Key Points
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Palantir is guiding for substantial growth across revenue and operating profits in the second quarter, driven by AI tailwinds.
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Despite crushing its earnings results for the first quarter back in May, the stock experienced a harsh sell-off following the report.
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Over the last few months, Palantir stock has rebounded sharply and now trades at historically high — and potentially unsustainable — valuation levels.
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Palantir Technologies (NASDAQ: PLTR) has been one of the biggest beneficiaries of artificial intelligence (AI) tailwinds. The company’s software suites, Gotham and Foundry, serve as the AI backbone for hundreds of global enterprises and government agencies.
As of the closing bell on July 25, shares of Palantir have gained 110% so far this year, making it the top-performing stock in the S&P 500 and Nasdaq-100.
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On Aug. 4, the data mining specialist is scheduled to report financial and operating results for the second calendar quarter of 2025. Let’s dig into what investors should be on the lookout for as Palantir’s Q2 earnings loom around the corner.
Is now a good time to invest in Palantir stock? Read on to find out.
What should investors expect from Palantir’s Q2 report?
During the company’s first-quarter report back in May, Palantir’s management provided investors with financial guidance for Q2 as well as the full year.
Image source: Palantir Investor Relations.
Management expects the company to generate $936 million in revenue and $403 million in adjusted income from operations at the midpoint of its Q2 guidance. Should the company achieve these targets, it would represent year-over-year growth of 38% and 59%, respectively.
Image source: Getty Images.
What happened to Palantir stock following the Q1 report?
The chart below illustrates Palantir’s stock price action over the last three years. I’ve annotated the chart to include earnings reports, which are depicted by the purple circles labeled with an “E”.
Data by YCharts.
Do you notice anything peculiar from the stock’s trajectory above? Since AI burst on the scene in early 2023, Palantir’s share price has steadily climbed with each passing quarter report. The major exception, however, occurred earlier this year.
Following Palantir’s monster Q1 report back in May, shares lost 12%. However, the brief sell-off wasn’t driven by an earnings miss or anything management discussing during the investor call.
Rather, the meteoric rise in Palantir stock comes with heightened scrutiny around the company’s underlying operating metrics. In other words, despite Palantir reporting best-in-class software metrics and explosive growth, expectations from investors are now incredibly high. Another way of looking at this is that Palantir stock has entered territory where “good” simply may not be good enough.
Is Palantir stock a buy right now?
Despite its sell-off a few months ago, Palantir stock has since rebounded in epic fashion and now trades near an all-time high.
Data by YCharts.
The chart above plots the price-to-sales valuation of Palantir along with a group of peer companies. Palantir’s prolonged valuation expansion has brought its valuation multiple far above any of its peers in the enterprise software arena. To add some context around these figures, Palantir’s price-to-sales (P/S) ratio of 127 is meaningfully higher than where valuation multiples peaked for many companies during prior stock market bubbles.
While I remain optimistic about Palantir’s long-run prospects, the company’s valuation is overextended. And with expectations steadily rising, buying the stock with so much momentum behind it and at such a frothy premium does not seem prudent.
I wouldn’t be surprised to see Palantir stock witness another pullback following the Q2 report, even if the company beats its guidance. Moreover, in the event that Palantir actually misses its targets, the stock could experience enormous downward pressure.
To me, the best course of action is to wait until Palantir publishes its second-quarter results before buying the stock. This way, investors can get a clearer picture around revenue growth, operating margins, profitability, as well as any valuable information regarding broader industry trends that Palantir’s management may choose to share during the earnings call.
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Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, Datadog, MongoDB, Palantir Technologies, ServiceNow, and Snowflake. The Motley Fool has a disclosure policy.
