Palantir Q2 Earnings: “Astonishing” AI Impact Drives Record Revenue — Is Its Sky-High Valuation Justified?

TradingKey - Palantir (PLTR), the AI and defense software powerhouse, delivered a standout second-quarter performance on Monday, August 4, reporting its first-ever $1 billion revenue quarter. Driven by what CEO Alex Karp called the “astonishing impact” of artificial intelligence, the company raised its full-year guidance — helping to ease concerns over its sky-high valuation. Shares rose 5% in after-hours trading.

Record Quarter Amid AI Surge

Palantir’s Q2 2025 results:

• Revenue: $1.004 billion, up 48% YoY, beating expectations of $940 million
• Adjusted EPS: $0.16, above the consensus of $0.14

Q2 2025 Financial Results, Source: Palantir

As a key software provider to the U.S. Department of Defense, Palantir’s government business remains strong:

• U.S. government revenue: $426 million, up 53% YoY

But the real story was in the commercial segment:

• U.S. commercial revenue: $306 million, up 93% YoY
• This rapid growth highlights the company’s successful push to diversify beyond government contracts

Last week, Palantir secured a $10 billion software and data contract with the U.S. Army — one of the largest defense software deals in U.S. history, according to Wedbush analyst Dan Ives.

AI Driving Real Growth

CEO Alex Karp described the quarter as “phenomenal,” emphasizing the accelerating role of AI across both government and enterprise clients.

“The growth rate of our business has accelerated radically. Yet we see no reason to pause, to relent, here.”

Palantir is increasingly embedding its AI platform, AIP (Artificial Intelligence Platform), into mission-critical operations, from battlefield logistics to enterprise supply chain optimization.

Looking ahead, the company expects:

• Q3 revenue: $1.083–1.087 billion, well above the $983 million consensus
• Full-year 2025 revenue guidance raised to $4.142–4.150 billion
• U.S. commercial revenue now expected to exceed $1.302 billion, growing at least 85% YoY

High Valuation, Higher Growth?

Palantir’s market capitalization now stands at $379.1 billion, placing it among the top 20 most valuable U.S. companies, ahead of legacy tech giants like Cisco and IBM.

Yet its valuation remains extreme:

• Trailing P/E: 698.5x
• Forward P/E: 229x — far above peers like CrowdStrike (109x), Datadog (69x), and ServiceNow (49x)
• Only Tesla has a triple-digit forward P/E among the top 20 U.S. stocks, at 177x

Year-to-date in 2025, Palantir shares have surged 112.4%, closing at $160.66. Despite the strong performance, the average analyst price target is just $115.48 — implying a 25% downside — reflecting widespread skepticism about sustainability.

Analyst Price Targets for Palantir, Source: TradingKey

Can Growth Justify the Price?

RBC Capital Markets analysts questioned whether any fundamental metric can justify Palantir’s current valuation, warning that such levels may be unsustainable without continued hypergrowth.

DA Davidson noted that Palantir must now convert AI pilot programs into long-term contracts, proving that its commercial momentum is durable.

Third Bridge analysts said the strength in U.S. commercial revenue is a clear signal of robust demand. Experts report that Palantir maintains a unique position in a crowded, hype-driven market, successfully monetizing AI in high-stakes environments — a narrative reinforced by this quarter’s results.

In the earnings call, CEO Karp said,

“Stop talking to all the haters. They’re suffering.”