Palantir's Q2 Earnings: A Crucial Test for the Company's Valuation

Palantir Technologies (PLTR) is set to release its quarterly earnings on Aug. 4, with high expectations from investors. The company's software integrates data analytics with AI and has seen growth in multiple areas, including a 45% increase in government revenue and a 33% increase in commercial revenue in Q1. However, Palantir's valuation is hard to justify, with an 800% stock increase over the past year and a half despite only a 39% revenue growth in Q1. The mismatch between business and stock growth could dampen any positive effects from a strong quarter.

Palantir Technologies (PLTR) is poised to release its second-quarter earnings on Monday, August 4, with investors holding high expectations. The AI-powered software company has seen significant growth in various areas, including a 45% increase in government revenue and a 33% increase in commercial revenue in Q1 2025. However, Palantir's stock has surged by 800% over the past year and a half, despite only a 39% revenue growth in Q1. This discrepancy between business performance and stock growth could temper any positive impact from a strong earnings report.

Palantir's stock reached an all-time high of $160.39 on July 25, reflecting widespread investor optimism [1]. The company's 14-day Relative Strength Index (RSI) is at 65.30, indicating potential overbought conditions, but the market remains undeterred. The company's forward earnings multiple of 433.88x and price-sales ratio of 130.8x are significantly higher than those of major tech giants, suggesting that the market is pricing in continued acceleration in growth.

Analysts forecast PLTR to deliver earnings per share (EPS) of $0.08 for the second quarter, a significant increase from $0.03 a year ago. The company's management has guided Q2 revenue between $934 million and $938 million, representing roughly 38% year-over-year growth at the midpoint. However, the options market is already pricing in a potential move of about 10.48% in either direction following the earnings release, indicating potential for significant post-earnings volatility.

Palantir's U.S. commercial business has now surpassed a $1 billion annual run rate, driven by new customer wins and deepening engagement with existing clients. The company's U.S. operations are thriving across both commercial and government sectors, with the commercial segment standing out with 71% year-over-year growth in Q1. However, the company's valuation is hard to justify, with a forward earnings multiple of 433.88x and a price-sales ratio of 130.8x.

In conclusion, Palantir is heading into its Q2 earnings report with strong momentum, particularly in its U.S. commercial and government segments. However, the company's valuation is significantly higher than that of major tech giants, and the mismatch between business and stock growth could dampen any positive effects from a strong quarter.

References:
[1] https://www.barchart.com/story/news/33718847/should-you-buy-palantir-stock-ahead-of-q2-earnings-on-august-4
[2] https://www.fool.com/investing/2025/07/26/missed-palantirs-huge-100-run-in-2025-these-could/