Palantir Surges on Strong Q4 Earnings and Upbeat 2025 Outlook

Palantir Technologies (PLTR) delivered a standout fourth-quarter earnings report, surpassing analyst expectations on both earnings per share and revenue. The software and AI-driven analytics company reported adjusted EPS of $0.14, beating the consensus estimate of $0.11. Revenue for the quarter reached $827.5 million, reflecting a robust 36% year-over-year growth, significantly ahead of Wall Street’s expectation of $775.9 million.

The company’s strong quarter was fueled by continued expansion in both its government and commercial businesses, with U.S. commercial revenue growing by 64% and U.S. government revenue increasing by 45%. Management also provided a bullish 2025 revenue outlook of $3.74 billion to $3.76 billion, far exceeding analysts’ consensus of $3.54 billion. Palantir’s impressive guidance and sustained growth momentum sent shares soaring more than 20% in pre-market trading, testing the $100 level for the first time in its history.

Government and Commercial Growth Continue to Accelerate

Palantir’s government business remained a major driver, with total revenue from the segment climbing to $455 million, marking a 40% year-over-year increase. U.S. government revenue led the charge, accelerating 45% as agencies continued to deepen their reliance on Palantir’s software for defense and intelligence operations.

However, the real standout was the commercial division, particularly in the U.S. market. Palantir’s U.S. commercial business grew 64% year-over-year to $214 million, reflecting strong enterprise demand for AI-driven data analytics. The company’s ability to double its commercial backlog signals continued momentum, with management projecting U.S. commercial revenue to exceed $1.08 billion in 2025, representing a growth rate of at least 54%.

Profitability and Margins Improve Despite Lower Operating Profit

While revenue and demand trends were strong, the operating profit picture was mixed. Palantir reported Q4 operating profit of just $11 million, a staggering 83% decline from the prior year, missing estimates of $84.8 million. The drop was attributed to higher investments in AI infrastructure and hiring, as the company continues to expand its capabilities.

However, on an adjusted basis, Palantir posted a 78% increase in adjusted operating profit to $372.5 million, far exceeding estimates of $309.6 million. The company also expanded its adjusted operating margin to 45%, up from 34% a year ago, reflecting improved efficiency.

Adjusted EBITDA surged 75% to $379.5 million, while free cash flow remained strong at $517.4 million, up 70% from the prior year. Palantir’s cash and cash equivalents more than doubled to $2.1 billion, reinforcing its strong financial position.

Guidance Signals Continued Strength

Palantir’s 2025 guidance was another key highlight, with management projecting first-quarter revenue between $858 million and $862 million, well above analyst expectations of $802.9 million. The company also expects adjusted operating profit between $354 million and $358 million, a sizable beat compared to $300.4 million expected by analysts.

For the full year, revenue is forecasted at $3.74 billion to $3.76 billion, representing 31% growth—well above consensus estimates. The company also expects adjusted free cash flow of $1.5 billion to $1.7 billion, reinforcing its ability to self-fund expansion efforts.

CEO Alex Karp emphasized the company’s unique positioning in the AI revolution, highlighting how Palantir’s platform is rapidly becoming the backbone of enterprise AI applications. He noted that the company has been preparing for this moment for more than 20 years, and the demand outlook remains strong across both government and commercial sectors.

Market Reaction and Analyst Responses

The stock reaction was swift, with Palantir shares jumping more than 20% pre-market, testing the $100 level for the first time. The strong guidance and continued acceleration in key segments fueled enthusiasm among investors, especially retail traders, who have been a vocal supporter of the stock.

Despite the strong results, analyst opinions remain mixed. Morgan Stanley upgraded the stock to Equal Weight, raising its price target to $95 from $60, citing Palantir’s sixth consecutive quarter of accelerating growth. RBC raised its price target to $40 but maintained an Underperform rating, questioning whether management’s guidance was conservative or overly aggressive. Mizuho lifted its target to $80 from $44, acknowledging Palantir’s execution but arguing that the company’s valuation—now trading at 56x estimated 2026 revenue—remains difficult to justify.

Valuation Concerns Persist, But Bulls Remain in Control

Despite the bullish price action, some analysts remain cautious about Palantir’s valuation and long-term growth runway. At over 120x estimated 2026 free cash flow, Palantir is trading at a premium multiple relative to most software companies, even amid strong execution.

However, Palantir’s track record of beating expectations, accelerating growth, and expanding margins continues to attract investor enthusiasm. With AI adoption accelerating, demand for Palantir’s software remains robust, particularly as enterprises seek data-driven decision-making platforms.

Looking ahead, Palantir’s ability to sustain its high growth rate, particularly in the commercial sector, will be a key test. While its government contracts provide stability, the stock’s lofty valuation leaves little room for error. Any slowdown in adoption or unexpected headwinds could result in sharp corrections, as seen in prior high-multiple tech stocks.

Bottom Line: A Strong Quarter, but Valuation Risks Loom

Palantir delivered one of its strongest earnings reports to date, with revenue growth accelerating for the seventh consecutive quarter and margins expanding sharply. The company’s commercial business continues to outpace expectations, and its 2025 outlook suggests durable long-term growth.

However, the stock’s ultra-premium valuation remains a point of contention among analysts. While some see further upside given strong execution, others argue that the current price already bakes in significant future growth expectations.

For now, the bulls remain in control, as Palantir continues to march higher on the back of its AI-driven growth story. Whether the stock can sustain its gains in the face of elevated expectations will be a key question for investors in the months ahead.