Palantir Technologies Inc (NASDAQ: PLTR) has long been the Pentagon’s favorite software company. That’s not a slur. It’s simply how the business earned its reputation.
For years, government contracts supplied credibility, drove most of the growth, and gave investors an easy way to explain what Palantir actually did. The company reported another blockbuster quarter, beating expectations with non-GAAP EPS of $0.41 on $1.94 billion in revenue while lifting its full-year revenue outlook once again, and causing the stock to surge about 16%.
The first few pages looked like another textbook Palantir earnings beat. Except that Palantir this quarter made a huge statement against the “pentagon” label, and with heavy numbers to back it up
America’s Boardrooms Are Growing Faster Than Washington
149%. That’s how much Palantir’s U.S. commercial revenue grew over the past year, reaching $764 million. The government business – long regarded as the company’s heartbeat – grew a still-impressive 40%, a number most software companies would build an entire earnings narrative around. This quarter, it looked almost ordinary beside what was happening on the commercial side.
The pace of customer commitments explains why. You see, Palantir signed 220 deals worth more than $1 million during the quarter. Seventy-three exceeded $10 million while 15 crossed the $100 million mark. U.S. commercial total contract value jumped 153% to $2.13 billion, and remaining deal value climbed 124% to $6.24 billion. Those figures tell me companies aren’t experimenting with Palantir’s software anymore, they’re weaving it into how they expect to operate years from now, which is a fundamentally different relationship than a pilot program or an annual subscription renewal. In other words, while government contracts built Palantir’s reputation. Commercial customers are rebuilding its identity.
Last Year’s Revenue Doesn’t Even Cover This Year’s Profit
Alex Karp pointed out that Palantir generated more profit this quarter than the company generated total revenue in the same quarter a year ago. That’s the kind of statement that makes you put the earnings release down and go back to the financial statements to verify it, and the numbers back him up completely.
Revenue nearly doubled to $1.94 billion, yet profitability expanded even faster, which is the exact sequence a scaling software business is supposed to produce but rarely actually delivers. GAAP operating income climbed to $908 million. Adjusted operating income reached $1.21 billion. Adjusted free cash flow came in at $1.22 billion. Suggesting that the company is becoming more efficient as its software deepens inside existing customer relationships, which is what happens when the product solves a problem that compounds in value the longer it runs.
Winning a customer is easy to celebrate. Keeping that customer long enough for margins to widen, cash flow to accelerate, and profits to compound is where enduring software businesses separate themselves from ones that simply look impressive on a quarterly beat. I came away from this section of the report thinking less about AI and more about how fast the business model is stronger.
An End To The Valuation Debate?
Almost every discussion about Palantir circled back to the same question: how can a company trading at this multiple possibly justify it?
Post earnings, the stock opened at $144.47, hit a high of $147.50, and closed at $145.75 – up 16% on the session – on volume of 2.50 million shares that exceeded recent average activity by a significant margin.
More importantly, that move sliced through the 20-day moving average at $129.28 and the 50-day at $130.66 simultaneously in a single session, two levels that had been capping every meaningful rally attempt since the stock rolled over from its February highs near $185. The 200-day moving average at $152.45 is the next meaningful test and the level I’d watch as the stock decides whether this is a breakout or a bounce. Clearing it on similar volume would confirm the structural shift. Stalling here would tell you institutions are trimming into strength rather than adding.
The Customers Reached This Conclusion Before Investors Did
As much as this quarter tried to convince me, I don’t think Palantir stopped being a government company this quarter.
The Pentagon isn’t going anywhere. Neither are the intelligence agencies and defense contracts that built Palantir into what it is today. But after reading this report, corporate America has become equally important to the next chapter of this business because the customer dynamics are structurally different. Governments buy carefully and renew predictably. Businesses buy repeatedly and expand aggressively when the software works, and when hundreds of companies are signing eight- and nine-figure contracts within a single quarter, the investment case stops being “Washington spending” and becomes something harder to cap.
I’ve heard people call Palantir expensive for years. Maybe it is. But customers don’t commit billions of dollars because a stock trades at a rich multiple. They commit because the software solves a problem worth paying for. The 153% growth in commercial contract value, the 124% growth in remaining deal value, and the 220 deals signed in a single quarter all suggest those customers reached their conclusion a while ago. Wall Street is only now beginning to catch up.
