Palantir Q2 2026: Record 93% Revenue Growth, 155% Rule of 40, Stock Up 30% — Then Consolidates

The reported figures also broke records. Total revenue of $1.935 billion exceeded the average revenue estimate by Wall Street of approximately $1.81 billion, resulting in year-over-year and sequential increases of 93% and 19%, respectively. Revenue from Palantir's fastest growing segment, U.S. commercial revenue, was $764 million and increased year-over-year and sequentially by 149% and 28%, respectively, and constituted approximately 39% of total revenue. U.S. government revenue increased by 90% year over year to $809 million, and also constituted approximately 42% of total revenue.

GAAP net income was $1.062 billion, equating to a net margin of 55%. Adjusted operating income was $1.194 billion, corresponding to a 62% margin. These are fantastic margins, especially considering the rapid growth of the company. Adjusted free cash flow was $1.22 billion with a 63% margin. Even more impressive, the company accomplished a Rule of 40 scoring at 155% (revenue growth = 93; operating margin = 62). Large-cap software companies have not achieved these results.

Palantir's records are especially impressive compared to other years due to the quality of their deals. Palantir closed 220 deals of at least $1 million. This includes 98 deals over $5 million and 73 which were over $10 million. The total dollar value of closed deals was $3.37 billion, which is a 49% increase from last year. The total contract value in the U.S. alone was $2.13 billion. 

This is an increase of 153% from last year and is greater than the company's total revenue for all other businesses and operations in the quarter. This shows that the demand and interest is both increased and broad and Palantir's clients are getting bigger.

Palantir's U.S. Commercial remaining deal value (the value of deals won but not fulfilled) increased and is now $6.24 billion, which is a 124% increase from last year. This means that even if Palantir stopped making deals, they would still have a lot of work to do for years to come.

Palantir's focus for this quarter is on 'AI Sovereignty', the belief that clients need to keep their control over their data and AI Models instead of giving it to outsourced frontier AI labs or cloud providers. CEO Alex Karp said on the earnings call, 'This quarter was otherworldly... the sovereign AI revolution makes us very optimistic about the future." Palantir's pitch is that companies want to run their own AI Models and their own infrastructure, and Palantir's Foundry and Gotham platforms give them the ability to do that. It is unknown how long this particular market focus will last before commoditization occurs. This is the main question for the next year.

On August 4, Palantir Technologies' stock price rose 30% because the company, for the first time, had a quarter that beat analyst expectations on all fronts. Palantir also increased their guidance to the market by a significant amount and did so by providing greater visibility into the near-term. Palantir’s projected annual revenue for 2023 is $8.15 billion, an approximate 82% increase year-over-year, and represents a significant increase from their 2023 revenue guidance of $7.66 billion.

Palantir also increased their projected U.S. commercial revenue for 2023 to $3.424 billion, an increase of 134%. Palantir also provided positive guidance on free cash flow for 2023 to the range of $4.5-4.7 billion. Those that shorted Palantir Technologies stock suffered from a short squeeze as the fundamentals of the company improved and the stock experienced a significant increase in value.

A drop to the $156 range following a surge to $164 is certainly expected after a stock rises 30%. It is common for stocks that ascend that sharply to consolidate at a level before continuing to advance. We can see in the chart that Palantir is at a 23.6% Fibonacci Retracement level at $155.21, which is a level where consolidations typically stabilize. RSI has dropped back from overbought and is now at 65. Momentum is back to normal. The stock remains above both the 50 day and 100 day moving averages.

The core value and sustainability questions are at play. Palantir is trading at $156 with a price to earnings multiple of 107 and a price to next years earnings of 80, both are among the highest multiples in the software space, and both are extremely high for a stock with estimated earnings growth of 80%+ for the next year.

Palantir Price Chart - Source: Tradingview

The long term question is whether the growth of U.S. commercial can remain at 149% with a larger base, whether international commercial can pick up greater than 26% growth, and whether government revenue can continue to grow at 90% without hitting a saturation point. The opinions of analysts are highly divergent, with some considering it a once in a generation AI investment and others citing that the valuation provides a very thin margin of error.

Key Levels (Technical Setup)

• Resistance: $166.19, $171.68, $176.30
• Support: $155.21 (23.6% Fib, currently holding), $148.42, $142.85 (50 EMA)
• 52-week range: $106.37 (low), $207.52 (high)
• Current price: ~$156 (consolidating)
• RSI: 65 (momentum normalized, not overbought)

Palantir exceeded expectations in revenue, earnings, and guidance. U.S. commercial revenue increased by 149%, and total revenue increased by 93%. Their Rule of 40 score increased to 155%, and management substantially increased guidance for the full year. The combination of a beat-and-raise quarter and a short squeeze contributed to the stock surge.

This depends on your opinions around the importance of AI sovereignty, and your willingness to pay a premium for a stock that has a high valuation. Palantir stock is currently trading at 107x earnings. Investors will want to monitor Palantir's backlog and the increased guidance, as this will be a factor to the company’s continued growth. However, if the growth and revenue of the company begin to decline, the stock will likely undergo a significant correction. The technical factors are promising, as Fibonacci support is in place and resistance is likely to be broken, but this is a high-risk investment.

This was a phenomenal quarter for Palantir. Booking a 93% revenue increase with margins increasing to 62%, all while seeing a positive trend in the number and size of deals and a backlog that stretches for years, is extraordinary. These metrics speak volumes, making the recent 30% increase understandable. Seeing a interim period of price increasing and consolidating at $156 after a recent sharp increase is to be expected. Prices are expected to oscillate and consolidation is the market equilibrium. 

The absence of a price increase to $171-$176, while the price remains relatively high, correlates to expected limits of the valuation models. 

Exceptional fundamentals, a high valuation, and a price consolidating with technical indicators, are expected to suppress price to a key support line of $156. A price increase to 166, would support a long position with a momentum strategy. The next support price level after 155, is expected to be 148 (the 50-day moving average).