May The Fourth Be With Palantir (Earnings Preview)

Palantir was reiterated at Buy with a $224 price target, implying 55% upside. The key growth driver is US Commercial revenue, which rose 109% YoY in FY25 and is forecast to accelerate to 115% YoY in FY26. Despite a high 108x forward P/E, the note argues rapid earnings growth and rising inference demand should drive multiple contraction over time.

Analysis

The market is still underestimating the reflexive effect of this kind of growth acceleration on PLTR’s terminal economics. Once a software business gets into triple-digit growth in a large segment, the real catalyst is not the headline multiple expansion, but the way rapidly rising forward earnings compress the effective valuation before consensus can fully reset. That creates a window where the stock can keep working even if the starting multiple looks absurdly high on next-year numbers.

The second-order winner is the broader AI inference stack: PLTR’s demand is a proxy for customers moving from experimentation to production workloads, which tends to pull through cloud consumption, data infrastructure, and model-serving tooling. That helps hyperscalers and selected infrastructure names, but it also raises competitive pressure on legacy enterprise software vendors whose products look static relative to PLTR’s operating momentum. In other words, the risk is not just share shift inside analytics, but a re-rating of what “mission-critical” software growth deserves across the sector.

The main bear case is timing, not thesis. If management fails to sustain this growth rate for even one or two quarters, the stock can de-rate violently because expectations are now front-loaded and the multiple is carrying a lot of perfection. The near-term catalyst path is earnings guidance credibility over the next 1-2 quarters; the medium-term catalyst is whether AI inference spend becomes an annual budget line item rather than a discretionary pilot, which would support the bull case over 6-18 months.

Consensus may be underpricing how quickly operating leverage can appear once revenue scale compounds at this pace. If gross margin holds and sales efficiency remains exceptional, the market could begin valuing PLTR less like a high-growth software name and more like a durable platform with expanding FCF visibility. That said, any deceleration toward merely strong growth will likely be punished more than usual because the current setup embeds a scarcity premium on sustained hypergrowth.

Key Decisions for Investors

• Maintain/accumulate a core long PLTR position on 1-3 month pullbacks; use weakness to build because the risk/reward is driven by forward estimate revisions, not current-year valuation.
• Buy PLTR call spreads 3-6 months out to express upside with defined risk; structure around the next two earnings prints, where guidance credibility is the key catalyst.
• Pair trade: long PLTR / short a slower-growth enterprise software basket over 2-4 quarters to isolate relative multiple expansion from broad AI enthusiasm.
• If already long PLTR, hedge with out-of-the-money puts into earnings; the stock’s elevated expectations make post-print gap risk asymmetric even if the fundamental thesis stays intact.
• Watch hyperscaler capex and AI inference-related commentary over the next 1-2 quarters; a broadening of production AI spend would reinforce the PLTR setup and justify adding on confirmation.