Dell's AI Server Bonanza Lifts Palantir 9%, but London's £50 Million Contract Blockade Fuels Governance Debate

Dell’s AI server revenue surged 757%, lifting Palantir shares 9% higher, even as London’s mayor blocked a £50 million police contract over data sovereignty concerns.

A stellar quarterly report from Dell Technologies propelled Palantir shares more than 9% higher in New York on Friday, adding to a week that already saw the stock gain over 12%. Yet the rally unfolded against a backdrop of mounting political headwinds in Europe, where London mayor Sadiq Khan has blocked a separate £50 million contract with the Metropolitan Police, citing procurement irregularities and concerns over data sovereignty.

Dell’s first-quarter figures for its 2027 fiscal year blew past estimates, with revenue reaching $43.84 billion — 23% above consensus. Adjusted earnings per share came in at $4.86, well ahead of the $2.96 expected. Most strikingly, revenue from AI-optimised servers surged 757% to $16.13 billion, while new AI orders totalled $24.4 billion. The numbers confirmed what the market had been hoping: enterprise demand for artificial intelligence infrastructure is accelerating rapidly.

The direct link to Palantir lies in the companies’ joint offering. Palantir’s Foundry and Ontology platforms run on-premises within the Dell AI Factory, which uses Nvidia technology. This combination targets customers — especially regulated industries and government agencies — that want to keep sensitive data out of public cloud environments. Each Dell AI Factory sale effectively becomes a potential entry point for Palantir’s software. The market read that signal loud and clear.

The Counterpoint: London’s Data Privacy Pushback

Even as the stock enjoyed its biggest single-day jump in weeks, details emerged of a concrete setback in the United Kingdom. On May 21, Sadiq Khan halted a £50 million agreement between Palantir and the Metropolitan Police, arguing that the procurement process contained a serious breach. He stated that public money should only be directed to companies whose practices align with the city’s values.

That decision follows a separate controversy over a 12-week pilot contract between Palantir and the Financial Conduct Authority. Under that pilot, Palantir’s AI systems are given access to case data, consumer complaints and fraud reports. Martin Wrigley, a member of the House of Commons Science and Technology Committee, has warned that the US Cloud Act could compel Palantir to hand over that data to American authorities, regardless of where it is stored. The FCA insists it remains the sole data controller, but critics remain sceptical. The fate of the pilot — and whether it is extended beyond the initial 12 weeks — will be a key test of Palantir’s European ambitions.

Palantir’s Own Numbers Tell a Booming Story

Political turbulence aside, the company’s own financials are on a tear. First-quarter revenue hit $1.63 billion, beating the $1.54 billion consensus and representing 85% year-on-year growth. Adjusted earnings per share of $0.33 also topped estimates of $0.28. The “Rule of 40” score — a combined measure of growth and profitability — reached an extraordinary 145%, a level rarely seen even in high-growth software. The US commercial business grew 104% year on year.

Management raised its full-year guidance to roughly $7.65 billion in revenue, implying around 71% growth. For the first time, it expects positive GAAP operating income in every quarter of the current fiscal year. Free cash flow guidance sits between $4.2 billion and $4.4 billion, giving the company ample runway to fund operations without external financing. In the first quarter alone, adjusted free cash flow was $925 million, a margin of 57%.

The remaining deal value in Palantir’s US commercial segment stood at $4.92 billion, up 112% from the prior year, suggesting a strong pipeline. Historically, software budgets follow infrastructure purchases by two to four quarters, so Dell’s backlog could be an encouraging leading indicator for Palantir’s second-half performance.

Technical Heat and Valuation Caution

The stock closed in Frankfurt at €134.18 after the Friday surge, putting it roughly 13% above its 50-day moving average. The relative strength index at 86 signals an overbought condition. The 200-day moving average sits at €138.36, only about 3% above the current level.

Citi recently upgraded Palantir to “Buy” with a price target of $235, citing the growth trajectory. Yet the valuation remains stretched: the trailing price-to-earnings ratio is 149, and the forward multiple stands at 90. Institutional investors hold about 45.65% of the outstanding shares, though some funds have trimmed their positions.

The broader market backdrop remains supportive. Snowflake’s results earlier in the week had already triggered a rally in data and AI platforms, lifting ServiceNow and Oracle by more than 6% each. Gartner projects global AI software spending will grow roughly 60% this year to around $453 billion, with total AI outlays expected to hit $2.59 trillion. On the policy front, the Trump administration is exploring direct financial aid for US drone makers, with talks underway between the Pentagon and the Office of Strategic Capital.

For now, Palantir’s near-term direction hinges on whether Dell’s AI order boom translates into software contracts over the coming quarters — and whether the FCA decides to extend its London pilot or follows Khan’s lead and pulls the plug.