Hook / Thesis (short)
Palantir has been delivering the operational ingredients that justify a tactical long: sequential revenue acceleration across 2025 quarters, expanding operating and net margins, and positive operating cash flow. The price has already moved materially higher, but the recent quarter-to-quarter improvement gives room for more upside if growth stays intact and the company continues to convert revenue into cash.
This is a swing trade: buy the constructive setup on weakness, keep position size and downside defined, and aim for a two-step targeting framework that captures upside from continued AI adoption and enterprise conversion while respecting valuation and execution risk.
What Palantir does and why the market should care
Palantir Technologies sells data integration and analytics platforms to two obvious end markets: government (Gotham) and commercial enterprises (Foundry). The core product proposition is not speculative experimentation with models; it is operational software that embeds data processing, decision workflows and model outputs into mission-critical workflows for Western-allied customers. That combination - sticky, mission-critical deployments plus new AI monetization opportunities - is what underpins the investment case.
The market cares because Palantir is showing it can turn that proposition into faster growth and higher profitability at scale: customers are expanding deployments, revenues are increasing sequentially and free cash flow is moving from inconsistent toward reliably positive. For an enterprise software vendor, that profile - durable revenue + improving cash conversion - tends to compress risk premia and justify higher multiples, provided execution continues.
The hard numbers you need to know
Use the quarter-to-quarter progression as the primary signal — Palantir showed clear sequential improvement in 2025:
- Q1 2025 revenue: $883.9M (quarter ended 03/31/2025)
- Q2 2025 revenue: $1,003.7M (quarter ended 06/30/2025)
- Q3 2025 revenue: $1,181.1M (quarter ended 09/30/2025; filing 11/04/2025)
Margins and profitability are improving in step:
- Q3 2025 gross profit: $973.8M -> implied gross margin ~82.5% (973.8 / 1,181.1)
- Q3 2025 operating income: $393.3M -> implied operating margin ~33.3%
- Q3 2025 net income: $476.7M -> implied net margin ~40.4%
Cash flow and balance sheet give the company staying power:
- Q3 2025 net cash flow from operating activities: $507.7M.
- Q3 2025 total assets: $8.11396B and equity: $6.68827B, with current assets of $7.58616B against total liabilities of $1.425691B.
Those are not small numbers: sequential top-line growth plus >30% operating margins and half-a-billion in operating cash flow in a quarter is a different company than one burning cash and losing money. That transition matters to the market's willingness to pay for growth in AI-era software names.
Valuation framing - the way I think about the multiple
The dataset does not provide a formal market cap, so I construct a back-of-envelope reference using the most directly available share metric in the filings: the Q3 2025 diluted average shares of 2,571,057,000 shares. Applying the recent trade in the market snapshot (last close ~$166.63, 01/27/2026) gives a rough implied market capitalization of approximately $428B (note: this is a crude proxy because diluted average shares are not an exact outstanding share count and the dataset does not include an official market-cap figure).
Whether that implied valuation is fair depends on expectations: the company is currently running >$1.1B per quarter (Q3) and improving margins, which implies revenue can approach or exceed ~$4.5B on a run-rate basis if growth holds. If Palantir can sustain revenue growth and the profit margins remain elevated, investors may rationalize a premium multiple. But that presumes continued commercial adoption of higher-margin offerings: the valuation is sensitive to any slowdown or margin pressure.
Catalysts to drive the next leg higher
- Repeatable commercial AI revenue: Continued adoption of AI-enabled features in Foundry (commercial) that increase seat pricing or add subscription/performance fees.
- Government contract renewals / upsells: Large sovereign customers expanding Gotham implementations or signing multi-year renewals.
- Margin expansion and operating cash flow consistency: If operating margin stays above ~30% and OCF remains positive, the stock can re-rate versus software peers that trade on profitability.
- Visible capital allocation: Any management moves toward buybacks or more aggressive reinvestment ROI can act as a short-term re-rating catalyst.
The trade (actionable plan)
Summary stance: Long - tactical/swing trade with defined risk. Time horizon: swing (4-12 weeks typical, extendable to position if catalysts occur).
| Entry | Stop | Target 1 (near) | Target 2 (upside) |
|---|---|---|---|
| $160 - $170 (buy range; scale in) | $150 (hard stop; cut if price closes below or a decisive break below on heavy volume) | $200 (≈ +20% from current) | $250 (≈ +50% from current; for traders willing to roll risk into a position if fundamentals stay strong) |
Rationale: recent quarters show accelerating revenue (Q1->Q3 2025 went from $883.9M to $1,181.1M) and substantial operating margin. Buying in the $160-$170 band lets you scale while keeping a stop near the previous consolidation area (around $150) — roughly a 7-9% stop from the top of the entry band.
Position sizing: risk no more than 1-2% of portfolio value on this single trade (i.e., size the position so that a stop loss to $150 equals that portfolio-risk target).
Risks - what can go wrong (at least four)
- Valuation sensitivity: The implied valuation is high relative to historical norms for Palantir and many enterprise software peers. If growth stalls or the market rotates away from high-multiple AI names, the stock could retrace aggressively.
- Execution risk: Converting pilots into scalable enterprise rollouts is non-trivial. A slowdown in commercial bookings or extended sales cycles would quickly show up in sequential revenue and guidance revisions.
- Customer concentration / renewal risk: A meaningful portion of revenue still comes from large government contracts and a smaller set of commercial customers; a missed renewal would dent growth and cash flow.
- Regulatory / geopolitical risk: Palantir works primarily with Western-allied governments. Any change in contracting rules, export controls, or public sentiment around surveillance/data usage could impede some revenue streams.
- Retail / sentiment volatility: News-driven retail interest can inflate short-term moves and create whipsaw risk. The trade plan includes a strict stop to manage that.
Counterargument (a balanced look)
One reasonable counterargument is that much of the positive move is already baked in. The stock has more than doubled from lower price points over the last year and investor expectations are now high. If any quarter shows a sequential slowdown in revenue growth or even a modest margin slip (from hiring, price competition or one-off costs), multiples could compress and erase the upside before fundamentals catch up.
Put another way: this trade depends on the continuation of a multi-quarter improvement trend. If that trend reverts, the path to the targets will be rocky and the stop will be tested.
What would change my mind
- If revenue growth decelerates materially (e.g., two consecutive quarters with QoQ declines or low single-digit growth), I would exit and reassess — that would invalidate the thesis of accelerating commercial adoption.
- If operating margins fall meaningfully (sustained below ~20%) while revenue growth stalls, valuation justification evaporates and I would step aside.
- Conversely, if Palantir reports an acceleration in multi-year contract value, sustained high renewal rates, or publishes evidence of step-function commercial monetization from its AI features, I would increase conviction and treat the trade as a position (longer-term) rather than a swing trade.
Execution checklist before entering
- Confirm price is in the entry range ($160-$170), ideally buying on smaller intraday pullbacks rather than at the top of the band.
- Check volume profile: prefer entries on light-to-medium volume pullbacks; avoid buying into heavy-volume distribution days.
- Set the stop immediately at $150 and size the position so loss on stop equals your risk allocation.
Bottom line
Palantir's recent results show a company executing at a higher level: sequential revenue growth from $883.9M to $1,181.1M across Q1-Q3 2025, operating margins north of 30% and positive operating cash flow. Those are real operational improvements. They create a tactical opportunity to trade the stock long with a clearly defined stop and two-tiered target strategy.
That said, the stock is not without risk. Valuation sensitivity and execution/renewal risk mean this is an aggressive, high-conviction trade that should be sized accordingly. Put simply: the fundamentals are providing the runway for upside, but only disciplined risk control and follow-through on future quarters turn this swing idea into a longer-term position.
Note: figures and dates cited are from the latest company filings and market snapshot available through 01/27/2026. Use those data points as the basis for your sizing and risk calculations.
Disclosure: This is not financial advice. I may initiate a position in PLTR as part of executing this trade plan; individual investors should consider their own risk tolerance and constraints.