Is This An Epic Buying Opportunity?
Is This An Epic Buying Opportunity?
Palantir drops double-digits despite a historical earnings report.
Good morning, folks.
Palantir is on fire. Despite the stock gapping lower after its Q1 2025 earnings, the company posted one of the strongest quarters in Wall Street history.
Palantir’s Founder and CEO, Alex Karp, was asked to be modest about the result, but he failed to listen. I highly recommend tuning into the company’s earnings call to feel the emotion and passion Karp evokes in building this business.
Let’s get into the numbers.
The Numbers
Palantir’s revenue and U.S. commercial growth beat Wall Street expectations, while EPS was in-line with estimates. Net income more than doubled, reflecting the company’s ability to scale profitably.
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Revenue: $884M (+39% YoY)
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U.S. Revenue: $628M (+55% YoY)
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U.S. Commercial Revenue: $255M (+71% YoY)
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U.S. Government Revenue: $373M (+45% YoY)
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Net Income: $214M (+104% YoY)
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Earnings Per Share: $0.13 (in-line with estimates)
Raising Guidance
Palantir raised its full-year revenue guidance by nearly 4%, now expecting $3.89–$3.90 billion, well above previous forecasts. U.S. commercial revenue guidance jumped 9%.
This degree of upward revision is rare among companies of Palantir’s size.
Rule of 40: Setting a New Standard
The Rule of 40 combines revenue growth and profit margin – a quick measure of a business’s quality of revenue. A score above 40% is considered strong.
Palantir posted 83% this quarter (39% growth + 44% margin).
While some smaller or early-stage tech firms have posted higher growth rates, no other large-cap software company in recent Wall Street history has combined this level of revenue growth, profitability, and upward guidance revision in a single quarter.
Even industry leaders like Microsoft, Adobe, and ServiceNow typically report Rule of 40 scores in the 40–60% range. Palantir is in a league of its own.
What’s Driving Growth?
Palantir’s U.S. business is booming, with commercial and government segments both outperforming. CEO Alex Karp described demand as a “ravenous whirlwind of adoption,” driven by a surge in enterprise AI and defense contracts.
The company closed 139 contracts over $1 million in Q1, including major wins in the healthcare, energy, and government sectors.
An Overreaction…?
Despite these results, Palantir shares gapped lower on the earnings report. The stock was up 60% year-to-date going into earnings, making it the S&P 500’s top performer.
High expectations and concerns about international growth may have contributed to the pullback. Or perhaps it’s nothing more than an overreaction.
My Thoughts
Alex Karp’s passion and vision were clear on the earnings call. This is his life’s work. Here’s Karp’s money quote from the earnings call,
The reality is this is a massive cultural shift in the US… The reindustrialization is happening with our software.
Skeptics have long doubted Palantir’s model, but these results speak for themselves.
Very few companies raise guidance by nearly 4%. No other software company has posted a Rule of 40 score close to Palantir’s 83%.
The stock was the strongest S&P 500 member going into the report. This pullback may be exactly what it needs for its next leg higher.
Sellers may have won today’s battle, but Palantir looks poised to win the war.
Great returns are not present without risk. We use technical analysis to manage this risk.
If PLTR holds above $100 amid this pullback – this may be one of the best buying opportunities for the rest of 2025.
Here’s the daily chart.
Resources
Palantir’s Q1 2025 earnings press release.
Palantir’s Q1 2025 earnings webcast and accompanying slide deck.
Alex Karp’s Letter to Shareholders.
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Godspeed – Rosebee
Disclosure: The author of this newsletter holds $ACHR/W.
