Palantir Technologies reported Q2 revenue of $1.94B, a 93% jump from a year ago, beating analyst estimates and sending shares higher.
The standout number was US commercial revenue, which surged 149% year-over-year to $764M. US government revenue grew 90% to $809M.
US revenue now makes up 81% of the overall business. Adjusted free cash flow hit $1.22B, the first time Palantir has crossed the $1B mark in a single quarter.
Sovereign AI as a growth engine
CEO Alex Karp credited demand for what he calls sovereign AI, letting customers run models on their own infrastructure and keep full ownership of their data.
Most AI adoption, Karp argued, has pushed companies to hand over proprietary processes to large lab models, which he said creates resistance inside enterprises.
Palantir's approach, built in part through its ongoing Nvidia partnership with Nvidia, lets customers customize models without that tradeoff.
Karp also publicly opposes the token-based revenue model dominant among frontier AI labs, arguing it gamifies what he calls the most significant development in modern economic history.
"Our results represent a subset of the economic value that our software has created for our customers."
Alex Karp, Palantir CEO
Palantir raised its full-year revenue guidance to between $8.15B and $8.16B, up from a prior range of $7.65B to $7.66B, a lift of roughly $500M.
The company now expects US commercial revenue to exceed $3.42B in 2026, up from prior guidance of $3.22B. Q3 revenue guidance of $2.16B to $2.164B also topped the Wall Street estimate of $2.00B.
The company's remaining US commercial deal value more than doubled to $6.24B, and total contract value closed in the quarter reached $3.37B, up 49% year-over-year.
The valuation debate hasn't gone away
Despite the blowout numbers, Palantir's stock has lost roughly 25% to 29% year-to-date, hurt by a broader software selloff and concerns that the AI software trade is losing momentum.
Before earnings, the stock traded at roughly 67 times forward earnings, down from a peak of 247 in Oct. 31. However, it still remains among the 15 most expensive names in the S&P 500. On a price-to-sales basis, it's the most expensive stock in the index.
Of the 33 analysts tracked by Bloomberg who cover the stock, 22 have buy ratings, with a consensus price target implying more than 50% upside over the next 12 months.
Karp told CNBC the strong growth looks like it will continue for at least another 18 months, though the gap between Palantir's fundamentals and its stock price remains the central question for investors.
