analysis, helping government and business leaders to make data-driven decisions. The biggest hurdle to adopting Palantir's software is the lack of expertise and experience among decision-makers necessary to make an informed choice. To that end, Palantir offered a novel solution in the form of intensive hands-on-keyboard sessions dubbed "boot camps," which last from one to five days. Developers and executives are partnered with Palantir engineers to familiarize themselves with AIP while creating solutions to their real-world business problems. By providing them with the training and experience they need to address critical business issues, Palantir demonstrates the value of its system and is able to close a growing number of seven-figure deals within just days or weeks after hosting a session. For example, in the second quarter, the number of deals worth $1 million or more doubled, while deals worth $5 million or more increased 5x. Even bears acknowledge the success of Palantir's strategy. The company reported its second-quarter results after the market close on Monday, and its performance was laudable. Revenue of $1 billion climbed 48% year over year and 14% sequentially. This fueled adjusted earnings per share (EPS) of $0.16, which surged 78%. To put those results in context, analysts' consensus estimates were calling for revenue of $939 million and adjusted EPS of $0.14, so Palantir blew the doors off expectations. Those numbers are impressive in their own right, but the devil's in the details. Palantir's U.S. commercial segment, which includes AIP, grew 93% year over year and 20% quarter over quarter, now accounting for nearly 31% of all sales. Furthermore, the segment's customer count grew 64%, and the remaining deal value -- or contractually obligated sales not yet included in revenue -- soared 145%. The company's accelerating results have driven a blistering run for the stock, which is up 549% over the past year (as of market close on Monday) and has increased more than 1,590% since its IPO in late 2020. The meteoric rise in its stock price has led to a commensurate ballooning of its valuation. Palantir is currently selling for 694 times earnings and 128 times sales, so the stock isn't for the faint of heart. Yet these results and another recent development help illustrate why some investors are willing to pony up for Palantir stock, despite its lofty price tag. The excitement surrounding generative AI often overshadows Palantir's legacy business of providing AI solutions for the U.S. government and its allies. But the company just scored a major win in its government segment. Late last week, Palantir signed a major contract with the U.S. Army, worth as much as $10 billion over the next decade, the company's largest contract to date. The agreement "establishes a comprehensive framework for the Army's future software and data needs," according to the press release. Furthermore, the deal aggregates 75 contracts into a single enterprise deal, which provides purchasing flexibility, "while removing contract and reseller pass-through fees." Perhaps more importantly, it accelerates (emphasis mine), "the delivery of proven commercial software to warfighters." This announcement comes just weeks after Palantir's Maven Smart System contract with the U.S. Army was expanded to a total project value of $1.3 billion, a new milestone for the company. Earlier this year, Palantir Technologies stock took a hit when U.S. Secretary of Defense Pete Hegseth ordered the Defense Department to cut existing budgets by 8% each year over the next five years. Investors feared these cuts would eventually trickle down to Palantir. However, as this contract illustrates, Palantir's proven AI solutions continue to be in high demand. There's no denying the stock's valuation is pricey, but enterprises and businesses are lining up to avail themselves of Palantir's expertise. The accelerating demand suggests Palantir could continue to generate double-digit growth for much of the next decade, according to Wedbush analyst Dan Ives. He further posits that Palantir's market cap, which stood at $378 billion on Monday, will increase by more than 164% to $1 trillion over the next two to three years -- despite the stock's frothy valuation. Ark Investment Management CEO Cathie Wood goes even further: "CEO Alex Karp believes that [Palantir] will become the largest pure-play enterprise AI software company in the world. I believe him." Palantir shareholders who have held through the turbulence have already been richly rewarded. For those looking five to 10 years into the future, the runway ahead is long.

The Faces of the Artificial Intelligence (AI) Revolution -- Nvidia and Palantir -- Can Plunge 42% and 74%, According to Select Wall Street Analysts | The Motley Fool

Though rare, dissenting opinions do exist when it comes to the most influential businesses in the AI arena. Roughly three decades ago, the advent and proliferation of the internet changed the growth arc for corporate America. Since this transformational event, investors have been waiting for the next true technological leap forward to emerge. The rise of artificial intelligence (AI) looks to be the answer. The capacity for software and systems empowered with AI solutions to make split-second decisions without human intervention is a potential game-changer for most industries around the globe. It's the reason PwC pegged the global addressable market for AI at a staggering $15.7 trillion by 2030 in Sizing the Prize. But as is the case with all next-big-thing innovations, this optimism isn't universal. Although an overwhelming percentage of Wall Street analysts have buy ratings and lofty price targets attached to the faces of the AI revolution -- Nvidia (NVDA -1.04%) and Palantir Technologies (PLTR 7.64%) -- there are exceptions. Based on reports and issued price targets from two select Wall Street analysts, these foundational pieces to the evolution of artificial intelligence can plummet 42% and 74%, respectively, over the coming year. Arguably no AI stock is more loved by Wall Street than Nvidia. Its graphics processing units (GPUs) hold the bulk of AI-data center market share and act as the brains powering split-second decision-making, generative AI solutions, and the training of large language models. Out of the 66 analysts who've issued a buy-, hold-, or sell-equivalent rating on Nvidia, 59 rate its stock a buy. What keeps Nvidia stock from being universally loved is analyst Jay Goldberg of Seaport Global. Goldberg is the lone Wall Street analyst to have a sell rating on Nvidia, with a price target of $100. If Goldberg's pessimistic prognostication was to come to fruition, the largest publicly traded company would tumble 42%. One of Goldberg's top criticism's of Nvidia is something I've been beating the drum on for the last year: internal competition. Though external competitors are ramping up their production of AI-GPUs, Nvidia's top threat may very well come from its own top customers by net sales. Most members of the "Magnificent Seven," which happen to be some of Nvidia's top clients, are developing AI chips to use in their data centers. Even though these chips can't stand up to Nvidia's GPUs on a compute basis, they're considerably cheaper and not backlogged. In other words, they're going to minimize the AI-GPU scarcity that's helped drive Nvidia's pricing power and gross margin higher. Goldberg is also skeptical of the sustainability of the AI spending cycle. Nvidia CEO Jensen Huang isn't sparing any expense when it comes to sustaining his company's competitive edge. He aims to bring a new advanced AI chip to market annually, with Blackwell Ultra being the next in line to reach clients. While newer and faster chips should, on paper, help Nvidia support its premium pricing, it could also quickly depreciate prior-generation AI chips, such as the Hopper (H100). If previous generation AI-GPUs rapidly depreciate, it may delay upgrade cycles and/or irritate key customers. The other consideration here is that every next-big-thing technology since (and including) the proliferation of the internet has endured a bubble-bursting event early in its existence. Though it's impossible to predict when the music will stop since bubbles are typically driven by emotions, historical precedent doesn't lie. Investors consistently overestimate the adoption and utility of game-changing technologies. If an artificial intelligence bubble was to form and burst, there's not an AI stock that would be more directly impacted than Nvidia. But on a comparative basis, the projected downside for AI-data mining specialist Palantir Technologies over the next year is even more pronounced. According to longtime Palantir bear Rishi Jaluria of RBC Capital Markets, Palantir stock is headed to $40, which would represent a 74% pullback from where shares of the company closed on August 1. It's worth noting that Jaluria previously had an $11 target on Palantir entering 2025. Palantir stock has rallied more than 2,300% since the start of 2023 due to its shift to recurring profitability, as well as its irreplaceability. Though Palantir's enterprise-focused Foundry platform has some small-scale competition, neither Foundry nor its government-driven Gotham platform, which assists with military mission planning and execution, have large-scale challengers. This has led to consistent operating cash flow and sales growth of 25% or greater on an annual basis. Jaluria's displeasure with Palantir boils down to two factors. First, RBC Capital's software analyst is skeptical of Foundry's sales momentum. In a note released prior to Palantir's first-quarter operating results being revealed, Jaluria expressed his concerns that Foundry's rapidly rising margins were the result of one-off deals. Given the level of personalization needed of Foundry to satisfy its clients needs, it's not yet clear if this is a rapidly scalable segment. But make no mistake about it, the biggest problem with Palantir, in the eyes of Rishi Jaluria, is its valuation. As of the closing bell on Aug. 1, Palantir was tipping the scales at a price-to-sales (P/S) ratio of 123. To offer some idea of how far outside of historical norms this is, industry-leading companies on the cutting-edge of the dot-com bubble topped out at P/S ratios of roughly 30 to 40. No megacap company has ever been able to sustain a P/S ratio above 30, let alone four times that amount. Something else that should be taken into consideration is Gotham's narrow pool of potential clients. An AI- and machine learning-driven platform that assists with data collection and military mission planning isn't something that China, Russia, or dozens of other countries will be granted access to. In fact, only America and its immediate allies are potential buyers of these solutions. This places a genuine ceiling on Gotham's growth potential, which isn't ideal for a stock trading at a nosebleed valuation.

Palantir CEO Alex Karp Just Delivered Incredible News for Nvidia Stock Investors | The Motley Fool

The artificial intelligence (AI) and data mining specialist just provided the clearest evidence yet that the AI revolution is gaining steam. The past few years have been something of a blur for Nvidia (NVDA -1.04%). The company pioneered the graphics processing units (GPUs) that ushered in the artificial intelligence (AI) revolution. The resulting surge in sales and profits catapulted Nvidia to a $4 trillion market cap, the first company to achieve such a distinction. Yet some investors are concerned that the hype has outpaced the innovation, and the AI gravy train will inevitably slow. As such, many are looking for signs that businesses are continuing to adopt AI tools and integrate these next-generation algorithms into their operations. Palantir Technologies (PLTR 7.64%) just delivered the clearest evidence yet that the adoption of AI has reached a tipping point. To say that Palantir's results beat expectations may be an understatement. For the second quarter, revenue of $1 billion surged 48% year over year and 14% quarter over quarter. This fueled adjusted earnings per share (EPS) of $0.16, which soared 78%. For context, analysts' consensus estimates called for revenue of $939 million and adjusted EPS of $0.14, so Palantir cleared the already high bar investors had set. The headline numbers aside, the star of the show was Palantir's U.S. commercial segment, which includes the company's flagship Artificial Intelligence Platform (AIP). Revenue for the segment accelerated for the eighth successive quarter to $306 million, up 93% year over year and 20% sequentially. At the same time, the segment's customer count climbed 64%, as new businesses flock to AIP. This helped drive the segment's total contract value to $843 million, soaring an impressive 222%. It's worth noting that not all the benefits will show up in the current quarter, but rather, the company is setting the stage for future growth. Palantir's remaining performance obligation (RPO), which represents contractually obligated revenue that hasn't yet hit sales, surged 77% to $2.42 billion. This provides insight into future growth, and the future looks bright. Beyond the good news for Palantir investors, the results have much more to say about what's happening across the AI landscape. Nvidia CEO Jensen Huang recently predicted that data center spending to support AI would soar 300% to more than $1 trillion by 2028. Recent revelations by big tech seem to support that view. Each of the "big three" cloud infrastructure providers has revealed plans in recent weeks to increase their 2025 capital expenditures (capex) to support the growing demand for AI among their customers. This generally translates to revenue growth for Nvidia, as its GPUs are the gold standard for AI processing. More broadly, however, the adoption of AI is moving downstream, as evidenced by Palantir's accelerating results. In order for enterprise businesses to implement AI internally, they will need the necessary infrastructure (read: AI-capable chips) to power those systems, which also bodes well for Nvidia. Naysayers continue to suggest the implementation of AI is slowing, despite significant evidence to the contrary. The bottom line is that the adoption of AI continues at a healthy clip. Nvidia holds a dominant position in the data center GPU market, with a 92% share, according to IoT Analytics. Yet as AI moves beyond the data center, Nvidia stands to benefit from the further proliferation of AI, as its processors are table stakes for both the training and inference of AI models. The AI revolution has fueled meteoric gains for Nvidia since the advent of AI at the start of 2023, as the stock has soared 1,120% (as of this writing). The stock is currently trading for 31 times next year's expected earnings, and while some might call that frothy, I would argue that it's a reasonable price to pay for a company expected to grow revenue by 54% this fiscal year. Nvidia has established itself as the AI chip leader, and despite the stock's epic run, the evidence suggests there's likely more to come.

Is Palantir Stock a Buy Now? | The Motley Fool

Palantir stock popped once again following its latest quarterly report, and its growing revenue backlog points toward better times. Palantir Technologies (PLTR 2.53%) stock delivered astronomical gains of 600% to investors in the past year, and it looks like the artificial intelligence (AI) software specialist could keep marching higher following the release of its latest quarterly report. Palantir released its second-quarter results on Aug. 4. Soaring demand for the company's Artificial Intelligence Platform (AIP) allowed it to beat Wall Street's expectations, and it also raised its guidance for the full year. However, investors may now be wondering if it makes sense to buy Palantir stock following the massive gains it has clocked in the past year, especially considering the mind-boggling valuation it is trading at. Let's see if Palantir has enough fuel in the tank to justify its expensive valuation and deliver more gains to investors. Palantir reported a 48% year-over-year increase in revenue in Q2 to just over $1 billion. This was the company's first ever billion-dollar quarter in terms of revenue. It is worth noting that Palantir reported a 27% year-over-year increase in revenue in the same quarter last year, meaning that its growth accelerated impressively in the previous quarter. Palantir management credits its improving growth trajectory to the rapidly improving demand for AIP, both from existing and new customers. Palantir's AIP is being deployed in multiple industries ranging from healthcare to automotive to telecom to banking, among others. This platform allows customers to integrate generative AI into their operations to boost productivity, reduce redundancy, and improve operational efficiency, all of which help them achieve substantial cost savings. As a result, Palantir says that it is witnessing "new starts with higher ambition, and existing customers expand their work at a faster rate." On the other hand, the company's government-related revenue also jumped an impressive 49% year over year. The company's AI-focused software capabilities are in solid demand from government customers, as evident from the decade-long $10 billion contract it signed last week with the U.S. Army. The terrific demand for Palantir's AI software solutions in both the commercial and federal segments is setting the company up for stronger growth in the long run by helping it build a robust revenue pipeline. After all, the company signed a record $2.3 billion worth of new contracts last quarter. Palantir's total contract value jumped a phenomenal 140% year over year, which was nearly triple the pace at which its top line expanded. This outstanding jump in Palantir's contract value last quarter pushed up the company's remaining deal value (RDV) by 65% from the year-ago period to $7.1 billion. With RDV referring to the total value of Palantir's unfulfilled contracts at the end of a quarter, it can be safely said that the company is sitting on a solid backlog that should allow it to grow at an even better rate in the future. Additionally, investors should note that the contract expansions that Palantir is signing with customers are having a positive impact on its margins. Its adjusted operating income margin jumped by nine percentage points from the year-ago period to 46%. It is easy to see why that's happening, as Palantir isn't having to spend more money on getting new business from existing customers. Considering that the company continues to add new customers at a nice clip -- its customer count increased by 43% in the previous quarter -- there is scope for further improvement in its margins once new customer accounts start expanding the usage of Palantir's solutions. Palantir reported a 78% year-over-year increase in adjusted earnings last quarter to $0.16 per share. The company's adjusted operating income guidance of $495 million for Q3 would translate into a 79% jump from the year-ago period, indicating it is well-placed to sustain its outstanding earnings growth rate. Finally, when we consider the long-term opportunity available in the AI software platforms market that Palantir is serving, the company seems capable enough to justify its expensive valuation. With a price-to-earnings ratio of 700, investors will have to pay a massive premium if they want to buy into Palantir's growth story right now. Of course, the forward earnings multiple of 285 is significantly lower on account of the healthy earnings growth that the company is witnessing, but even that's quite expensive. However, with the global AI software market expected to generate a whopping $440 billion in annual revenue in 2029, Palantir seems to be positioned at the beginning of a remarkable growth curve. As the demand for its AIP grows and it wins more business from existing customers, the company should be able to keep growing its earnings at eye-popping rates. Palantir's growth exceeds the 28% annual growth rate the AI software market is projected to clock in the next five years, indicating that it is cornering a bigger share of the $440 billion revenue opportunity on offer. So, Palantir can become a much bigger company in the long run, which is why investors may consider looking past its valuation at its remarkable growth could be rewarded with more upside on the stock market.

Palantir's AI Momentum Continues. Can It Keep Going, or Is It Too Late to Buy the Stock?

With high valuation comes high expectations, but Palantir Technologies (PLTR 2.53%) recently once again showed why it's one of the preeminent artificial intelligence (AI) growth stocks in the world. The stock jumped on the back of its strong second-quarter results, reported Aug. 4, and is up 575% over the 12 months ended Aug. 6. With such a strong performance, investors may be wondering if the momentum can continue, or if it is too late to buy the stock. Let's take a closer look at its Q2 results and prospects to find out. Revenue growth keeps accelerating For the eighth straight quarter, Palantir saw its quarterly revenue growth accelerate. During this period,year-over-year growth went from 13% in 2023's Q2 to 48% last quarter. Meanwhile, its Q2 revenue of $1 billion easily topped management's forecast of $934 million to $938 million. Data source: Palantir. Palantir's growth continues to be led by U.S. commercial customers adopting its Artificial Intelligence Platform (AIP). The company once again credited AIP's ontology, saying it is "pure understanding," and that without it, large language models (LLMs) cannot actually work in the real world The company said it is seeing new commercial customers now begin using AIP with higher initial ambitions, while existing customers are starting to expand more quickly. It once again highlighted various use cases, from Fannie Mae using AIP to uncover mortgage fraud to automotive seating and electrical system company Lear using its platform for various tasks, such as proactively managing its tariff exposure, automating administrative workflows, and dynamically balancing its manufacturing lines. As a result, U.S. commercial revenue surged 93% to $306 million in the quarter. Meanwhile, its U.S. commercial remaining deal value -- which refers to revenue it will recognize in the future from contracts already signed -- soared 145% to $2.79 billion. U.S. commercial customer count climbed 64% year over year, or 12% sequentially, to 485. On the government side of its business, revenue jumped 49% year over year to $553 million. U.S. government revenue soared 53% to $426 million. The company said it was winning business across civil, intel, and defense contracts. It highlighted a recent $10 billion, 10-year contract with the U.S. Army that consolidated 75 contracts into one. International government revenue, meanwhile, grew 37% to $127 million, and it had its highest-ever bookings quarter in the segment. International commercial customers remain Palantir's one weak spot, with revenue down 3% to $144 million. Net dollar retention -- which measures revenue growth from existing customers that have been with the company for more than a year -- was 128%. A number above 100% indicates expansion. This metric was up from 124% last quarter, as customers rapidly expand their use of AIP. Adjusted earnings per share (EPS) rose from $0.09 to $0.16 year over year. That was ahead of the $0.14 analyst EPS consensus compiled by LSEG. Looking ahead, the company guided for Q3 revenue of between $1.083 billion and $1.087 billion, representing growth of nearly 50% at the midpoint. It also raised its full-year revenue guidance, taking it from a range of $3.890 billion to $3.902 billion to a new range of $4.142 billion to $4.150 billion, representing 45% growth. Is the stock still a buy? Palantir's stock is not cheap. It trades at a forward price-to-sales (P/S) ratio of over 110 times the 2025 analyst estimates and more than 85 times the 2026 estimates. In fact, if its stock price got cut in half, the stock's valuation still wouldn't exactly be in the bargain bin. However, the company's quarterly revenue growth has accelerated from 27% a year ago to 48%, and it looks like it could grow its revenue by more than 50% in Q3. That's an incredible acceleration and speaks volumes about the company's technology. AIP can be used across such a wide breadth of industries to help solve very different problems. As Palantir establishes AIP as the AI operating system needed to bring AI to the real world, the upside is enormous, and the company has the opportunity to one day grow into one of the largest companies in the world. Given its valuation, Palantir doesn't have a lot of room for error, but it's not a stock I'd bet against over the long term. Expect the momentum to continue.

Palantir's blockbuster results sparks stock surge

Concerns were raging earlier this year that the artificial intelligence revolution was overhyped and AI stocks were due for a reckoning. It certainly felt like that were true this spring, when stocks got battered amid worries over peak AI spending and growing fear that the US economy was destined for recession. The risk-off environment led to a 24% drop in the technology-laden Nasdaq, and even bigger losses for individual stocks like Palantir Technologies, which tumbled 47% from its February peak to April's low. Don't miss the move: Subscribe to TheStreet's free daily newsletter Those concerns, however, have yet to materialize, and stocks, including Palantir, have produced substantial returns since April 8. The Nasdaq has rallied nearly 40% and Palantir, which is increasingly being viewed as an AI lynchpin, has seen its stock price more than double. The reality is that while concerns remain, there's little to suggest that companies are tapping their brakes on AI investments, and Palantir's latest quarterly results and guidance suggest spending strength will continue to prop up its business this year. Palantir goes from defense dynamo to AI kingpin The first wave of AI development centered on large language models, or chatbots, that could digest huge data sets and parse data based on user questions, including OpenAI's ChatGPT, Anthropic's Claude, Perplexity, and Google's Gemini. The spending on network infrastructure to support creating those chatbots was enormous, with hundreds of billions flowing out of enterprises and cloud service providers, including hyperscalers, to buy semiconductor chips from Nvidia and servers from Super Micro and Dell. While that spending is likely to continue, R&D is increasingly shifting to the second wave of AI -- solutions like agentic AI that can be used to assist and in some cases replace workers across industries. Developing those AI apps, however, isn't easy, especially since it requires breaking down data silos to find solutions securely. To do that, companies need help, and increasingly, they're turning to Palantir's Artificial Intelligence Platform. Palantir's (PLTR) roots stretch back to the early 2000s, when the Peter-Thiel founded company was tasked with securing data for the Defense Department. It still does a ton of work for the government, but recently, its seen explosive demand for AIP within companies using Palantir's Foundry platform. As a result, Palantir's sales and earnings are surging. Palantir delivers breakneck growth in the second quarter The company's second quarter earnings results show solid and growing demand for its service. Palantir's revenue jumped 48% year-over-year to $1 billion, $61 million better than Wall Street was expecting. As a result, earnings per share (EPS) increased to 16 cents per share, 2 cents higher than analysts forecast, and up 78% from one year ago thanks to improving profit margins. Government deals contributed to the revenue beat, but the real shining star during the quarter was demand from corporations. US sales were up 68% from last year, reaching $733 million. US government revenue rose 53% to $426 million, while commercial revenue surged 93% to $306 million. "It's a blowout across the board. I mean, look, that's why they're the Messi of AI, right? I mean, it just speaks to, this is transformational, the type of growth they're seeing," said Wedbush Securities influential technology analyst Dan Ives on Yahoo!Finance. "I've covered tech 25 years. This is unprecedented territory. It speaks to our view. It's a trillion dollar market cap in the next two to three years." The company closed contracts worth a record $2.27 billion, including commercial deals worth $843 million, up 222% from one year ago. Net income of $327 million helped its cash and investment securities stockpile grow to above $6 billion from about 5.2 billion coming into the year. That's a lot of financial flexibility, especially given that the company is debt free. The growth rate of our business has accelerated radically, after years of investment on our part and derision by some," said CEO Alex Karp. "The skeptics are admittedly fewer now, having been defanged and bent into a kind of submission. Yet we see no reason to pause, to relent, here." Palantir guidance outpaces Wall Street forecasts The company's CEO, Alex Karp, expects the good times to not only continue but accelerate. Palantir raised its full year revenue guidance to between $4.142 billion and $4.15 billion. Consensus analyst forecasts were targeting $3.9 billion. For a startup, even one only a thousandth of our size, this growth rate would be striking," said Karp. "For a business of our scale, however, it is, we continue to believe, nearly without precedent or comparison." Palantir expects commercial deals to continue to be the big driver, guiding for US commercial revenue of $1.3 billion, up at least 85%. Palantir is also targeting adjusted income from operations of $1.912 billion to $1.92 billion and it raised its adjusted free cash flow guidance to between $1.8 billion to $2 billion. Overall, it expects to remain profitable throughout 2025. Currently, Wall Street consensus targets full year EPS of 58 cents, up from 55 cents ninety days ago. It wouldn't be surprising to see those earnings estimates climb more in the coming days following the updated guidance. Palantir has a high bar to clear given its valuation Following the second-quarter results, Palantir's shares are up 4.6% to $168, a new all-time high. That move isn't going to let those concerned about the company's valuation sleep any better. Palantir was already trading with a forward price to earnings ratio (a key valuation measure) of 276, making it among one of priciest stocks out there. For comparison, the S&P 500's forward P/E is 22.4. Technology stocks often command higher than normal valuations, but even the price to sales ratio is arguably stretched, given shares are trading at about 123 times sales. Given that backdrop, Palantir is arguably priced to perfection, so it will need to continue to put up similarly eye-popping growth from here to keep investors happy. Todd Campbell owns Palantir shares. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc. This story was originally published August 4, 2025 at 9:27 PM.