Hook / Thesis
Palantir is no longer just a promise-maker in the AI hype cycle. The company's most recent quarter (Q3 fiscal 2025) and the 02/02/2026 earnings print show revenue scale, robust operating cash flow, and a sustained shift from proof-of-concept projects to recurring, production AIP deployments. That combination - faster commercial adoption of Palantir's AI orchestration assets plus solid cash generation - is exactly what investors wanted to see before believing growth could support a higher multiple.
We think PLTR is a tactical long today: buy into continued AIP adoption with a disciplined stop and two price targets that reflect a near-term swing trade and a multi-quarter position. Entry, stop, and target levels are in the trade plan below. The trade is predicated on continued acceleration in commercial bookings, margin stability, and the company converting pilot projects into enterprise contracts.
What Palantir Does and Why the Market Should Care
Palantir provides AI, analytics and automated decision-making platforms - Gotham for government and Foundry for commercial customers. The meaningful change investors should care about is the company moving from bespoke analytics to broader AI orchestration - what management has called AIP (Palantir's AI product initiatives). That shift matters for three reasons:
- Revenue scale: AIP deployments are stickier and higher-value than one-off analytics projects because they become part of customers' operational backbone.
- Margin leverage: recurring software-style revenue combined with high gross margins drives fast operating leverage, demonstrated in recent quarters.
- Competitive moat: Palantir's data integration and governance layer is not trivial to replicate, which raises switching costs if AIP is woven into workflows.
Put simply: if Palantir turns AIP into recurring, high-margin revenue at scale, the stock's multiple has room to expand. The early evidence is encouraging.
Data That Backs The Case
Use the numbers, not the narrative. Q3 fiscal 2025 (period ended 09/30/2025; filed 11/04/2025) shows:
- Revenues: $1.181092 billion.
- Gross profit: $973.785 million - gross margin roughly 82% on that quarter.
- Operating income: $393.256 million - operating margin ~33% for the quarter.
- Net income: $476.748 million and diluted EPS of $0.18 on 2.571 billion diluted shares.
- Operating cash flow: $507.664 million (quarterly) and net cash flow of $693.592 million (quarterly cash inflow).
- Balance sheet: Total assets $8.11396 billion and equity ~ $6.590457 billion; liabilities are modest at $1.425691 billion.
Year-over-year growth is striking when you compare the Q3 2025 revenue of $1.181B to Q3 2024 revenue of $725.516M - roughly a +63% increase. Operating cash flow has also trended higher: Q1 2025 operating cash flow was $310.263M, Q2 was $539.251M, and Q3 $507.664M - that cadence shows both growth and conversion to cash.
Finally, the most recent earnings event (02/02/2026) reported revenue $1.406802B and EPS $0.25 versus estimates of $1.35012B and $0.2348. That beat suggests the AIP and commercial momentum continued into Q4 2025.
Valuation Framing
There isn't a market cap line item in the dataset to calculate an exact multiple, so valuation needs to be framed qualitatively and relative to the company's operational picture. The stock has traded as low as the $70s and as high as roughly $207 over the trailing year; the current market price at the time of this note is ~ $145.45. That range reflects high volatility tied to sentiment on AI and lumpy contract wins.
If Palantir sustains high-single to double-digit revenue growth and keeps operating margins north of 25-30% (as Q3 suggested), the company looks priced for continued premium multiples versus traditional software names because of its unique government/commercial mix and data moat. But if growth cools or customer concentration bites, the multiple could compress quickly - hence the need for a disciplined trade with stop-loss protection.
Catalysts (what can drive the trade)
- Broader commercial AIP contract wins announced and publicized by management.
- Quarterly results showing continued revenue and operating cash flow expansion (next prints confirming the 02/02/2026 beat).
- Large government contract renewals or multi-year expansions that remove revenue lumpiness.
- Partnership announcements with large cloud/AI vendors that accelerate Foundry/AIP adoption.
- Visible migration of pilots to production inside enterprise customers (higher ARR conversion rates).
Trade Plan - Actionable
Thesis: Buy the stock to ride continued AIP adoption and improving cash/margins. Time horizon: 3–12 months (swing-to-position).
Direction: Long PLTR (buy the shares or equivalent long ETF/option strategy if preferred)
Entry: 140 - 148 (limit or accumulate up to 148)
Stop: 125 (hard stop; roughly -14% from 145.45)
Target 1 (near-term): 175 (≈ +20% from entry)
Target 2 (multi-month): 220 (≈ +50% from entry)
Position sizing: risk no more than 2-3% of portfolio on stop-to-entry distance
Time horizon: swing (weeks to months) with potential to convert to position if growth continues
Rationale: entry zone keeps you below the near-term resistance seen around $150, stop at $125 protects against a sentiment-driven reset, and targets are calibrated to the stock's recent trading range and the magnitude of upside that would justify re-rating if AIP adoption persists.
Risks & Counterarguments
Every trade has a counterpart case. Below are principal risks and a short counterargument.
- Valuation risk: AI enthusiasm may already price in a lot of future wins. If future quarters decelerate, the stock can re-rate lower quickly.
- Competition and commoditization: Large cloud providers and AI companies are building overlapping orchestration and model-hosting features. If customers prefer a single-cloud stack, Palantir's moat could be pressured.
- Customer concentration / government exposure: A significant portion of business is still government-related. Political and budgetary shifts can create lumpiness.
- Execution risk: Converting pilots into repeatable, enterprise-wide AIP deployments is hard; delays or low conversion would reduce visibility.
- Dilution / share count pressure: Diluted average shares are sizable (2.57B in Q3 2025); any heavy equity issuance or aggressive compensation could impact EPS metrics.
Counterargument: The bears are right that AI hype has elevated valuations across the space; Palantir's upside depends on repeatable enterprise sales and multi-year contracts. If those don't materialize, even excellent technical execution may not be enough to justify current price points.
Conclusion & What Would Change My Mind
Given the data - double-digit revenue growth, gross margins above 80% in the latest quarter, operating margins ~33%, and strong operating cash flow - Palantir has moved from 'proof of concept' to meaningful commercial scale. That makes a tactical long sensible with a disciplined stop. My base case: continued AIP adoption drives further revenue and margin expansion and takes PLTR to the target band above.
What would change my mind - factors that would invalidate the trade thesis:
- A sustained slowdown in sequential revenue growth or a single quarter with both revenue and operating cash flow contraction.
- Evidence of major customer churn or loss of a key government contract without a material replacement.
- Significant dilution that meaningfully reduces EPS/share without corresponding growth in free cash flow per share.
Trade with position sizing appropriate to your risk tolerance. For those bullish on AI but wary of headline volatility, the structured approach above gives an asymmetric downside buffer while keeping upside optionality.
Disclosure: This is a trade idea, not investment advice. Size positions appropriately and use the stop loss above to protect capital.