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

​​​Strong quarter expected but valuation remains stretched

​Palantir is set to deliver another impressive quarter when it reports second quarter (Q2) 2025 results, with adjusted earnings per share (EPS) forecast at $0.139. Revenue is projected to hit $940 million, essentially flat quarter-on-quarter (QoQ) but more importantly, a robust 48.2% year-over-year (YoY) growth.

​The numbers tell a compelling growth story. Adjusted operating profit is expected to reach $404 million, with EBITDA projected at $410 million and net income at $357 million. These metrics represent the kind of growth that has driven the stock's meteoric rise this year.

​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 663x and forward P/E of 252x highlight just how much growth is already priced in. At $156.24, the shares trade well above the consensus target of $115.00, suggesting notable downside risk if results disappoint.

​Commercial momentum drives the growth narrative

​The star of Palantir's growth story remains its US Commercial segment, forecast to expand approximately 70% YoY. 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 a crucial diversification away from Palantir's historical reliance on government contracts. Corporate clients offer more predictable revenue streams and typically involve longer-term strategic partnerships rather than project-based work.

​However, growth outside the US appears to be moderating, suggesting the international expansion story may be more challenging than initially anticipated. Different regulatory environments and competitive landscapes overseas present ongoing hurdles.

​The commercial momentum has been vital in offsetting some headwinds in the government segment. This balance will be crucial as investors assess whether Palantir can maintain its impressive growth trajectory in the quarters ahead.

​Government segment faces new competitive pressures

​Palantir's Government segment is projected to grow 36% in Q2 2025, representing solid but decelerating growth. The more concerning development is the emergence of serious 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. These contracts represent direct competition for the AI spending that has fuelled Palantir's government revenue growth.

​This diversification of AI procurement by government agencies suggests a move away from single-vendor relationships. Instead of relying primarily on Palantir, departments are spreading their AI investments across multiple technology providers.

​The increased competition could impact Palantir's ability to secure the large, multi-year government contracts that have historically provided stable revenue growth. Investors will be watching closely for management commentary on this evolving competitive landscape.

​Strategic partnerships offer growth acceleration

​Palantir's partnerships with Accenture and other system integrators could prove crucial for the next phase of growth. These alliances offer the potential to boost indirect sales and improve win rates in competitive enterprise software bids.

​The partnership strategy makes particular sense given the competition from established enterprise software players like Databricks and Snowflake. These companies have deep relationships with corporate IT departments and offer alternative solutions for data analytics needs.

​System integrators can provide Palantir with access to existing client relationships and ongoing projects where data analytics capabilities could add value. This channel strategy could accelerate adoption without the need for Palantir to build extensive direct sales capabilities.

​However, partnerships also mean sharing revenue and potentially reduced margins. The challenge will be balancing growth acceleration with profitability, particularly given the high expectations embedded in the current valuation.

​Valuation premium demands perfect execution

​Despite upward revisions to 2025 sales-growth estimates by approximately 10 percentage points year-to-date, Palantir's premium valuation continues to expand. The 252x 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 and analyst consensus targets suggests meaningful downside risk if execution falters.

​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.

​The upcoming results will test whether fundamentals can catch up with valuation multiples. For a stock that's up sharply year-to-date, even strong results may not be sufficient to drive further gains without proportional guidance upgrades.

​Palantir stock price – technical analysis

​‘Palantir mania’ hit a speed bump in February, but by late April they had shaken off this volatility and were pressing higher again.

​The uptrend has reasserted itself in impressive style, though some bearish divergence has been this month as the price makes higher highs while daily stochastics have declined. This divergence may result in a short-term pullback.

​The late June highs around $147.00 might provide an area of support.

​Palantir chart