Shares of big data software pioneer Palantir (PLTR -2.31%) rallied 51.5% in August, according to data from S&P Global Market Intelligence.
Palantir became a darling of the AI era over the past couple of years, and hit a very high valuation at its peak last November. Since then, the "SaaS-pocalypse" has taken a toll on the entire software sector, including Palantir, as fears of disruption from leading AI labs cut its stock price nearly in half, from its November 2025 highs to its June 2026 lows.
The downturn set Palantir up for a bounce higher if it posted continued strong financial results. Its second-quarter August report provided that, in spades.
NASDAQ: PLTR
Key Data Points
Palantir delivers eye-popping growth... again
In the second quarter, Palantir delivered 93% revenue growth to $1.94 billion, while adjusted (non-GAAP) earnings per share grew 156% to $0.41. Both figures handily beat analyst expectations. This amazing growth marked a stunning acceleration from the 48% revenue growth in the year-ago quarter and the 85% growth in the first quarter of 2026. Another impressive metric was profitability, as adjusted free cash flow margins expanded to a massive 63% -- among the highest in the industry.
So much for the "SaaS-pocalypse," at least as it applies to Palantir's business.
In the press release, earnings call, and in recent media appearances, CEO Alex Karp made the case for Palantir to manage a company's artificial intelligence problem-solving, rather than going directly to one of the big AI labs such as OpenAI or Anthropic, saying:
Palantir is the only company that has demonstrated it can transform tokens into actual economic value. Our customers trust us to provide them with maximum control over their operations, data, and decisions. Their competitive advantage should never be used as training data for future models.
This quote is quite illuminating as to how Palantir is positioning itself in the age of AI and fending off the powerful frontier model labs. Karp claims that enterprises that use leading-edge frontier models directly risk their company's data and AI use cases being 'learned" by the AI models, which the models could theoretically use to improve and then spread that knowledge to competitors. An even worse scenario would involve the model-makers building their own products to compete with customers themselves.
The pitch appears to be working, especially with U.S. commercial customers, which grew 149% year over year. That's a pretty amazing figure, especially since overall sales and marketing expenses grew less than 40% over the past year, even including stock-based compensation. It's pretty clear that Palantir's platform is translating AI into real business value; otherwise, it wouldn't be growing this fast with so little incremental expense growth.
Image source: Getty Images.
How high is too high a price?
Palantir continues to accelerate its growth and expand margins, despite the company's larger size and already sky-high profitability. That goes a long way toward justifying the company's 78 times forward P/E ratio, based on 2026 earnings estimates.
It's hard to imagine Palantir continuing to accelerate its growth rate off an ever-higher base, but then again, that's what many might have thought last year, and yet, Alex Karp and company managed to do so.
While the stock is far too expensive for value investors, younger growth-oriented investors should have a look at Palantir shares, even after its big August bounce.
