Big Data giant Palantir (NYSE:PLTR) continues to impress, shattering concerns of a slowdown in AI adoption with its superb second-quarter showing. Blowing past expectations across both lines, the firm raised its third-quarter and full-year forecasts, boosting the case for Palantir stock.
Despite the recent price increase, analysts believe the stock is still undervalued with potential for significant growth. Palantir stock is a strong buy due to its AI leverage and market positioning.
Stock market movements suggest a reset in AI expectations. Investors will assess companies effectively using AI.
In this regard, Palantir stands out as arguably the best exponent of AI, adding new layers to its compelling growth story. Moreover, its rapid expansion into the commercial sector has been remarkable as it reduces its traditional reliance on government agencies.
That said, let’s explore Palantir’s impressive trajectory as it scales new heights in its growth journey.
AI-Powered Earnings Explosion
Palantir posted another banger of an earnings report on Monday. Its Q2 results sped past analyst estimates across both lines, with double-digit growth across its government and commercial segments.
CEO Alex Karp touted the firm’s transformative use of AI in driving robust top-line growth in Q2. Karp lauded the company’s powerful Artificial Intelligence Platform in revolutionizing its business model, making AI indispensable to its current and potential clients.
Additionally, Palantir’s proactive refinement of its AI technologies highlights a focused effort to unlock new efficiencies and capabilities across the board.
Digging into the numbers, company sales surged 27% to $678 million, from $533 million last year. Commercial sales were up 33% to $307 million, while government sales shot up 23% to $371 million.
U.S. commercial sales, in particular, soared 55% to $159 million, with a massive 83% increase in customer count. Government sales from the U.S. were up 24%, with Palantir closing 27 deals valued at over $10 million during Q2.
On the bottom-line front, GAAP net income jumped an eye-popping 379% to $134 million, while adjusted net income surged 84% to $221 million.
Q2 marks the company’s seventh consecutive profitable quarter, a remarkable achievement given the challenging conditions. Consequently, its GAAP and adjusted EPS grew by 500% and 80%, respectively.
Reflecting its positive outlook, Palantir raised revenue guidance for the year to $2.742 to $2.750 billion, a 2.4% increase from its Q1 guidance at the midpoint. Also, it lifted its adjusted income from operations guidance to $966-$974 million, an 11% jump at the midpoint from its prior-quarter guidance.
Post-Q2 Analyst Acclaim
Following its stellar Q2 showing, Wall-Street analysts couldn’t help but heap praise on the results. Wedbush analysts, led by Dan Ives, maintained their ‘outperform’ rating on Palantir stock, raising their price target to $38 from $35. Ives and his team, reflecting on the firm’s Q2 results, remarked that
“This was a game changer quarter for the Palantir story as the AIP monetization piece on U.S. commercial was front and center as a major growth driver.”
Wedbush Q2 Note On Palantir Stock
Moreover, in a very bullish scenario, Palantir stock could reach an eye-catching $50, based on a $5 billion sales estimate for fiscal 2027. Jordan Berger of Third Bridge highlights the firm’s performance in the U.S. commercial space.
Berger points to the superb market appeal of Palantir’s A.I. technologies despite a saturated landscape, with the rollout of AIP and the Bootcamp sales model adding significantly to its market share.
| Fiscal Year Ending | Revenue (in billions) | Forward P/S Ratio |
|---|---|---|
| DEC-23 | $2.48 Billion | 15.06 |
| DEC-24 | $2.76 Billion | 21.45 |
| DEC-25 | $3.31 Billion | 17.89 |
As the table above shows, forward revenue projections show significant growth for Palantir over the next couple of years. For the current year, analysts expect revenues to rise to $2.76 billion, representing an 11.3% increase from 2023.
Moving into 2025, the revenue is expected to rise even further to $3.31 billion, pointing to a 19.8% jump from the 2024 estimates. It’s imperative to recognize that if it hits its 2025 sales targets, it will trade at roughly 17.9 times sales, noticeably below its five-year average of 19.3.
Bottom Line on Palantir Stock
Palantir’s exceptional Q2 results point to a fantastic long-term outlook for the company as it builds on its AI competencies.
Following comfortable top-and-bottom-line beats in Q2, the firm raised its full-year guidance, signaling incredible momentum ahead. Meanwhile, Wall-Street continues showering praises on the company, raising price targets while reflecting a strong belief in its upside potential.
This has everything to do with the effective monetization of its AI platform in its commercial segment and its efforts to reduce dependency on government contracts.
These factors, coupled with its aggressive growth in AI applications, paint a promising picture for Palantir’s ascendance in the tech sphere.
On the date of publication, Muslim Farooque 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
