Palantir's Q2 2025 Revenue Surges 48%

Palantir's second-quarter financial report for 2025 has been met with high praise from a prominent financial analyst at UBS. The analyst noted that the company's narrative is "flawless," leading to an upward revision of the target price for Palantir's stock from 110 dollars to 165 dollars. This positive assessment comes as Palantir continues to demonstrate strong revenue growth, marking the eighth consecutive quarter of increased revenue.

The analyst highlighted that Palantir's revenue growth accelerated from 13% in the second quarter of 2023 to 48% in the second quarter of 2025. The company's revenue has reached an annualized level of 400 million dollars, a significant milestone that underscores its financial strength and market potential. Despite the impressive performance, the analyst noted that valuation remains a key challenge, with Palantir's current valuation reaching 136 times its free cash flow for the fiscal year 2026. This has led to a maintained "neutral" rating for the stock.

Palantir's second-quarter financial report exceeded market expectations across the board. The company reported a total revenue of 100 million dollars, a 48% increase year-over-year, surpassing the market's forecast of 93.93 million dollars. This marks the eighth consecutive quarter of revenue growth, with an annualized revenue level exceeding 400 million dollars. The adjusted operating profit was 46.44 million dollars, an 83% increase year-over-year, with a profit margin of 46%, three percentage points higher than market expectations. The adjusted earnings per share were 16 cents, exceeding the consensus estimate of 14 cents.

Both the commercial and government sectors showed strong growth, contributing 45% and 55% of total revenue, respectively, with year-over-year growth rates of 47% and 49%. Notably, the U.S. commercial sector experienced the most rapid growth, with quarterly revenue reaching 306 million dollars, a 93% year-over-year increase, and an annualized revenue level of 120 million dollars.

Driven by these strong financial results, Palantir has raised its full-year guidance. The company now expects revenue for 2025 to be between 414 million dollars and 415 million dollars, up from the previous range of 389 million dollars to 390 million dollars, and significantly higher than the market consensus of 391 million dollars. The full-year adjusted operating profit is expected to be between 191 million dollars and 192 million dollars, with adjusted free cash flow projected to be between 180 million dollars and 200 million dollars. The company also anticipates that its U.S. commercial business will generate more than 130 million dollars in revenue for the year.

The outlook for the third quarter is equally robust. Palantir expects revenue to be between 108 million dollars and 109 million dollars, significantly higher than the market's forecast of 98.54 million dollars. The adjusted operating profit for the third quarter is projected to be between 49.3 million dollars and 49.7 million dollars.

The analyst attributed Palantir's growth to three key trends: the surging demand for customized AI applications, increased investment in data infrastructure, and the modernization of defense technology. The company's strong performance in both government and commercial sectors was highlighted, with the commercial sector contributing 45% of revenue and growing at 47% year-over-year, and the government sector contributing 55% of revenue and growing at 49% year-over-year. The U.S. commercial sector, in particular, showed remarkable growth, with quarterly revenue of 306 million dollars, a 93% year-over-year increase, and an annualized revenue level of 120 million dollars. The analyst noted that while this is not an official guidance, the CEO expressed a goal of achieving a 10-fold increase in this business over the next five years, implying an average annual growth rate of 58%.

The analyst also pointed out that while the financial report was nearly flawless, the only area of concern was the 3% year-over-year decline in international commercial business. As a result, the analyst raised the revenue growth forecast for 2025 from 38% to 47%.

From an industry perspective, the analyst noted that this financial report reinforces the market consensus that demand for customized AI applications and data modernization remains strong, benefiting companies like Snowflake and Databricks. However, the resilience of Palantir's U.S. government business may not be applicable to all SaaS companies with federal contracts. The analyst suggested that the strong performance of software companies like Microsoft and Palantir could boost market confidence in investing in infrastructure, data, and AI-related stocks, rather than traditional subscription-based SaaS companies.

In terms of valuation, the analyst noted that Palantir's valuation based on its 2026 fiscal year free cash flow is 136 times. By extending the valuation model to the 2027 fiscal year, the analyst raised the target price to 165 dollars (previously 110 dollars), based on a valuation of 105 times the 2027 fiscal year free cash flow (previously 120 times the 2026 fiscal year free cash flow). This premium is attributed to Palantir's exceptional growth and profitability.