What Does Palantir Do?
Zacks Rank #2 (Buy) company Palantir (PLTR) builds AI-powered software platforms for the intelligence community. Its platforms help intelligence agencies with counterterrorism investigations and operations across the United States and globally. In addition, the company’s software is used in approximately 80 industries globally, including automotive manufacturing, oil and gas exploration, and utility operation analysis.
Palantir offers customers four software platforms: Gotham, Apollo, Foundry, and the Palantir Artificial Intelligence Platform (AIP). Gotham allows users to find patterns deep within data sets and bridges the gap between analysts and operators. Apollo enables customers to deploy their software securely, in virtually any environment. Foundry transforms the ways companies operate by creating a central operating system for their information. AIP enables responsible AI advantage across the enterprise primarily using core components built to activate LLMs and other AI within any organization efficiently.
Palantir Smashes Q2 Earnings
“Every single person who’s financially literate or illiterate in anything like technology is spitting out their dentures when they look at these numbers.” ~ Alex Karp, Palantir CEO
Monday night, Palantir delivered a massive beat-and-raise quarter. Year-over-year revenue exploded 93% while adjusted earnings-per-share of $0.41 blew past consensus estimates of $0.35. The earnings beat is nothing new for Palantir. The company has beaten Zacks Consensus Estimates for 15 consecutive quarters and counting.
Palantir: Why Growth Will Accelerate
If there are three things Americans can count on, it’s death, taxes, and more government spending. Regardless of which political party controls Washington, government spending continues to rise at a blistering pace. While that may not be good news for inflation, it is good news for Palantir, where government spending accounts for roughly 55% of revenue. In Q2, Palantir’s government revenue soared 90%.
Meanwhile, U.S. commercial revenue growth exploded by a staggering 149% year-over-year.
According to Zacks Consensus Analyst Estimates, overall annual EPS will soar from ~$0.69 in 2025 to over $2 in 2027. However, after the rosy Q2 numbers, investors should expect these estimates to be revised even higher in the coming weeks and months.
Palantir’s Staggering Rule of 40
The ‘Rule of 40’ score is a metric used by fundamentalists to evaluate a company’s financial health. It adds the annual revenue growth rate and profit margin. A score of 40 or higher is considered healthy. Currently, PLTR has a Rule of 40 score of 155, making it one of the highest on Wall Street.
Palantir Free Cash Flow Soars
Some AI giants, such as Alphabet (GOOGL) recently reported negative free cash flow. However, this is not an issue for Palantir, which just reported more Q2 FCF than all of H1 2025.
PLTR Valuation Improves
Palantir’s recent share price consolidation has made shares more attractive from a valuation perspective. The PEG ratio has plunged from 9x to 3 since mid-2025.
Bottom Line
Palantir continues to prove that its AI-driven software ecosystem is growing rapidly and exceptionally profitable. With unmatched revenue in the lucrative commercial and defense sectors, soaring free cash flow, and sustained earnings beats, the company is one of Wall Street’s most compelling growth stories.
Beyond Nvidia: AI’s Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren’t likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
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This article originally published on Zacks Investment Research (zacks.com).
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