Palantir, an AI-powered Software-as-a-Service (SaaS) provider that allows companies and government agencies to gather and analyze tons of raw data, has just achieved a rare financial milestone: a 48 percent year-over-year growth in revenue paired with an operating margin of 46 percent.
For the benefit of those who might not be aware, Palantir currently has two specialized platforms, with Gotham geared towards the data analytics needs of various government agencies, and Foundry enabling the agglomeration and analysis of data for enterprises. Palantir has also developed its bespoke Artificial Intelligence Platform (AIP), which allows for the integration of various LLMs and other types of generative AI within an organization's operational structure via AI-powered applications and agents.
Palantir revealed its Q2 2025 earnings on Monday, blowing away expectations on nearly every metric. It notched its first-ever billion dollar quarter, reporting $1.004 billion in revenue against a consensus estimate of $939.71 million, driven by 157 deal closures of at least $1 million, 66 deal closures of at least $5 million, and 42 deal closures of at least $10 million, which pushed up its closed total contract value (TCV) metric to a record-setting $2.27 billion, corresponding to a year-over-year growth of 140 percent.
Of course, the star of the proverbial show was Palantir's commercial business, which is now expected to haul in over $1.302 billion in FY 2025, as per the company's guidance, representing a year-over-year growth rate of at least 85 percent. Even so, Alex Karp, Palantir's CEO, wants this run-rate to grow by 10x over the next five years, which would imply a CAGR of 58 percent, as per the calculations by UBS.
Palantir's guidance was equally impressive, now projecting between $1.083 billion and $1.087 billion in revenue for its third quarter, and raising its full-year revenue guidance to $4.142 - $4.152 billion, with a free cash flow projection of between $1.8 billion and $2.0 billion.
Karp has also identified three major tailwinds for the company: custom AI application demand, data infrastructure investment, and defense tech modernization.
This brings us to the core of today's topic. Morgan Stanley analyst Sanjit Singh has now raised his price target on Palantir shares from $98 to $155, while maintaining an 'Equal Weight' rating on the stock. For reference, Palantir shares are currently trading at the $169 price handle in early pre-market trading.
Singh went on to laud Palantir in his dedicated investment note, boldly declaring:
"Palantir Has the Winning Recipe to Deploy AI. Wow… is our reaction to Q2 results with nearly every headline metric and KPI accelerating versus Q1 which itself was a very strong quarter."
To contextualize the seemingly unbridled growth at Palantir, Singh points towards eight consecutive quarters of "accelerating YoY growth" and an "astounding" Rule of 40 score of 94 percent, composed of a year-over-year revenue growth of 48 percent and an operating margin of 46 percent, paired with a run-rate that has just eclipsed $4 billion.
For context, do note that the Rule of 40 posits that a company is healthy if its growth rate plus profit margin either equals or exceeds 40 percent.
Singh then describes Palantir's four core strengths:
- Software-defined data integration/ingestion.
- "Creating an ontology that allows AI models to have a true understanding of the underlying inter-relationships between data, transactions, employees and customers."
- "Workflow automation and grounding state of the art models in enterprise data using the AIP platform."
- "Bringing to bear highly technical engineers to help get customer's complex use cases into production environments."
Of course, Palantir's lone concern remains its sky-high valuation, which is now approaching nose-bleed levels, replete with a P/E ratio of 1285.58.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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