The data analytics firm, known for its close work with the U.S. government, has delivered quarterly results that surpassed Wall Street expectations. In its latest report, Palantir announced revenue of nearly 1 billion dollars in the second quarter of 2025, marking significant growth in both its government and commercial business.
The company also raised its full-year revenue guidance to between 4.1 and 4.2 billion dollars, signaling confidence in its outlook. Combined with high-profile deals, such as a 10 billion dollar U.S. Army contract, investors are rushing to buy into the narrative. The key question now is whether the stock’s rally has gone too far or if there is still room for further gains.
What’s Fueling the Run-Up in Palantir Stock
Several factors have combined recently to drive Palantir’s stock sharply higher. These include strong financial performance, large government contracts, expanding commercial business, and growing investor enthusiasm.
Strong financial results
In its Q2 2025 report, Palantir posted 48% year-over-year revenue growth, crossing the $1 billion quarterly revenue mark for the first time. That performance beat consensus expectations. that the company’s adjusted earnings per share came in at $0.16 for the quarter, above many forecasts.
Alongside strong results, Palantir raised its 2025 revenue guidance to between $4.142 and $4.150 billion (up from prior estimates), signaling confidence in its forward trajectory.
Big government and defense contracts
Palantir has long been a fixture in U.S. government contracting, and its recent wins have reinforced investor faith. Among the most notable is a $10 billion U.S. Army enterprise agreement to consolidate contracts under a unified platform. That deal helps cement long-term recurring revenues. Tech news site TECHi also highlights the importance of that Army contract to the company’s outlook.
Beyond that, Palantir is involved in defense modernization efforts such as the “Golden Dome” air and missile defense initiative, in partnership with Anduril Industries. That project faces competition from legacy defense players, but its potential scale commands attention.
Commercial growth acceleration
While government contracts remain central, Palantir has increased focus on its commercial segment. In Q2 2025, its U.S. commercial revenue grew 93% year over year.
The company also reported that it closed more large deals, those above $1 million and $5 million, at much higher rates compared to prior years. That trend suggests clients are willing to commit more deeply to its platforms.
Investor sentiment and analyst support
Investor sentiment has started to align with the fundamentals. Bank of America recently highlighted Palantir’s combination of AI tools and forward-deployed engineering support (“agentic AI + FDEs”) as a differentiator, and upgraded its price target accordingly.
The narrative of Palantir as a bridge between intelligence, defense, and enterprise AI has gained momentum. That helps attract speculative capital, especially in a broader market environment that favors high-growth tech and AI plays. These combined elements are driving the stock’s sharp advance.
Risks, & Red Flags
Despite Palantir’s strong results and expanding contracts, there are several risks that raise questions about whether investors are arriving too late to the rally.
Valuation concerns
One of the biggest red flags is valuation. Analysts caution that Palantir trades at a steep premium compared to other software companies. The stock is currently priced at more than 30 times forward sales, a level that is difficult to justify without continued rapid growth. According to Stock Analysis, the consensus 12-month target price is around 139 dollars per share, which is below its recent market price.
Insider selling and dilution
Investors are also watching insider activity closely. Palantir cofounder Stephen Cohen recently sold more than 300 million dollars’ worth of shares, cutting his stake by nearly a quarter. This type of insider selling can sometimes signal caution from those closest to the business. In addition, Palantir’s reliance on stock-based compensation continues to weigh on margins and dilute existing shareholders.
Dependence on government contracts
Although government contracts are lucrative, they also carry risk. Palantir is heavily dependent on U.S. defense and intelligence budgets, which can fluctuate with political cycles and policy changes.
The Golden Dome missile defense program, for example, is still in development and faces competition from established defense contractors like Lockheed Martin. A slowdown or cancellation of such projects could affect Palantir’s revenue trajectory.
Market sentiment and macro headwinds
Finally, broader market conditions could influence the stock. Rising interest rates and recent warnings about an AI investment bubble create uncertainty. If investor sentiment shifts away from high-multiple tech names, Palantir’s valuation could be vulnerable.
Taken together, these risks suggest that while Palantir’s growth story is strong, buying at current levels carries significant downside if expectations are not met.
Is It Too Late to Buy?
The recent surge in Palantir’s stock has left investors debating whether now is the right time to enter. On one hand, the company’s fundamentals are stronger than ever, with billion-dollar government contracts and rapid growth in its commercial segment. If Palantir can maintain this momentum, particularly in expanding its role in both defense and enterprise AI, its premium valuation may continue to hold.
However, the risks of buying at current levels are clear. The stock’s high multiples leave little margin for error, and any slowdown in contracts or earnings could trigger sharp pullbacks. Insider selling and heavy reliance on government budgets add further caution.
For long-term investors who believe in Palantir’s role in national security and AI-driven analytics, gradual buying strategies such as dollar-cost averaging may offer a safer approach. For others, waiting for a correction could provide a more attractive entry point.
Conclusion & Takeaway
Palantir’s stock surge reflects a mix of strong earnings, expanded contracts, and growing optimism about its role in defense and artificial intelligence. The company’s position as both a government partner and a commercial AI provider gives it unique exposure in a fast-growing sector.
At the same time, valuation pressures, insider selling, and dependence on public contracts remain important risks.
For investors, the decision hinges on risk tolerance. Those confident in Palantir’s long-term trajectory may still find opportunity, but caution and disciplined entry strategies are advisable given the stock’s elevated price and volatile sentiment.