Palantir Technologies (PLTR) posted exceptional Q2 2025 results, crossing the billion-dollar quarterly revenue threshold for the first time and delivering some of the best free cash flow margins in the software sector. Despite the naysayers, the results have kept rolling in.
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The stock is up an astonishing 143% year-to-date and almost 500% over the past 12 months, leading many to question how much higher it can climb. With a trailing P/E of over 620, the valuation is undeniably rich — but I remain Bullish for several key reasons.
Yet Another Quarterly Blowout
Revenue for the second quarter surged 48% year-over-year to about $1 billion, beating Wall Street estimates. More than 40% of sales came from the U.S. government, and total contract value hit a record $2.27 billion, up 140% from a year ago.
The U.S. commercial segment led growth, soaring 93% to $306 million, while U.S. government revenue climbed 53% to $426 million. Overall, U.S. revenue was up 68% to $733 million. CEO Alex Karp credited the “astonishing impact of AI leverage” for driving both commercial momentum and adoption across industries. Profitability metrics topped expectations. Income from operations reached $464.4 million with a margin of 46.3%, while free cash flow came in at $568.8 million — crushing the consensus estimate of $329.6 million.
Management raised full-year revenue guidance for the second time in 2025, now forecasting $4.14–$4.15 billion. U.S. commercial revenue is expected to exceed $1.302 billion, representing growth of at least 85%. Adjusted free cash flow guidance was lifted to $1.8–$2.0 billion.
Government Pipeline Keeps On Pumping for Palantir
Sales to the U.S. government jumped 53% to $426 million, accounting for more than 42% of Q2 revenue. Momentum could continue for years — recently, the U.S. Army indicated it might spend up to $10 billion on Palantir’s services over the next decade.
Customer concentration remains strong yet is expanding. The top 20 customers now average $75 million in trailing 12-month revenue, up 30% year-over-year. Across the company, Palantir closed $2.79 billion in deals during the quarter, up 141% from last year.
Rule of 40 and Operating Leverage
Palantir continues to excel by the software industry’s Rule of 40 standard, posting a combined score of 94 — derived from 48% revenue growth and a 46% adjusted operating margin. Free cash flow rose 283% year-over-year to a 57% margin, underscoring that growth isn’t being bought through excessive capital spending.
Client growth remains broad-based. Commercial customers grew 11.25% quarter-over-quarter and 48.18% year-over-year to 622. Government customers increased 6.8% quarter-over-quarter and 24.6% year-over-year to 157. Overall, Palantir’s customer base rose 43.17% year-over-year to 849. The number of $5 million-plus deals doubled to 66, while deals over $10 million rose 55.56% to 42.
Net revenue retention (NRR) is at 128%, showing that existing customers are expanding their engagement — a powerful sign of stickiness and long-term revenue potential.
The Prime Risks to PLTR’s Valuation
Palantir’s stock commands an EV/EBITDA (TTM) multiple of 715.49 versus a sector median of just 17.07. Using traditional valuation approaches — such as EV/EBIT multiples, five-year DCF EBITDA exits, and P/E multiples — I arrive at a fair value of $85, which would imply roughly 54% downside from current levels.
However, I believe these conventional models fail to fully capture Palantir’s long-term optionality in AI, government contracts, and commercial data solutions. If the company continues delivering extraordinary revenue growth, expanding margins, and defending its leadership in AI-powered analytics, it could grow into its premium multiple over time.
Is Palantir Technologies a Buy, Sell, or Hold?
Professional market analysts have assigned Palantir a Hold rating based on 20 analyst reviews: five Buys, 13 Holds, and two Sells in the past three months. PLTR’s average stock price target is $154.56, implying ~16% downside over the next twelve months.
Following Q2’s beat, several analysts raised their targets. Wedbush’s Daniel Ives lifted his price target from $160 to a Street-high $200, citing “another eye-popping quarter for the Messi of AI” and a “golden path to become the next Oracle.”
UBS raised its target from $110 to $165 while maintaining a Neutral rating, citing the company’s long streak of consecutive quarters of revenue growth acceleration. The firm attributes Palantir’s performance to a confluence of mega-trends in AI application development, investments at the data layer, and the modernization of defense technology.
Palantir’s Exceptional Growth Comes at a Higher Price
Palantir’s Q2 results confirm its position as a leader in AI-driven data analytics. With record revenue, expanding customer relationships, and unmatched free cash flow margins, the business is firing on all cylinders. Its entrenched government contracts, surging commercial demand, and high retention rates create a competitive moat that few rivals can match.
Valuation is the key risk. At current levels, Palantir must sustain extraordinary growth and protect its market position against fast-moving AI competitors to justify its multiple. I believe it can, making PLTR one of the most compelling — if expensive — ways to invest in the AI revolution.