It seems like Palantir Technologies (NASDAQ:PLTR) is finally wearing its big-boy pants. It’s stepping into the game this year more seriously – which I think is just about time.

Recently, Palantir announced its Q4 2023 earnings results, shocking the market because the results were unexpectedly good. The earnings report stoked optimism and increased investor confidence, allowing the stock to surge as much as 31% the next trading day. Palantir was able to see an impressive 20% year-over-year revenue rise, and it reached a revenue milestone of $608 million.

Now that the company is looking to grow more and expand its advertising and commercial segment, this places Palantir in a good light in the stock market and the AI race.

Additionally, demand for Palantir’s products surged, affirming its market presence after over two decades. The data analytics firm posted its fifth profitable quarter, marking its first good year. The market’s positive reaction, with PLTR stock climbing nearly 20% to end the day, underscores the power of Big Data and AI synergy. 

Renowned as the “best pure-play” in AI, Palantir’s promising outlook suggests this is only the start of its upward trajectory.

Excellent Yet Shocking Q4 Earnings

Palantir shares soared over 19% after-hours following Q4 earnings that surpassed revenue expectations. The company’s full-year 2024 guidance aligned with Wall Street estimates, and investors were quite happy, to say the least. Key figures include earnings per share of 8 cents (adjusted), revenue of $608.4M (up 20% year-over-year) and net income of $93.4 million.

Palantir’s CEO, Alex Karp, highlighted the unprecedented expansion and demand for AI models in the U.S. The company’s Artificial Intelligence Platform grew significantly, with over 600 pilots in 2023. Revenue projections for Q1 and the full year slightly missed Wall Street expectations.

Palantir, renowned for its collaborations with the U.S. government, noted a 70% surge in U.S. commercial revenue. Additionally, its U.S. commercial-customer base expanded by 55%. This consistent profitability positions Palantir for potential inclusion in the S&P 500.

Looking at the Numbers

Although financial results were modest, the stock gained traction due to notable achievements. Annual revenue reached $2.2 billion, up 17%, with a 20% surge in Q4 revenue. Palantir’s increased profits stemmed from controlled operating expenses. Its 2023 net income of $217 million contrasts starkly with the $371 million loss in 2022. Notably, Q4 alone saw a $97 million profit, a 152% increase from the previous year.

Despite its initial profitability in Q4 2022, investors should note that early profits often inflate, making its P/E ratio 360+ irrelevant. Looking ahead, a forward P/E of 73, while high, aligns with AI industry norms. Although its P/S ratio surged from single digits to 23 in a year, it’s below the 2021 bull market peak, suggesting investors accept higher sales valuations for Palantir.

Sustaining the AI Hype

Bank of America increased Palantir’s price target to $24, noting the significant impact of its AIP and its role in AI-driven decision-making. Wedbush also raised its target to $30, praising Palantir’s commercial success with AIP, likening it to a standout tech innovator.

However, some analysts expressed concerns regarding AIP’s growth sustainability and overall company valuation. Jefferies upgraded Palantir to “hold” with a $22 price target, citing AIP’s rapid expansion but remaining cautious due to valuation concerns.

There’s a Reason Why PLTR Stock Is Soaring

Investors may find Palantir’s current position promising for share acquisition. Though the company’s valuation is steep, customer confidence in its software implies strong pricing leverage. Rising customer numbers and U.S. commercial revenue signal sustained demand, potentially lowering sales and earnings multiples. 

I’m going to remain on the sidelines with Palantir for now. But I understand the bullish sentiment around this stock. To be honest, this earnings report has shifted my view on the company considerably. AI-related tailwinds are real, and this company is finally performing well from a fundamental standpoint. I didn’t think I’d be saying this a year ago, but maybe it is the time to give this big data company a shot.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.