By Martin Baccardax
Palantir Technologies, the most expensive stock in the S&P 500, might also be one of a handful of companies capable of performing one of the most crucial tasks in the current economy.
The data-analytics group, which boasts ties to both the U.S. Department of Defense and military organizations around the world, is not only making money from its artificial-intelligence expertise but also convincing companies, governments, and investors that it can do so at scale.
And at a time when investors are questioning the ability of megacap tech giants such as Microsoft, Google, and Amazon to translate massive AI spending into bottom-line profits, that credibility is becoming a rare and valuable commodity in a market showing little patience for software companies that promise more than they deliver.
Palantir is looking to grow its overall revenue by more than 60% this year, a staggering rate of growth considering it's working from a 2025 base of $4.48 billion. Its commercial business, which uses proprietary AI technologies to corral, sort, and analyze data to support decision-making, is expected to more than double to $3.14 billion -- just under half of its overall tally -- with the remainder coming from government contracts.
Operating earnings are forecast at roughly $4.1 billion, implying a profit margin of about 57.5% -- a sign of improving efficiency even as Palantir's Artificial Intelligence Platform $(AIP)$ continues to scale. In the three months ending in December, Palantir signed contracts worth $4.26 billion, including more than 60 deals valued at over $10 million each.
Fourth-quarter earnings rose 78% from the prior year, while adjusted operating income came within a whisker of $800 million.
"What's clear right now is that the market isn't rewarding AI hype, it's rewarding production," said Jake Behan, head of capital markets at Direxion. "There is a broader AI monetization test happening across the market right now. This quarter helped position Palantir as a company showing AI in real workflows and generating real revenue."
That, in turn, speaks to the group's larger value, and in some ways underscores a willingness from investors to buy into a stock that's trading at around 142 times its projected earnings and about 45 times forecast revenue. Companies wouldn't be adopting Palantir's platform -- or paying it fees -- if it wasn't delivering measurable returns for their own businesses.
Ruben Dalfovo, investment strategist at Saxo Bank, said Palantir is proving it can make AI "useful inside real organizations, not just impressive in a lab."
"The commercial acceleration suggests that buyers are moving from pilots to production," he said. "In other words: fewer 'proof of concept' projects, more 'this is how we run the business' contracts."
"Palantir's story used to be hard to pin down: powerful technology, big claims, and a lot of debate," he added. "This quarter makes the story easier, because it looks like a business that sells outcomes, signs larger contracts, and turns those contracts into real cash."
That's not to say the valuation risks aren't real. Palantir shares were among the market's worst performers heading into last night's earnings, having fallen more than 17% since the start of the year amid a nearly 30% slump from their mid-November peak.
Some of that drop was being clawed back in early trading Wednesday, with shares up 5.2% at $155.48.
Still, buying into the stock at these levels requires faith. Mizuho analysts wrote in a note published Tuesday that while Palantir is "increasingly well-positioned to benefit from long-term trends in AI, government digital transformation, and industrial monetization," the stock's valuation remains stretched.
D.A. Davidson's Gil Luria agrees.
"We continue to believe Palantir is the best story in all of software, and (as usual) only valuation leads us to maintain our neutral rating," he wrote in a note published Tuesday. "More important than the stock, we appreciate Palantir's mission and moral clarity."
Morality aside, Palantir might have something few of its rivals can duplicate: a real-world answer to the market's most persistent question about AI -- whether it can reliably generate profits.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 03, 2026 10:08 ET (15:08 GMT)
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