Palantir's Post-Earnings Frenzy Pits a Blowout Quarter Against a Stretched Valuation

Palantir's Q2 revenue and profit smash estimates, lifting guidance, but analysts debate if the stock's rally has priced in future growth.

The numbers out of Palantir Technologies' second quarter were so strong that even the most bullish forecasts on Wall Street came up short. But the debate now swirling around the stock has less to do with whether the company is executing — and far more with how much of that success is already baked into the share price.

The software firm's shares closed Friday at €148.84 in German trading, a daily gain of 9.88 percent and a weekly advance of 39.47 percent. The secondary market's seven-day tally was nearly identical at 38.16 percent, underscoring the ferocity of the post-earnings rally that began when results landed Monday.

A Quarter That Rewrote the Script

Palantir generated $1.94 billion in revenue for the quarter, up 93 percent year over year and well ahead of the $1.81 billion consensus estimate. Earnings per share came in at $0.41, topping the $0.35 analysts had penciled in by more than 18 percent. Management responded by lifting full-year guidance to a range of $8.15 billion to $8.16 billion in revenue, up $500 million from the prior outlook, and projecting free cash flow of up to $4.70 billion.

The margin story was arguably just as striking. Adjusted operating margin hit 62 percent, a 1,600-basis-point jump from the 46 percent posted in the year-ago period — evidence, the company's supporters argue, that growth isn't coming at the expense of profitability.

The US commercial engine, in particular, is firing on all cylinders. Segment revenue surged 149 percent to $764 million, and total contract value in that business grew 153 percent to $2.132 billion. Palantir now expects US commercial revenue to exceed $3.42 billion for the full year, up from a prior target of $3.22 billion. The pipeline of unbilled US corporate orders has more than doubled over the past twelve months to $6.24 billion, while net dollar retention reached 157 percent and the US commercial customer base expanded 35 percent to 653 accounts.

The quarter produced 220 deals worth at least $1 million, including 73 above $10 million. Government demand remained robust as well, with US public-sector revenue climbing 90 percent to $809 million. For the third quarter, Palantir guided to revenue between $2.160 billion and $2.164 billion.

Wall Street Rewrites Its Price Targets — With Some Exceptions

The analyst reaction was broadly positive, though the enthusiasm was not universal. Citi's Tyler Radke raised his price target Tuesday from $200 to $245 while maintaining a buy rating, citing accelerated growth momentum, the record US quarter, and improved contract metrics. Deutsche Bank upgraded the stock the same day from "Hold" to "Buy," keeping its target at $200 and describing the report as "exceptional," with the bank noting Palantir is "several steps ahead" of the rest of the software sector in monetizing AI.

Other firms offered more measured takes. Citi's move stood in contrast to an earlier reduction by the same bank — before the earnings release, it had trimmed its target from $225 to $200, citing broader compression in market valuations. Oppenheimer and William Blair held firm on their optimistic stances, with the latter arguing the results undercut concerns about competition from AI rivals like OpenAI and Anthropic.

The most notable contrarian call came from Pythia Research, which downgraded Palantir from "Strong Buy" to "Buy" — not because of deteriorating fundamentals, but because the valuation runway had narrowed after the rally. Morningstar, meanwhile, acknowledged that Palantir's growth and margins are the strongest in its software coverage but cautioned that the valuation leaves "little room for error," keeping its fair value estimate at $153 — implying roughly 6 percent downside from current levels.

The price-target range across Wall Street now spans $200 to $245.

Insider Selling and a Big Seller's Exit

Not everyone is leaning into the rally. Cathie Wood's Ark Invest trimmed its position on Tuesday and Wednesday, selling roughly 109,500 shares worth about $17 million, followed by another 70,259 shares valued at approximately $11.4 million on Thursday. Even after those sales, Palantir remains one of Ark's top ten holdings at around 3.11 million shares worth roughly $493 million.

Insider activity tells a similar story. Director Alexander Moore sold 20,000 shares on August 1 through a pre-arranged trading plan, netting about $3.09 million, following an earlier disposal of 16,000 shares at an average price of $134.05 on July 17.

On the other side of the ledger, Montchanin Asset Management disclosed a new position on August 1, and the New York State Common Retirement Fund reported holding approximately 2.37 million Palantir shares as of July 29. The juxtaposition of institutional accumulation and insider selling suggests a market where long-term conviction and short-term profit-taking are coexisting uneasily.

Michael Burry, the investor known for betting against Palantir, renewed his criticism of the company's valuation on X on Tuesday. CEO Alex Karp, for his part, told CNBC he expects the growth momentum to persist for "at least another 18 months."

A UK Tax Dispute Adds a Cloud

The rally also unfolded against a separate controversy across the Atlantic. The Centre for International Corporate Tax Accountability and Research reported Wednesday that Palantir paid just £2 million in UK corporation tax in 2024 on £247 million in British revenue and £25.3 million in profit — an effective rate of roughly 8 percent, well below the standard UK rate of 25 percent. The group claimed Palantir's worldwide effective tax rate was just 1.4 percent.

A company spokesperson dismissed the criticism of its transfer-pricing practices as "simply not credible," noting that US parent companies typically book revenue earned abroad and pointing to the $148 million Palantir paid in UK payroll taxes last year. The company holds UK government contracts worth around £670 million, including a £240 million three-year deal with the Ministry of Defence awarded without a competitive tender in December.

The Valuation Question Lingers

The fundamental story is difficult to argue with: 93 percent revenue growth alongside expanding margins is a rarity in the software industry, and the raised guidance signals management's confidence in its own trajectory. But the stock's technical position tells a different tale. After last week's surge, the shares look stretched in the near term, and the Pythia downgrade illustrates that even sympathetic observers are hitting the limits of their valuation models.

The next test arrives with the third-quarter report, tentatively scheduled for November 2. Whether Palantir can sustain this pace — and whether the market will keep paying up for it — remains an open question that both bulls and bears will be watching closely.