Palantir Q2 2025 earnings preview: can fundamentals justify the premium?

When is Palantir reporting?

Palantir Technologies is set to deliver another impressive quarter when it reports second quarter (Q2) 2025 results on Tuesday, 5 August at 6.05am (AEST). 

Q2 2025 forecasts

• Adjusted earnings per share (EPS): $0.139
• Revenue: $940 million (48.2% year-over-year growth, flat quarter-on-quarter)
• Adjusted operating profit: $404 million
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA): $410 million
• Net income: $357 million

Historical performance builds credibility

Palantir's track record of beating expectations remains intact, having exceeded price-to-earnings (P/E) estimates in each of the past eight quarters. This consistency has built significant credibility with investors and helps explain why sentiment remains bullish despite the elevated valuation.

However, the trailing 12-month P/E of 663 times and forward P/E of 252 times highlight just how much growth is already priced in. At $156.24, the shares trade well above the consensus target of $115, suggesting notable downside risk if results disappoint.

Business segments are mixed 

Commercial segment leads growth trajectory

Commercial growth drives the narrative as Palantir's United States (US) Commercial segment remains the star, forecast to expand approximately 70% year-over-year. The company's Artificial Intelligence Platform (AIP) continues to gain traction across corporate America, with enterprises increasingly recognising the value of advanced data analytics. This commercial success represents crucial diversification away from Palantir's historical reliance on government contracts, offering more predictable revenue streams and longer-term strategic partnerships rather than project-based work. However, growth outside the US appears to be moderating, suggesting international expansion faces ongoing regulatory and competitive challenges.

Government contracts face new competition

Government segment faces competitive pressures with projected 36% growth in Q2 2025, representing solid but decelerating momentum. The concerning development is emerging competition for federal artificial intelligence (AI) budgets that Palantir has traditionally dominated. The US Defence Department's decision to award contracts worth up to $200 million to OpenAI, Anthropic, Google, and xAI for large-scale language model deployments marks a significant shift. This diversification suggests departments are moving away from single-vendor relationships, potentially impacting Palantir's ability to secure large, multi-year government contracts.

Partnership strategy balances growth and margins

Strategic partnerships offer acceleration potential through alliances with Accenture and other system integrators. These partnerships provide access to existing client relationships and ongoing projects, potentially boosting indirect sales and improving win rates against competitors like Databricks and Snowflake. However, partnerships also mean sharing revenue and potentially reduced margins, creating a balance between growth acceleration and profitability.

Five key factors for Q2 results

Beyond headline numbers, five factors will determine Palantir's post-earnings trajectory:

• Commercial segment momentum: sustainability of 70% growth rates and international expansion progress
• Government contract pipeline: impact of increased AI procurement competition on future revenue
• Partnership revenue contribution: progress on Accenture and system integrator channel development
• Margin sustainability: balance between growth investments and profitability targets
• Forward guidance tone: management outlook on maintaining exceptional growth rates

Valuation premium demands perfection

Despite upward revisions to 2025 sales-growth estimates by approximately 10 percentage points year-to-date, Palantir's premium valuation continues to expand. The 252 times forward P/E ratio demands sustained exceptional growth to justify current price levels. Any shortfall in commercial growth or signs of government demand deceleration could trigger significant multiple compression. The gap between the current share price ($156.24) and analyst consensus targets ($115) suggests meaningful downside risk if execution falters.

Key valuation metrics:

• Trailing P/E: 663 times
• Forward P/E: 252 times
• Current price: $156.24
• Analyst target: $115 (26% downside)
• Revenue growth: 48.2% year-over-year expected

Guidance for future quarters will be particularly crucial given these elevated expectations. Management's commentary on pipeline development, client retention rates, and competitive positioning will significantly influence post-results price action.

Investment outlook weighs growth against valuation

Palantir faces the ultimate growth stock challenge: exceptional fundamentals meeting extreme valuation multiples.

The bull case sees a transformative data analytics platform successfully diversifying from government dependence while capturing the enterprise AI opportunity. Commercial momentum and strategic partnerships position the company for sustained high growth. The bear case focuses on valuation unsupported by current fundamentals, emerging government competition, and international growth challenges. At 252 times forward earnings, there's virtually no room for disappointment.

The upcoming results will test whether fundamentals can catch up with valuation multiples. For a stock trading well above analyst targets, even strong results may not drive further gains without proportional guidance upgrades.

Palantir technical analysis

'Palantir mania' hit a speed bump in February, but by late April the stock had shaken off volatility and resumed pressing higher. The uptrend has reasserted itself impressively, though some bearish divergence emerged this month as price makes higher highs while daily stochastics declined.

Key technical levels:

• Current support: $147 (late June highs)
• Resistance: previous highs around current levels
• Pattern: ascending trend with potential short-term pullback

This divergence may result in a short-term pullback, with the late June highs around $147 providing potential support. Volume patterns and momentum indicators will be crucial for confirming trend continuation post-earnings.

Palantir daily chart