Palantir Technologies Inc. (NASDAQ:PLTR) saw its shares surge 8.6% to $169.40 in late Friday trading, extending gains from its post-earnings rally. The stock's climb came as investors digested the company's better-than-expected second-quarter results and an upgraded full-year outlook, with U.S. customers playing a dominant role in the growth story.
According to the company's latest filing, U.S. revenue surged 114.7% year-over-year to $1.573 billion, while the rest of the world grew 33.7% to $362.4 million. This translated to U.S. customers contributing 90.2% of the total revenue increase, which amounted to $931.8 million in additional sales. The U.S. sales mix expanded to 81.3% of total revenue, up from 73.0% in the prior year, highlighting an increasing concentration risk.
Palantir's total second-quarter revenue climbed 92.8% to $1.935 billion, driven by robust demand across both commercial and government sectors. U.S. commercial revenue jumped 149% to $764 million, while U.S. government revenue advanced 90% to $809 million. CEO Alex Karp described the quarter as "otherworldly," underscoring the company's exceptional performance.
Profitability also improved significantly. Palantir reported a GAAP operating margin of 47% and an adjusted operating margin of 62%. Adjusted free cash flow reached $1.220 billion, representing 63% of revenue. These figures reflect the company's strong operating leverage and efficient capital deployment.
Management raised its full-year 2026 guidance, increasing the revenue midpoint by 6.5% to $8.154 billion and lifting the adjusted operating income midpoint by 10.1% to $4.893 billion. The company also boosted its adjusted free cash flow guidance by 7.0% to a midpoint of $4.6 billion. The more aggressive profit outlook suggests Palantir is scaling efficiently as AI demand accelerates.
The stock's performance outpaced several software peers. Snowflake Inc. (NYSE:SNOW) rose 2.5%, Datadog Inc. (NASDAQ:DDOG) gained 2.6%, and C3.ai Inc. (NYSE:AI) advanced 4.6%. The Invesco QQQ Trust (NASDAQ:QQQ) edged up 0.7%, meaning Palantir outperformed the tech-heavy ETF by nearly eight percentage points. Growth stocks broadly benefited from softer jobs data, which eased concerns about interest rate hikes.
Analysts remain divided on Palantir's valuation, which stands at roughly 53 times its updated annual sales target and 95 times the midpoint for adjusted free cash flow. Target prices range from $80 to $223, reflecting scenarios from a 53% drop to a 32% increase. Deutsche Bank's Brad Zelnick raised his rating to Buy with a $200 target, citing Palantir's lead in converting AI demand. Conversely, Jefferies' Brent Thill maintained an Underperform rating with an $80 target, cautioning that "the setup gets harder from here" as comparisons become more difficult.
Risks remain, including termination clauses in most contracts and a 66% increase in stock-based compensation to $265 million in the second quarter. The heavy reliance on U.S. customers exposes Palantir to domestic budget and policy changes. Investors will now focus on whether third-quarter revenue lands within the guided range of $2.160 billion to $2.164 billion while sustaining margins.
