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Palantir Technologies (PLTR +8%) is continuing its remarkable move higher following its strong Q2 report last night. The data analytics software company and government intelligence contractor reported upside EPS and very strong upside revenue, which grew 48% yr/yr to $1.00 bln. This was a notable as its first-ever $1 bln quarter. The guidance was also impressive with upside revs for Q3 and FY25.

• Its US commercial segment led the way with 93% yr/yr revenue growth to $306 mln, outpacing US government revenue growth of 53% yr/yr to $426 mln, but that was quite impressive in its own right. Its overall US business revenue grew 68% yr/yr and 17% sequentially, and now represents 73% of total company revenue. Management cited accelerating demand for its AIP (Artificial Intelligence Platform) offering, which continues to drive the outperformance in its US business overall.
• Palantir is known for its exposure to US government contracts, but it has been doing a good job at building its commercial business. In fact, US commercial comprised 31% of Q2 revs, which is up from 23% a year ago and US Commercial grew faster than US govt. This is being done by Palantir's focus on delivering AI production impact for commercial clients. This was evidenced by strength in new starts and expansions at existing customers. In fact, Palantir says it's seeing new starts with higher ambition and existing customers expand their work at a faster rate.
• Turning to its US government business, Palantir says it's delivering across civil, intel and defense, including greenfield efforts. US Space Force Space Systems Command awarded it a $218 mln delivery order. And last week, Palantir was awarded a 10-year enterprise agreement with the US Army, totaling up to $10 bln, consolidating 75 contracts into a single contract. The Army is one of Palantir's longest-standing customers.
• Another thing that stands out with Palantir is its robust margins. Q2 adjusted operating margin came in at 46%, exceeding the high end of prior guidance by nearly 300 basis points. While Palantir expects adjusted operating margin to continue to expand in 2H25, the company does expect a significant ramp in expenses in Q3 due to the seasonality of new hire starts. PLTR remains committed to investing in the most elite technical talent, but this will impact margins in Q3.

Shares of Palantir have been on a remarkable run since mid-2024. And the stock has made a huge move over the past year, going from around $30 to $174 currently. This computes as a current P/E of 280x, so the valuation has gotten quite stretched, so caution is warranted. However, it seems investors are focusing more on the impressive growth and huge margins. Also, Palantir is being seen as a top tier AI play.