Data analytics firm Palantir Technologies Inc. reported fourth-quarter results after Monday's market close, revealing revenue that surpassed market expectations with a substantial 70% year-over-year increase to $1.41 billion. Concurrently, the company's revenue guidance for the next quarter also exceeded expectations, coming in 15.3% higher than analysts' initial forecasts. The strong performance spurred an approximately 8% rise in the company's stock during after-hours trading on Monday.
Here are the key highlights from Palantir's earnings report:
Key Financial Data:
Revenue: $1.41 billion, exceeding analyst expectations of $1.34 billion (a 70% year-over-year increase, beating estimates by 4.9%). Government Revenue: Government sector revenue grew 66% year-over-year to $570 million, also surpassing the $522 million analysts had anticipated for this segment. Commercial Revenue: Surged 137% year-over-year to $507 million, higher than the market's projection of $479 million; the total value of remaining performance obligations for U.S. commercial contracts grew 145% year-over-year to $4.38 billion. Adjusted Earnings Per Share (EPS): $0.25, beating the analyst estimate of $0.23 (exceeding expectations by 8.6%). Adjusted Operating Income: $798.5 million, higher than the analyst forecast of $701.1 million (operating margin of 56.8%, beating expectations by 13.9%). Customer Count: Increased 34% year-over-year and 5% quarter-over-quarter.
Performance Guidance:
First Quarter Revenue: Expected to be between $1.532 billion and $1.536 billion, with the midpoint exceeding the analyst consensus of $1.32 billion. Full-Year 2026 Revenue: The company anticipates full-year revenue to be in the range of $7.182 billion to $7.198 billion, also higher than the FactSet consensus estimate of $6.22 billion.
Following the earnings release, the stock climbed about 8% in after-hours trading, after closing the regular session at $147.77. The stock had declined 29% from its peak last November. Year-to-date through Monday's close, the stock was down 17%.
Government business demand surged, but cooperation with ICE enforcement sparks controversy. Palantir primarily provides software to clients for consolidating, managing, and analyzing massive datasets. Capitalizing on the broader AI boom, the company's profitability has repeatedly reached new highs. Over the past two years, the stock has surged nearly 800%, adding approximately $315 billion to its market capitalization. Reports indicate that Palantir's robust performance reflects strong demand for its artificial intelligence technology from both U.S. government and commercial clients. Simultaneously, Palantir's role in assisting the Trump administration's agenda to deport immigrants is facing increasing scrutiny. A significant portion of Palantir's U.S. revenue stems from government contracts, with users including U.S. Immigration and Customs Enforcement (ICE), the Internal Revenue Service, and the Department of Defense. Palantir reported $570 million in revenue from U.S. government contracts last quarter, a 66% annual increase. Sales to U.S. commercial clients reached $507 million, more than doubling from a year ago. Both figures exceeded analyst expectations. Last month, the company signed a $448 million contract with the U.S. Navy to provide enhanced data support for the maintenance and upgrades of nuclear submarines. However, over the past year, criticism from current and former employees, as well as elected officials, regarding Palantir's collaboration with ICE has cast a shadow over the stock's strong performance. ICE has a contract with Palantir to use its technology to develop applications for locating and tracking immigrants targeted by the agency for deportation. Criticism intensified last month following escalated immigration enforcement actions in Minneapolis that resulted in the deaths of two U.S. citizens. Palantir has consistently defended its work with ICE in public statements. According to an analysis of government contract announcements, Palantir has secured $81 million in contracts from ICE since January 2025. This includes a $30 million contract signed last April to establish a system aimed at streamlining the "screening and apprehension operations for illegal immigrants."
Facing skepticism over excessive valuation. In a letter to shareholders, CEO and Co-founder Alexander Karp described the accelerating revenue growth as a "cosmic-level return" for the company's supporters. He stated that the performance is "driven by a growing cohort of increasingly discerning U.S. enterprises and institutions that truly grasp the value of AI." He told media outlets,
"It is, in my knowledge, the undisputed best performance in the tech industry over the past decade." "If you're not spending money on this, then you're not investing in things that are keeping up with the momentum."
Despite its weak performance this year, the company's $350 billion market capitalization still places it among the higher-valued stocks in the S&P 500 index. According to a November analysis based on inflation-adjusted FactSet market data (which dates back to 1984), no company currently in the S&P 500 has ever reached Palantir's level of "valuation relative to revenue scale." Late last year, hedge fund manager Michael Burry, famous for shorting mortgage debt in the late 2000s and depicted in the film *The Big Short*, disclosed a short position against Palantir. Burry also posted on social media platform X, issuing broad warnings about an AI bubble risk. Subsequently, as investors rotated away from AI stocks amid valuation concerns and fears of an AI bubble, the stock recorded its worst month in two years. At the time, Karp called the move "just crazy" in a media interview and accused it of being "market manipulation." In his shareholder letter, Karp asserted that despite rising market pressure for AI companies to return to fundamentals, Palantir's profits are "pure, unmanufactured." He added that the company's commercial business benefits from demand for software that can provide the structural foundation for large language models. Karp wrote,
"Any company lacking a fanatical focus on the value created by these technological systems, and lacking the genuine ability to 'catch the mouse,' will ultimately fade into obscurity and be forgotten."
On Monday, William Blair analyst Louis DiPalma upgraded Palantir's stock rating from "Market Perform" to "Outperform," stating that the recent pullback has made the company's valuation "more reasonable."
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