Palantir Stock Ready to Face Real Test After the Bell as the Most Expensive Stock Must Justify Its Valuation

Palantir Technologies (PLTR) is set to report second-quarter earnings after the market closes on Monday, and the stakes couldn't be higher. As the most expensive stock in the S&P 500 by price-to-earnings ratio, Palantir is under intense pressure to deliver results that justify its sky-high valuation.

The stock has surged over 500% in the past 12 months, making it the top performer in the S&P 500 for both 2024 and 2025. As of Friday, it had already gained 104% year-to-date. That meteoric rise has pushed Palantir’s market cap up by roughly $300 billion over the past year alone — a stunning number for a company that remains in its early growth phase.

Analysts expect Palantir to post sales of $939.3 million for Q2, representing nearly 39% year-over-year growth. That includes an estimated $425 million in commercial revenue — much of it tied to artificial intelligence software — and about $513 million in government-related sales, up 38% from a year earlier. Adjusted earnings per share are expected to come in at $0.14, up 54% from Q2 2024, according to FactSet.

These numbers would mark the company’s second consecutive quarter of nearly 40% top-line growth and help maintain its narrative as a rare software company capable of scaling at both high speed and high margin. Palantir’s estimated organic revenue growth rate of 35% this year is the highest among the 100+ software companies tracked by DA Davidson, and it boasts an industry-leading 42% expected free cash flow margin.

Despite the impressive metrics, Palantir’s valuation has become a focal point of skepticism. Its forward price-to-earnings ratio stands at 229 — more than double that of CrowdStrike, the next most expensive tech stock, and roughly eight times that of its sector peers.

“The company is now in a position where they have to blow out numbers,” said Ted Mortonson, managing director at Baird. “They just have to absolutely annihilate the Street.”

Palantir also carries more "sell" or "hold" analyst ratings than "buy," reflecting widespread caution around its current price. Yet the stock continues to attract strong retail interest, fueled by optimism around its deep ties with the U.S. government, rapidly expanding commercial AI offerings, and increasing relevance in national security.

DA Davidson’s head of technology research, Gil Luria, called Palantir “one of the most high-momentum software companies” in the market but remains cautious, assigning a neutral rating due to its valuation.

While there were recent concerns that the U.S. government might reduce its reliance on certain tech contractors — including Palantir — the company quickly regained footing following a major announcement: a 10-year software procurement agreement with the U.S. Army and Department of Defense, valued at up to $10 billion. It’s one of the largest deals in Palantir’s history and serves as a significant tailwind for its government division.

Wedbush Securities’ Daniel Ives, a noted Palantir bull, sees this as a powerful validation of the company’s value to federal agencies and a foundation for future contract wins.

On the commercial side, Palantir’s growth hinges on converting AI pilot programs into long-term, high-value contracts. That’s no small task in a market increasingly defined by intense competition for both clients and top-tier AI talent.

Luria noted that the rising talent war is becoming a serious concern, as companies like Google and Meta offer massive compensation packages — some exceeding $200 million — to secure AI specialists. Palantir will need to stay competitive in both innovation and recruitment to maintain its edge.

Despite valuation warnings, some investors believe Palantir could be at an “Apple moment” — a transformative phase akin to the iPhone launch era. “If they’re in this Apple moment, which they very well could be,” said Jim Worden, CIO at The Wealth Consulting Group, “they could grow into their valuation.”

With Palantir trading at arguably "bubble-era" levels, Monday’s earnings report will serve as a key test of whether the company can meet — or exceed — the market’s lofty expectations.