Key Points
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Palantir has been caught up in a broader AI sell-off, but its results continue to accelerate.
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The company’s Artificial Intelligence Platform (AIP) continues to attract new users.
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Palantir’s valuation appears tempting, if you know where to look.
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Shares of Palantir Technologies (NASDAQ: PLTR) got pummeled during the first six months of 2026, with shares plunging 34%, according to data provided by S&P Global Market Intelligence. That’s a far cry from the 10% gains of the S&P 500.
Artificial intelligence (AI) stocks have been taking a breather over the past year as investors have grown more discriminating, casting a wary eye on stocks with frothy valuations and looking for the “next big thing.” However, Palantir’s stellar results and its lower stock price have combined to bring its valuation back to Earth, making the price more reasonable than it’s been in some time.
Is the worst over? Let’s take a look.
The numbers paint a compelling picture
Since the start of this year, Palantir has delivered two quarterly financial reports, and each has been better than the last.
For the fourth quarter — which was reported in early February — Palantir delivered record revenue that surged 70% year over year and 19% quarter over quarter to $1.4 billion. This marked the 10th successive quarter of accelerating growth. This drove adjusted earnings per share (EPS) of $0.25.
Driving the results was demand for the company’s Artificial Intelligence Platform (AIP). U.S. government revenue of $507 million climbed 66% to $570 million, while U.S. commercial revenue — which includes AIP — soared 137% to $507 million. Perhaps more telling was Palantir’s remaining performance obligation (RPO), commonly called backlog, which surged 143% to $4.21 billion. This shows the company is building a solid foundation for the future.
Palantir’s first-quarter results, reported in May, were even better. Revenue jumped 85% year over year to $1.63 billion — marking the company’s highest-ever year-over-year growth rate. This fueled adjusted EPS that surged 154% to $0.33.
While U.S. government revenue grew an impressive 84% year over year, U.S. commercial revenue flew even higher, soaring 133% year over year, as demand for AIP continued to lead the way. At the same time, its RPO jumped 134%. Its Rule of 40 score, which illustrates the balance between the company’s strong growth and increasing profitability, reached rarified territory of 145% — when any number above 40% is considered healthy.
Not only is Palantir attracting new customers, but is also expanding its relationships with existing users, as evidenced by its net dollar retention rate of 150%. Put another way, existing customers spent 50% more, on average, in Q1 than in the year-ago quarter.
Why the worst may be over
Investors have been watching closely over the past year, concerned that AI adoption had peaked, but the evidence clearly suggests otherwise. Palantir increased its full-year 2026 financial guidance and is now anticipating 71% revenue growth, up from its earlier forecast of 61% issued earlier this year.
To the untrained eye, the stock appears somewhat pricey, selling for 149 times earnings — but that doesn’t account for Palantir’s accelerating high-double-digit growth. Using the more appropriate price/earnings-to-growth (PEG) ratio — which factors in the company’s phenomenal growth rate — returns a multiple of 0.52, when any number less than 1 signals an undervalued stock.
Taken together, Palantir’s stellar track record, accelerating growth, and moderating valuation make the case that the stock is a buy.
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Danny Vena, CPA has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
