Palantir Grew 93%. Its Valuation Still Grew Faster.

Palantir’s Q2 FY2026 results represented another acceleration rather than merely a continuation of the prior trend. Revenue reached $1.935 billion, up 93.0% from $1.004 billion in Q2 FY2025 and 19.0% sequentially. U.S. revenue increased 115.0% year over year to $1.573 billion. Within that total, U.S. commercial revenue grew 149.0% to $764 million, while U.S. government revenue rose 90.0% to $809 million, according to the Palantir Q2 FY2026 earnings release.

The change was not confined to revenue. Gross margin increased to 84.7% from 80.8% a year earlier. GAAP income from operations reached $912 million, lifting GAAP operating margin to 47.1% from 26.8%. Diluted GAAP earnings per share increased to $0.41 from $0.13. Stock-based compensation was still substantial at $265 million, but the business absorbed that expense while reporting materially higher GAAP profitability.

Cash conversion also improved. Cash from operations was $1.216 billion, and subtracting $14.6 million of capital expenditure produced GAAP free cash flow of approximately $1.202 billion. That compares with approximately $532 million in the prior-year quarter. Management’s adjusted free-cash-flow measure was $1.220 billion, but the report card uses GAAP cash from operations less capital expenditure for consistency.

Commercial contract activity provides evidence that the growth was supported by new commitments rather than revenue recognition alone. Palantir closed 220 deals worth at least $1 million, including 73 worth at least $10 million. Total contract value rose 49.0% to $3.373 billion, while U.S. commercial total contract value increased 153.0% to $2.132 billion. U.S. commercial remaining deal value reached $6.238 billion, up 124.0% year over year and 27.0% sequentially.

Management consequently raised FY2026 revenue guidance to $8.150-$8.158 billion, a midpoint of $8.154 billion and expected growth of approximately 82.0%. U.S. commercial revenue is now expected to exceed $3.424 billion, representing growth of at least 134.0%. Adjusted operating income guidance increased to $4.889-$4.897 billion, and adjusted free-cash-flow guidance increased to $4.5-$4.7 billion. Q3 revenue guidance of $2.160-$2.164 billion implies that management expects the sequential expansion to continue.

The central positive change is the combination of growth and GAAP operating leverage. Palantir has moved from a 10.8% operating margin in FY2023 to 31.6% in FY2025 and 47.1% in the latest quarter. Revenue growth has accelerated at the same time. That is a stronger economic profile than a software company producing growth through proportional increases in sales, research, and administrative spending.

The mix of growth also matters. U.S. commercial revenue increasing 149.0% weakens the argument that Palantir’s opportunity is principally tied to government procurement. Government revenue nevertheless grew 90.0%, so commercial expansion did not require weakness in the established public-sector business. The result is a broader growth engine, although the release does not provide enough information to determine customer concentration or the durability of revenue at individual accounts.

Contract metrics reinforce the demand signal but require discipline in interpretation. Palantir states that total contract value and remaining deal value can presume the exercise of customer options, while most contracts contain termination provisions. These figures therefore indicate sales activity and potential future revenue, not a guaranteed backlog. The more important confirmation will be whether reported revenue continues to track the rise in contract value without a deterioration in cash collection or margins.

The balance sheet reduces financial risk. Palantir reported $9.2 billion of cash, cash equivalents, and short-term U.S. Treasury securities, with no supplied debt balance. Accounts receivable increased to $1.485 billion from $1.042 billion at the end of FY2025, but operating cash generation remained strong. Liquidity is therefore not the principal thesis risk; valuation, execution, and the duration of exceptional growth are.

The quarter strengthens the fundamental thesis but does not resolve the price question. At $165.86, Palantir has a supplied market capitalization of $426.0 billion, trades at 143.0 times trailing earnings, and offers a trailing free-cash-flow yield of 0.8%. Those metrics leave little room for a normal deceleration from the current growth rate.

Because SageNoodle has no prior Palantir coverage, this update establishes rather than revises fair value. We use enterprise value to FY2026 revenue because management supplied a narrow full-year revenue range, while a comparable forward GAAP EBITDA figure was not disclosed. The snapshot’s EV/EBITDA field is therefore shown as 0 to denote that the metric is unavailable from the supplied data, not that the company has no EBITDA.

All three scenarios use the $8.154 billion midpoint of FY2026 revenue guidance, $9.2 billion of cash and short-term U.S. Treasury securities, no debt, and 2.569 billion diluted shares. The valuation multiples are explicit analytical assumptions. Bear, base, and bull multiples are 20, 32, and 48 times FY2026 revenue, respectively. These are demanding multiples even before considering that revenue growth will eventually slow.

The base-case calculation is: $8.154 billion of revenue multiplied by 32, plus $9.2 billion of net cash, divided by 2.569 billion diluted shares. That produces fair value of approximately $105.20 per share. The current price is 57.7% above that value, or the base-case fair value is 36.6% below the market price. Under the stated verdict rule, the shares are Overvalued.

The base multiple recognizes Palantir’s 93.0% quarterly growth, 47.1% GAAP operating margin, cash-rich balance sheet, and raised guidance. It also assumes that the current quarter is evidence of durable operating leverage rather than a temporary peak. Even so, the current price sits above our $156.00 bull-case value. Supporting $165.86 would require either a multiple above 48 times guided FY2026 revenue, revenue above current guidance, or both.

The valuation conclusion could be too conservative if Palantir sustains growth near current levels beyond FY2026 while preserving GAAP operating margins around the latest quarter. A business compounding revenue at an unusually high rate with limited capital requirements can justify a premium that conventional software multiples fail to capture. Continued U.S. commercial growth above 100%, accompanied by rising revenue guidance, would make the bull case increasingly relevant.

Conversely, the operating thesis would weaken if contract values fail to convert into recognized revenue. The Palantir Q2 FY2026 earnings release notes that contract options may not be exercised and that most contracts can be subject to termination provisions. Slower conversion, customer budget changes, or longer implementation cycles could expose a gap between headline deal metrics and economic value.

Margins also deserve scrutiny. Stock-based compensation increased to $265 million from $160 million a year earlier. GAAP profitability rose much faster, which is favorable, but sustained equity compensation can dilute per-share value even when it is excluded from adjusted results. The diluted weighted-average share count was 2.569 billion, slightly above 2.563 billion in the prior-year quarter.

Finally, Palantir identifies long and unpredictable sales cycles, dependence on attracting and expanding customers, complex implementations, geopolitical and macroeconomic conditions, and risks involving artificial intelligence and customer data. With the market already pricing exceptional results, an ordinary slowdown could have an outsized valuation effect even if the underlying business remains profitable and cash generative.