Palantir's Revenue Jumped 93% and Its Stock Surged 25%. The Shares Are Still Down 29% for the Year.

Palantir reported $1.94 billion in second quarter revenue after Monday's close, a 93% jump from a year earlier. Wall Street's answer on Tuesday was immediate. Shares closed up more than 25%, the S&P 500 hit a fresh record of 7,707.81, and the Nasdaq 100 climbed 2.5% as chip and AI-linked names rallied alongside it.

It wasn't the only earnings report doing work that day. Zebra Technologies jumped 22% and Applied Optoelectronics gained roughly 17% on their own results, and the broader rally spread well beyond a single stock. But Palantir was the name investors had been watching most closely going into the print, and it delivered the kind of number that's hard to argue with.

What Changed

The headline figures were straightforward. Revenue of $1.94 billion beat estimates, adjusted earnings per share of $0.41 came in well above the $0.35 analysts expected, and U.S. commercial revenue, the segment investors care most about because it isn't tied to slow-moving government contracts, grew 149% year over year to $764 million. U.S. government revenue grew a still-strong 90% to $809 million.

Management didn't just beat the quarter. It raised guidance for the rest of the year, lifting full-year revenue projections to a range of $8.15 billion to $8.16 billion, implying 82% growth, and pushing expected U.S. commercial revenue above $3.42 billion, a 134% growth rate. Adjusted operating income guidance rose to $4.89 billion to $4.90 billion, and adjusted free cash flow guidance climbed to $4.5 billion to $4.7 billion. Karp framed it directly on the earnings call: the company's Rule of 40 score, a standard software metric that adds revenue growth to profit margin, hit 155%. Anything above 40 is considered healthy. Palantir's number is nearly four times that.

The stock had a lot riding on this print. Shares opened Monday, ahead of the report, at $122.78, already down about 40% from the all-time high of $207.52 set last November. Options traders were pricing a swing of 10% to 15% in either direction, well above the roughly 7% average move Palantir has produced after its past four reports. The market got the upside case.

Why It Matters

This is the second straight record close for the S&P 500. It follows the Dow's own record run a day earlier, on the widest earnings-season beat margin FactSet has tracked since 2008. Palantir's report doesn't settle the broader debate over whether the Fed leans toward a hike or a cut this fall, but it adds another data point to the side arguing the economy, and corporate America specifically, doesn't need help. A company growing revenue 93% a year and raising guidance isn't a company bracing for a slowdown.

The valuation side of the story is where the nuance lives. Even after Tuesday's gain, Palantir is still down roughly 29% for the year, and it trades at a forward price-to-earnings ratio near 84 and a trailing multiple above 130. Those numbers only work if growth like this quarter's keeps showing up. Stock-based compensation ran $265 million in the quarter, insiders have continued selling shares into the rally, and the company's government contracts carry termination clauses that don't exist in most commercial software deals. None of that is new information. It's just easier to ignore on a day the stock is up 25%.

Wall Street's response leaned bullish anyway. DA Davidson raised its target from $175 to $200. Citi's Tyler Radke moved his from $200 to $245. Deutsche Bank upgraded the stock from hold to buy with a $200 target, and Piper Sandler and Rosenblatt set targets of $230 and $225. The average 12-month target across Wall Street sits near $189, according to TipRanks data from Tuesday, below where the stock is now trading. That gap between the average target and the actual price is worth watching. Either analysts catch up with more upgrades, or the stock has to cool off to meet them partway.

What to Watch Next

AMD reports after Tuesday's close, the next test in what Pulse24 flagged heading into this stretch as expectations week. AMD's results carry their own weight for the AI infrastructure trade, and a soft print there could quickly change the tone Palantir just set. SpaceX, the other company in that earlier preview, reports on the same after-close schedule as AMD.

Beyond this week, the question is whether Palantir's growth rate holds up. A 93% year-over-year comparison gets harder to repeat as the base grows, and a stock trading at 84 times forward earnings has little room for a quarter that merely meets expectations instead of crushing them. Watch whether analyst price targets keep climbing over the next few weeks, or whether Tuesday's move turns out to be the peak of the reaction rather than the start of a new trend.

The Pulse24 Take

A 93% revenue growth rate paired with a Rule of 40 score of 155% is rare no matter how it's framed, and the market rewarded it in a hurry. Worth remembering, though, is that Palantir needed this print. The stock was still down close to 30% for the year heading in, and options pricing implied a double-digit move either way. A good chunk of Tuesday's gain looks like relief as much as conviction.

Whether that relief turns into a lasting re-rating depends less on this quarter's number than on the next two or three looking similar. A forward multiple in the 80s doesn't leave much room for error, and the same government contract risk and insider selling that existed before earnings didn't disappear just because the stock jumped. Palantir proved it can still grow at an extraordinary rate. It hasn't yet proven the valuation is sustainable at this size, and that's a different, harder question for the quarters ahead.