Key Morningstar metrics for Palantir

  • Fair Value Estimate: $153
  • Morningstar Rating: ★★★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Very High

What we thought of Palantir’s earnings

Palantir PLTR shares are up more than 10% after second-quarter results delivered record growth rates in US commercial revenue (150%) and US government revenue (90%), along with all-time highs in operating margins (62%), net retention (157%), and free cash flow margin (63%).

Why it matters: Palantir has the best growth and margin profile in our software coverage, but its valuation is demanding. Ostentatious growth is needed to placate investors, and we got that this quarter. We think the current share price makes sense, but there’s little margin for error.

  • For an investor to achieve a 10% return, Palantir must benefit from multiple compression over the next five years while growing at roughly a 45% average annual rate. This growth rate would place it in the top quintile of previously realized growth rates for our software coverage since 2010. Difficult, but not impossible.
  • While most companies would salivate at adding 35% more US commercial customers year over year, we are more impressed by net retention, US commercial revenue, and expanding margins. This combination suggests the platform is seeing deeper deployments and scaling incredibly well.

The bottom line: We maintain our $153 fair value estimate for narrow-moat Palantir. We see the business thesis strengthening as customers demand model portability, data sovereignty, and governed actions in artificial intelligence deployments, but we believe the share price is adequately capturing Palantir’s impressive trajectory.

  • We believe Palantir’s ontology—the topological map that automates advanced decisioning by connecting customers’ data silos—is differentiated and hard to reproduce with frontier model solutions or cloud platforms today, but given the rapid pace of model advancements, we assume growth normalizes beyond the next 10 years.