Palantir’s big beat, bigger question: Are these results enough to justify the price?

Palantir’s latest earnings were, on the surface, hard to fault. Revenue beat expectations, profits came in ahead of forecasts, and the stock jumped in after-hours trading. Yet for a company already priced for near-flawless execution, the results raise a more nuanced question than simple momentum: is Palantir actually growing fast enough, in the right way, to support its exalted valuation?

That question matters because Palantir is no longer an overlooked, misunderstood contractor. It is a $100bn-plus market darling, valued less like a defence supplier and more like a premium software platform. The bar, accordingly, is very high.

Strong numbers, familiar drivers

Palantir reported $1.41bn in revenue for the fourth quarter of 2025, comfortably ahead of consensus forecasts. Earnings per share also exceeded expectations, and management highlighted a record quarter, with revenue growth of roughly 70% year on year.

Dig into the detail, however, and the pattern is familiar. Government remains the engine. Revenue from public sector contracts rose 66% year on year to $570m, while overall federal contracts for 2025 approached $1bn. The US Department of Defense is still the largest customer, with the Department of Homeland Security and other agencies close behind.

From an investor’s perspective, this is both reassuring and limiting. Government contracts are large, long-term and relatively sticky. They also cap upside. Budgets are political, procurement cycles are slow, and customer concentration risk remains high.

Valuation leaves little room for error

This is where Palantir’s valuation looms large. The company trades at multiples that imply sustained high growth, expanding margins and an eventual transition into something closer to a broad-based enterprise software giant.

That is a demanding story to tell when the fastest-growing part of the business is tied to the US federal government. Even with a supportive administration and rising enforcement budgets, government spending does not compound like commercial software adoption. It moves in steps, shaped by legislation and election cycles.

Investors betting on Palantir at current levels are not just backing execution. They are betting that government growth remains structurally elevated and that commercial adoption accelerates meaningfully enough to rebalance the mix.

The Karp confidence factor

Palantir’s chief executive, Alex Karp, was in no doubt about the company’s trajectory. On the earnings call, he described the quarter as an “iconic” performance and pointed to Palantir’s involvement in complex government operations as both a source of pride and a competitive moat.

Markets have long rewarded Karp’s confidence. His insistence that Palantir’s technology sits at the centre of modern statecraft has helped frame the company as indispensable infrastructure rather than a niche contractor.

Yet confidence is not the same as clarity. Investors still lack granular disclosure about how scalable Palantir’s most lucrative government deployments really are, or how transferable that capability is to commercial customers at similar margins.

Immigration enforcement as a growth lever

Part of the recent government surge is clearly linked to immigration enforcement. Under Donald Trump, agencies such as ICE and DHS have received sharply increased budgets. Palantir tools sit inside that expansion, supporting data integration and operational targeting.

From a purely financial standpoint, this is a tailwind. From a valuation standpoint, it is more ambiguous. Immigration enforcement spending is politically volatile. A future administration could redirect priorities, scrutinise contracts or simply slow the pace of growth.

That does not make Palantir’s current revenue fragile, but it does complicate long-term forecasting, particularly at today’s multiples.

Commercial growth still the missing piece

The bull case rests on Palantir’s commercial business eventually matching or surpassing government growth. Management argues that its AI-driven platforms are now gaining traction with private companies, and that operational use cases will drive durable demand.

So far, the numbers do not decisively prove that case. Commercial growth is positive, but it has yet to demonstrate the explosive, self-reinforcing adoption that would justify software-style valuations over the long run.

A good quarter, not a decisive one

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Palantir’s results were strong. They confirm momentum, reinforce government dominance and justify short-term optimism. What they do not yet do is settle the valuation debate.

For investors, the question is not whether Palantir is executing well. It is whether a company so dependent on federal spending can ultimately grow into the expectations already embedded in its share price. On that front, this quarter advances the story, but it does not close the gap.