Palantir TechnologiesPLTR spent the first half of 2026 as a cautionary tale for growth investors. Its valuation looked stretched, the broader market rotated away from richly priced software names, and the stock sold off hard.
Then came the second-quarter results, and the stock has surged roughly 45% over the past month alone. The question worth asking isn't whether Palantir is expensive. That it obviously is. The question is whether the business underneath the multiple is strong enough to justify it.
Palantir Technologies Inc. Price, Consensus and EPS Surprise
Palantir Technologies Inc. price-consensus-eps-surprise-chart | Palantir Technologies Inc. Quote
PLTR's Growth Story Doesn't Sacrifice Profit
High-growth software companies usually face a tough trade-off between rapid growth and strong profitability. Palantir, however, is proving it can deliver on both fronts, with robust revenue growth and expanding profits.
Revenues rose 93% year over year in the last reported quarter, adjusted operating margin expanded to 62%, and EPS jumped 156%. That combination of accelerating growth alongside improving profitability is rare even among the best-run software companies, and it's the foundation of the bull case.
Bookings back up the growth story. Palantir closed 220 deals worth at least $1 million in the second quarter, with more businesses and government agencies adopting its Artificial Intelligence Platform (AIP).
Management didn't just beat expectations but raised guidance for the second consecutive quarter. It now expects full-year 2026 revenues of roughly $8.15 billion, implying growth of about 82%, with third-quarter revenues up 12% sequentially.
Government Remains Key as Commercial Growth Accelerates
Government work is still technically Palantir's larger business— $990 million last quarter, up 79% year over year, or about 51% of total revenues. But that lead is getting thinner and seems to be closing fast. Commercial revenues hit $945 million, growing 109.7% year over year, nearly 30 percentage points faster than government.
That said, the government business is indeed not fading. The U.S. Army just handed Palantir's subsidiary a production contract for eight TITAN systems— AI-equipped ground vehicles that had spent years in prototype and are now headed to the field. And under the Pentagon's Open DAGIR program, Palantir's software is being used to modernize military operations through AI-enabled data interoperability and real-time decision-support tools. That kind of embedded, mission-critical work tends to renew. These projects establish the company as an important technology provider for national security operations.
But the more interesting growth is happening on the commercial side. Palantir's AIP boot camps— hands-on sessions where prospective clients see the platform solve real logistics, manufacturing, or supply-chain problems live— have become a genuinely effective sales engine, turning demonstrations into paying customers at scale. The new expanded alliance with PwC extends this reach further, pairing Palantir's AI platforms with PwC's industry expertise across supply chain, cyber risk, and deal execution. If commercial revenues keep growing near its current pace, the addressable market would be enormous.
Alex Karp's Pitch: Selling Sovereignty, Not Just Software
CEO Alex Karp has increasingly positioned Palantir differently from major AI labs, emphasizing its role as a provider of sovereign AI infrastructure for businesses and governments. The company's approach is centered on enabling organizations to use advanced AI while maintaining control over their data, intellectual property, models and critical operations.
This positioning could give Palantir a competitive advantage as enterprises increasingly look to adopt AI without handing over control of sensitive data and core business functions.
Palantir's Valuation & Estimates
None of this erases the valuation risk. Palantir trades at a significant premium to its peers in enterprise software. For instance, PLTR's 12-month forward P/S of 41.92X is higher than Snowflake's SNOW 17.69X and CrowdStrike's CRWD 32.39X.
PLTR's F12M P/S Vs. SNOW & CRWD
Image Source: Zacks Investment Research
But despite its expensive valuation, it's worth the hype because it's built on results— accelerating revenues, expanding margins, record bookings, upgraded guidance two quarters running, and a widening moat across both government and commercial customers.
Snowflake and CrowdStrike are excellent businesses, but neither is compounding revenues at Palantir's pace while also expanding operating margin into the 60s. That gap is exactly what the market is paying up for.
The Zacks Consensus Estimate of PLTR's 2026 and 2027 EPS implies year-over-year growth of 113% and 41%, respectively.
Image Source: Zacks Investment Research
Last Word
Palantir's valuation leaves little room for disappointment. Yet its combination of accelerating AI momentum, improving profitability and strong estimate revisions gives investors a business that is difficult to dismiss as merely hype. For long-term investors willing to tolerate valuation risk, Palantir's execution and growing strategic importance could continue to support the premium, despite near-term volatility.
PLTR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
