Palantir (PLTR) Q2 Earnings Overview
Palantir’s stock jumped nearly 8% on Tuesday after the software analytics company raised its full-year guidance, riding the wave of artificial intelligence momentum.
Shares have surged over 120% so far this year, pushing Palantir’s market capitalization above $400 billion, fueled by strong AI tailwinds and significant government contracts.
Last week, Palantir entered the ranks of the 20 most valuable U.S. companies, following its May inclusion among the top 10 U.S. tech firms.
Since we sold, Palantir’s stock has gained $100 a remarkable run though its current valuation appears disconnected from fundamentals.
This overview will recap the recent earnings and explain the reasons behind our view.
As noted earlier, we continue to view Palantir (PLTR) as significantly overvalued. Ahead of its latest earnings release, the stock was trading near 400x forward earnings estimates a staggering premium compared to other AI leaders. For context, Nvidia and Broadcom, key players in AI hardware, trade at just 26x and 31x forward earnings, respectively.
This vast valuation gap raises important questions. While Palantir’s business model is unique, its current multiple assumes near-perfect execution. Even a modest 4% revenue guidance increase for 2025 failed to excite a market hungry for bigger surprises. In today’s environment, where premium valuations are increasingly scrutinized, Palantir remains vulnerable to any growth setbacks.
We offer a balanced view: on the bearish side, there’s potential downside to the $40–$50 range, particularly if macroeconomic conditions worsen or growth slows. That would be the zone to reconsider buying.
On the bullish side, while our previous price target was exceeded, and despite limited fundamental support, a speculative move toward $200 by year-end cannot be ruled out given this year’s trading behavior.
Despite our caution, we maintain respect for Palantir’s mission. Unlike typical Silicon Valley firms, Palantir was built in defense rather than consumer apps or SaaS. This background continues to shape its unique value proposition and market influence. Few companies wield such sway behind the scenes in government and commercial data strategy.
Still, discipline is key. With Palantir near all-time highs, we reiterate a Sell/Hold rating. We’ve realized substantial gains, and this is not the moment to chase. Valuations this stretched rarely escape the pull of gravity.
Q2 2025 Highlights
U.S. revenue surged 68% year-over-year and rose 17% quarter-over-quarter, reaching $733 million.
U.S. commercial revenue experienced robust growth, up 93% year-over-year and 20% quarter-over-quarter to $306 million.
U.S. government revenue increased 53% year-over-year and 14% quarter-over-quarter to $426 million.
Total revenue grew 48% year-over-year and 14% quarter-over-quarter, surpassing the $1 billion mark at $1.004 billion.
The company closed 157 deals worth at least $1 million, including 66 deals over $5 million and 42 deals above $10 million.
Palantir set new records by closing $2.27 billion in total contract value (TCV), a 140% increase year-over-year.
U.S. commercial TCV also hit a record $843 million, soaring 222% year-over-year.
The U.S. commercial remaining deal value (RDV) stood at $2.79 billion, up 145% year-over-year and 20% sequentially.
Customer count expanded 43% year-over-year and 10% quarter-over-quarter, reflecting strong market traction.
Profitability and Cash Flow:
GAAP income from operations totaled $269 million, representing a healthy 27% margin.
Adjusted income from operations was $464 million, with an impressive 46% margin.
GAAP net income stood at $327 million, translating to a 33% margin.
Cash generated from operations reached $539 million, a strong 54% margin.
Adjusted free cash flow was $569 million, representing an exceptional 57% margin.
Earnings:
GAAP earnings per share (EPS) came in at $0.13.
Adjusted EPS was slightly higher at $0.16.
Balance Sheet:
Cash, cash equivalents, and short-term U.S. Treasury securities totaled $6.0 billion, underpinning the company’s financial flexibility.
Outlook for Q3 2025:
Revenue is expected to range between $1.083 billion and $1.087 billion.
Adjusted income from operations is projected between $493 million and $497 million.
Full Year 2025 Guidance:
Revenue guidance has been raised to between $4.142 billion and $4.150 billion.
U.S. commercial revenue guidance increased to exceed $1.302 billion, representing at least 85% growth.
Adjusted income from operations guidance has been raised to between $1.912 billion and $1.920 billion.
Adjusted free cash flow guidance has been increased to between $1.8 billion and $2.0 billion.
The company continues to expect positive GAAP operating income and net income in every quarter of the year.
Revenues were primarily driven by the U.S. commercial segment, fueled by strong demand for Palantir’s Artificial Intelligence Platform (AIP). This segment generated $306 million, representing 31% of total revenues a 20% increase from the previous quarter and a 93% rise compared to the prior year.
Palantir’s U.S. commercial customer base expanded by 12% sequentially and 64% year over year. Existing customers are also increasing their spending, reflected in a robust net dollar retention rate of 128%.
Goldman Sachs Maintains Neutral on Palantir Technologies, Raises Price Target to $141
Citigroup Maintains Neutral on Palantir Technologies, Raises Price Target to $177
DA Davidson Maintains Neutral on Palantir Technologies, Raises Price Target to $170
Wedbush Maintains Outperform on Palantir Technologies, Raises Price Target to $200
