Palantir’s Pentagon Hackathon and Record Earnings Can’t Bridge the Valuation Gap

Palantir posts 85% revenue surge and raises guidance, but valuation at 154x earnings and AI competition fears keep stock near 52-week lows.

The disconnect at Palantir has rarely been starker. The data analytics firm is embedding itself deeper into the US military’s digital backbone, has just posted a quarter that shattered expectations, and yet its stock is trading roughly 37 percent below its 52-week high. The market is looking at the same numbers as the analysts and seeing two entirely different stories.

Since May 6, Palantir has been participating in the US Army’s “Right to Integrate” hackathon in Colorado, a program designed to make weapons systems and software communicate seamlessly. The company is working alongside defense heavyweights Boeing and Lockheed Martin, with open interfaces now effectively serving as a ticket to future military contracts. More than 20,000 developers within the Department of Defense already use Palantir’s platforms, including the Gotham system that analyzes targeting data in active conflict zones. This new initiative ties those tools even deeper into military infrastructure.

The financial results from the first quarter give the bulls plenty of ammunition. Revenue surged 85 percent to $1.63 billion, handily beating analyst estimates. Gross profit nearly doubled to $1.42 billion, while operating income exploded more than 300 percent higher to $754 million. Net income nearly quadrupled to roughly $870 million. Management raised its full-year 2026 guidance to between $7.65 billion and $7.66 billion in revenue — about 71 percent above last year and well ahead of the consensus — while forecasting a billion-dollar free cash flow stream and a gross margin of 84 percent.

Wall Street’s response has been anything but uniform. Argus Research upgraded the stock to “Buy” with a $190 price target, calling the recent pullback an overreaction to a stellar report. Citigroup reaffirmed its “Buy” rating and lifted its target to $225. Bank of America stands pat at “Buy” with a $255 target. Among the 30 analysts covering Palantir, 17 rate it a Buy, 12 say Hold, and only one recommends selling.

That lone seller is Jefferies’ Brent Thill, who maintains a $70 price target and an Underperform rating. His argument isn’t that the business is weak — it’s that the valuation demands a growth trajectory that even Palantir may struggle to sustain. Eleven consecutive quarters of accelerating growth are impressive, he concedes, but they also make the comparison base increasingly difficult. HSBC took a middle path, downgrading the stock from “Buy” to “Hold” and slashing its target from $205 to $151. Analyst Stephen Bersey warned that competition from OpenAI and Anthropic is eroding Palantir’s once-unique model of deploying engineers ahead of demand, as new AI frameworks lower the barriers to entry.

The real battleground is valuation. Palantir trades at 154 times trailing twelve-month earnings and 114 times forward estimates. Even a whiff of doubt at those multiples can send the stock sliding. The shares currently change hands at around €114.48, down more than 20 percent year-to-date and well below their 200-day moving average. The relative strength index sits near 40, suggesting selling pressure hasn’t fully exhausted itself.

CEO Alex Karp has projected that US business will double again in 2027. The average analyst price target stands at $194. Whether the second-quarter and full-year forecasts prove too conservative — or are already priced in — will determine whether Palantir can close its valuation gap or remain stuck at current levels for the foreseeable future.