Overview
Palantir Technologies (NASDAQ: PLTR) shares have risen 57% over the past three months, compared with a 2.8% gain for the S&P 500, as accelerating artificial intelligence demand drives rapid revenue growth and investor expectations.
Goldman Sachs upgraded the PLTR stock from neutral to buy on October 8, 2026, following another quarter of exceptional growth in Palantir’s U.S. commercial business.
- Palantir shares gained 57% in three months, substantially outperforming the S&P 500, while Goldman Sachs upgraded the stock to buy on October 8, 2026.
- Q2 2026 revenue increased 93% to $1.935 bn, driven by 149% growth in U.S. commercial revenue. The company raised its full-year revenue guidance to $8.150-$8.158 bn.
- Palantir trades at 158.1 times trailing earnings, compared with 21.5 times for the S&P 500, leaving its valuation highly sensitive to future growth and profitability.
The company’s financial performance provides substantial evidence of accelerating demand. Second-quarter revenue increased 93% year over year to $1.935 bn, the highest growth rate Palantir has reported. U.S. commercial revenue rose 149%, while adjusted operating income reached $1.194 bn.
The central question for investors is whether this expansion can justify a valuation already pricing in years of substantial earnings growth.
Palantir shares trade at 158.1 times trailing 12-month earnings, compared with 21.5 times for the S&P 500. At those multiples, investors are paying more than seven times as much for each dollar of Palantir’s current earnings as they would for the broader index.
Assuming its share price remained unchanged, Palantir’s earnings per share would need to increase approximately 7.4 times for its price-to-earnings ratio to decline to the S&P 500’s current level. That comparison illustrates the scale of profit growth embedded in the stock’s valuation, although it does not account for potential changes in market multiples.
For existing shareholders, the 57% rally raises the question of whether to realize some gains or increase their positions. The answer depends heavily on whether Palantir can maintain its current growth trajectory.
Palantir’s 2026 revenue growth reaches 93%
Palantir reported second-quarter revenue of $1.935 bn, an increase of 93% from a year earlier and 19% from the preceding quarter.
The acceleration is particularly notable against its longer-term performance. Over the previous three years, Palantir’s revenue increased at an average annual rate of 46.3%, compared with 5.8% for the S&P 500. Its latest quarterly growth rate therefore substantially exceeds its historical average.
The U.S. market accounts for most of the expansion. Domestic revenue reached $1.573 bn in Q2, increasing 115% year over year and 23% sequentially. The United States now generates more than 81% of Palantir’s total revenue.
U.S. commercial revenue, which includes sales to businesses rather than government agencies, increased 149% year over year and 28% quarter over quarter to $764 mn.
Government customers also contributed substantially. U.S. government revenue rose 90% annually and 18% sequentially to $809 mn.
The figures show that Palantir’s expansion is supported by both commercial and government demand, although the commercial segment is growing considerably faster.
International commercial operations are advancing at a slower pace. Revenue from those customers increased 26% year over year during the quarter. Management also acknowledged weak growth in Europe in August 2026, highlighting the difference between U.S. adoption and performance in overseas markets.
Palantir signs $3.37 bn in new contract value
Palantir’s contract activity provides another indication of customer demand. The company closed 220 deals valued at $1 mn or more during the second quarter, including 98 worth at least $5 mn and 73 valued at $10 mn or more.
Total contract value reached $3.373 bn, representing a 49% year-over-year increase. U.S. commercial contracts accounted for a record $2.132 bn, up 153% from the corresponding period in 2025.
Palantir’s total remaining deal value stood at $13.1 bn at the end of the quarter, an increase of 83% year over year.
Within that total, U.S. commercial remaining deal value reached $6.238 bn, rising 124% annually and 27% from the preceding quarter.
These commitments provide visibility into contracted business, although remaining deal value should not be treated as revenue already recognized.
Discussion of the company’s performance, management set an ambitious objective of growing Palantir’s overall business at least as quickly as its U.S. commercial segment over the following 18 months. Management characterized the target as exceptionally demanding.
The objective would require sustained acceleration across the company’s operations, given the difference between overall revenue growth of 93% and U.S. commercial growth of 149% in the second quarter.
Palantir profitability improves as revenue accelerates
Revenue growth translated into substantial reported earnings and cash generation during Q2 2026.
Palantir recorded GAAP operating income of $912 mn, representing a 47% operating margin. Adjusted operating income reached $1.194 bn, equivalent to a 62% margin.
GAAP net income attributable to common stockholders totaled $1.062 bn, representing a 55% margin. Adjusted net income attributable to common stockholders was $1.047 bn.
Both GAAP and adjusted diluted earnings per share were $0.41. Adjusted EBITDA reached $1.203 bn, with a reported margin of 62%. Operating cash flow totaled $1.216 bn, equivalent to 63% of quarterly revenue. Adjusted free cash flow was $1.220 bn, also representing a 63% margin.
The company ended the period with $9.2 bn in cash, cash equivalents and short-term U.S. Treasury securities.
Palantir reported a Rule of 40 score of 155%, combining its 93% revenue growth rate with its 62% adjusted operating margin. The measure illustrates the combination of growth and profitability achieved during the quarter.
Alex Karp, Palantir’s co-founder and chief executive, attributed the results to demand for AI sovereignty and customers’ desire to maintain control over their operational data and decisions.
“Demand for AI sovereignty has now been unleashed. And Palantir is the only company that has demonstrated it can transform tokens into actual economic value,” Karp said.
He argued that customers should retain control over their competitive information rather than allowing it to become training data for future AI models.
“This quarter was otherworldly: our U.S. commercial revenue grew 149% year-over-year, our overall revenue grew 93% year-over-year, and our Rule of 40 score climbed to 155%,” Karp said, adding that the company’s position in sovereign AI made management optimistic about its prospects.
Palantir raises 2026 revenue guidance to $8.15 bn
Following its second-quarter results, Palantir increased its financial guidance for the full year. Management now expects 2026 revenue of $8.150 bn to $8.158 bn, representing approximately 82% annual growth.
U.S. commercial revenue is forecast to exceed $3.424 bn, implying growth of at least 134% year over year. The company also increased its profitability and cash flow expectations.
Adjusted operating income is projected at $4.889 bn to $4.897 bn for the full year, while adjusted free cash flow is expected to reach $4.5 bn to $4.7 bn.
Management continues to forecast positive GAAP operating income and net income in every quarter of 2026. For the third quarter, Palantir expects revenue between $2.160 bn and $2.164 bn, compared with the $1.935 bn recorded in Q2.
Adjusted operating income for the third quarter is projected at $1.292 bn to $1.296 bn. The upcoming quarterly report will provide another test of the company’s growth expectations. Revenue substantially above the projected range would indicate stronger sales performance than management anticipated. Results within the range would meet its forecast, whereas a figure below the lower boundary would represent a miss.
What could drive Palantir stock higher or lower?
Palantir’s valuation leaves relatively little room for a sustained slowdown in earnings growth.
The company’s dependence on U.S. customers is a central consideration. With more than 81% of revenue generated domestically, weaker demand among American commercial or government customers could materially affect its overall growth rate.
International performance presents a separate issue. Commercial revenue growth of 26% outside the United States is substantially below the 149% increase recorded in the U.S. commercial segment. Management’s acknowledgment of weak European growth indicates that expansion remains uneven across markets.
The share price has also demonstrated considerable sensitivity to broader market conditions.
During the inflation-driven market downturn in 2022, Palantir stock declined 64% from peak to trough, compared with a 24% fall in the S&P 500.
That historical decline does not establish how the stock would perform in another downturn, but it illustrates the potential volatility associated with the shares.
At 158.1 times trailing earnings, Palantir’s current valuation depends on expectations that its rapid revenue expansion will translate into much higher future profits.
Second-quarter results provide evidence of exceptional operating momentum, including 93% revenue growth, a 47% GAAP operating margin, substantial new contract activity and increased annual guidance.
The next test will be whether third-quarter revenue exceeds the $2.160 bn-$2.164 bn management forecast, and whether growth in the U.S. commercial business remains strong enough to support the expectations reflected in Palantir’s stock price.
