After underperforming the market for much of the year, Palantir Technologies (PLTR -0.17%) stock is back with a vengeance. Shares in the data analytics company jumped more than 35% last week after it delivered a sterling second-quarter earnings report that reset the bar for AI software performance.
Palantir shares recovered nearly all of their year-to-date losses as momentum from the company's Aug. 3 report carried into the week. The stock jumped 29.4% the day after the earnings report. Then, after two days of treading water, it climbed by another 10.3% on Aug. 8, closing the week 36.9% higher.
Palantir stock is now 15% below the all-time high of $207.52 it set in November. I think that number is well within reach -- in fact, I see it topping $220 before the end of the year.
And there's one clear reason why: Palantir's software has become one of the most effective ways for businesses to add AI in their everyday operations.
Image source: The Motley Fool.
Why businesses are flocking to Palantir
Palantir has always had a valuation problem -- particularly from 2024 through 2025 when shares rose by nearly 1,000%. Its forward price-to-earnings ratio climbed to more than 240 -- an eye-watering valuation that scared a lot of investors away.
So, it's no wonder that shares began pulling back this year. But even as that happened, Palantir maintained dynamic revenue and earnings growth as its AI-enabled software gained traction -- particularly among commercial customers.
One key advantage for the company is its ontology system, which creates a digital twin of a client's operations and then uses its software to connect data to real-world objects such as customers, employees, equipment, products, and orders. By mapping relationships and processes in an interconnected model, Palantir can analyze operations, coordinate decisions, and allow AI systems to automate tasks to improve operations.
"I think strategically what's really interesting to watch ... was they're not only helping their customers modernize their data, but they're actually helping customers kind of optimize and choose the best model," Tyler Radke, a senior equity analyst at Citi, said in an interview on BNN Bloomberg. "It's not always about the fastest, most powerful large language model. It's about what is the right model for that enterprise, and I think that's something that they're pretty uniquely positioned to bring to the table," he said.
Palantir's overall revenue grew 93% in the second quarter to $1.935 billion. U.S. government revenue was strong, growing 90% to $809 million, while U.S. commercial revenue increased 149% to $764 million. At this rate, it won't be long before it gets the majority of its U.S. revenue from commercial clients.
Radke increased his price target for Palantir from $200 to $245 following the earnings report. "I would argue that the fundamentals could not be stronger," he said.
Palantir may have gotten its start serving the government sector, but it's becoming an indispensable partner for commercial businesses that are looking for smart ways to use AI to improve their operations. Its strong growth curve will continue -- and by the time it reports Q3 earnings in early November, I predict the stock will have surpassed its all-time high and be north of $220 per share.
