When it comes to battleground stocks, it's pretty clear that Palantir Technologies (PLTR +1.65%) would fall somewhere near the top of the list. Bears want no part of the stock's stratospheric valuation, and bulls point to the company's phenomenal growth rate as justification for its lofty multiple. The truth, as they say, is likely somewhere in between.
Expectations were high coming into Palantir's quarterly financial report, with bulls and bears staking out positions on opposite sides of the fence. The results provided the clearest evidence yet that the ongoing adoption of artificial intelligence (AI) has a long runway ahead.
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Blockbuster results
Investors had great expectations heading into Palantir's fourth-quarter financial report, and the data mining and AI specialist delivered all that and more. Revenue of $1.40 billion accelerated 70% year-over-year and 19% quarter-over-quarter. This fueled adjusted earnings per share (EPS) of $0.25, which soared 79%.
For context, analysts' consensus estimates called for revenue of $1.34 billion and adjusted EPS of $0.23, so Palantir cleared both hurdles with ease.
The star of the show was Palantir's U.S. commercial segment, which includes its flagship Artificial Intelligence Platform (AIP). Revenue accelerated yet again, soaring 137% to $507 million, while climbing 28% sequentially, and accounting for 36% of total revenue.
The company closed a record-setting total contract value (TCV) of $4.26 billion during the quarter, up 138% year over year. The U.S. commercial segment also turned in a record performance, with TCV of $1.34 billion, up 67%.
Perhaps more impressive is Palantir's visibility into its future business. The U.S. commercial segment's remaining deal value (RDV) -- or the value of the agreements that haven't been fulfilled -- surged 145% year over year and 21% sequentially to $4.38 billion. This illustrates how the company is building a solid foundation for future growth.
NASDAQ: PLTR
Key Data Points
Other metrics are equally bullish. The company's Rule of 40 score, which is used to judge the quality of earnings, climbed to 127%, when any number above 40% is a sign of financial health. Palantir also delivered operating cash flow of $777 million, or a margin of 55%, and adjusted free cash flow of $791 million, or a margin of 56%.
This represents fantastic news for Palantir investors, quashing the popular narrative that its growth spurt has run its course.
CEO Alex Karp said, "Our financial results ... have again exceeded even our most ambitious expectations." Management clearly expects that trend to continue. After generating full-year revenue growth of 56% in 2025, Palantir announced a forecast of at least 61% revenue growth in 2026.
At 105 times next year's expected earnings, there's no denying that the stock is expensive. That said, this marks the 10th consecutive quarter of accelerating revenue growth, with no signs of a slowdown in sight. I predicted that Palantir would surprise everyone, and I wasn't wrong.
While it's clear the growth story is still intact, it will come with significant volatility. For investors still interested, buying a small position in the risky part of your portfolio wouldn't go amiss. Dollar-cost averaging is another way to ride this comet higher.
