Hook & thesis (short):
Palantir is no longer a pure-growth prospect burning cash to build platform scale. As of 02/03/2026 the stock is trading near $155.75 and the company is demonstrating profitable, cash-generative growth driven by enterprise AI deployment across both commercial (Foundry) and government (Gotham) verticals. Q4 2025 revenue surprised to the upside and management signaled a bigger 2026 revenue path, which combined with improving margins and strong operating cash flow supports an upgrade to a tactical long.
This is a trade, not a valuation endorsement without guardrails. Enter with a plan: buy into the momentum, use a tight stop to limit downside if sentiment reverses, and scale out at predefined targets as fundamentals and multiple expansion play out.
What Palantir does and why the market should care
Palantir builds decision-intelligence software: Gotham for government customers and Foundry for commercial clients. The product sell is more like a high-value enterprise contract or software-enabled services engagement than a simple SaaS seat - think multi-year contracts with integration, customization and recurring analytics revenue. The strategic point for investors is that these contract economics are now being amplified by enterprise AI demand: model deployment, operationalization and decisioning are increasing average contract values and accelerating renewals/expansions.
Why that matters now: AI budgets are shifting from pilots to production. Palantir's core value proposition - integrating heterogeneous data and operational workflows - is a natural fit for enterprises and agencies moving to production AI. That dynamic is visible in the company's revenue and profit run-rate.
Numbers that support the upgrade
- Revenue acceleration: Q4 2025 revenue (actual) reported at $1,406.8M and Q3 2025 revenue was $1,181.1M. Using Q4 2025 (1,406.8M), Q3 2025 (1,181.1M), Q2 2025 (1,003.7M) and Q1 2025 (883.9M) gives a trailing twelve months (TTM) revenue of ~ $4.48B.
- Profitability: Q3 2025 net income was $476.7M, operating income $393.3M and gross profit $973.8M. Palantir is consistently delivering positive net income and operating income versus earlier years when profitability was inconsistent.
- Cash flow resilience: Q3 2025 net cash flow from operating activities was $507.7M. Operating cash flow is sizable and supports continued investment in R&D (Q3 R&D $144.2M) while keeping the balance sheet liquid.
- Balance sheet: As of Q3 2025 assets and liabilities show a large current asset base ($7,586.2M current assets) and equity of ~$6.688B, signaling ample liquidity to fund growth and absorb cyclical shocks.
- Market action: As of 02/03/2026 the intraday snapshot shows the stock trading at roughly $155.75 (close) and moving up on the earnings/revision news, with volume above normal on the move. That indicates the market is starting to price in a faster 2026 revenue path and improved margin profile.
Valuation framing - be pragmatic
The dataset does not include a clean, explicit market cap value. Using the most directly reported share proxy in the filings (diluted average shares ~2.571B in the most recent quarter) multiplied by the snapshot price (~$155.75) produces an arithmetic market-cap proxy that is extremely high and misleading if taken at face value (this diluted-average-shares figure is an accounting average, not necessarily the real-time outstanding share count). Rather than rely on a single possibly misleading market-cap datapoint, think in terms of two valuation buckets:
- Fundamentals-first: Palantir's current revenue run-rate (~$4.48B TTM), positive operating income and >$500M quarterly operating cash flow justify a materially higher multiple than legacy software names when AI-driven expansion is priced in. But the proper multiple depends on sustainable growth beyond 2026.
- Multiple risk: The stock has been volatile; narrative-driven swings remain large. The right way to trade it is with a staged approach: capture near-term AI re-rating while protecting against a sudden sentiment reset that could re-price multiples back down.
In short: fundamentals (top-line acceleration + positive operating cash flow) reduce binary downside risk versus prior years, but valuation remains a driver of near-term volatility. That supports a tactical—rather than full-conviction—long.
Trade idea (actionable)
Trade direction: Long (rating upgrade)
Time horizon: Swing / Position (weeks to several months)
Entry: 1) Primary entry: $150 - $158 (near current price as of 02/03/2026). 2) Accumulate smaller lots up to $140 on weakness.
Initial stop-loss: $132 (about 15% below top of the entry band) - full size; tighten stops to breakeven after first target hit.
Targets:
- Target 1 (near-term): $185 - take ~30-40% of position. This captures a modest multiple expansion and normalizes the stock closer to recent highs around the $180-210 range seen in the past year.
- Target 2 (medium-term): $240 - scale out another ~40%. This assumes continued AI-driven revenue upgrades and multiple expansion as guidance holds and operating leverage improves.
- Final (optional) hold: $320+ - hold a residual position only if 1) guidance for 2026 continues upward and 2) operating margin expansion accelerates materially.
Position sizing note: Given volatility, limit initial exposure to a size you can stomach losing 10-15% on. Use the stop above; adjust size so stop loss equals your risk tolerance.
Catalysts (what to watch)
- Management guidance for 2026 revenue and TCV growth - the market already reacted to a "bigger 2026 revenue path"; further upward revisions would sustain the rally.
- Customer wins and expansion in large commercial verticals - multi-year, high-TCV deals materially raise visibility into revenue.
- AI integration milestones and partnerships (hardware ecosystem partnerships like NVIDIA/AMD mentions in the press matter) that accelerate deployment and increase average contract value.
- Continued margin expansion - evidence that R&D and SG&A scale is turning into durable operating leverage.
Risks and counterarguments
- Valuation reset / sentiment risk: Even with better fundamentals, Palantir remains a narrative-driven stock. A broad tech selloff or a short-term disappointment in guidance could force the stock sharply lower. The RBC narrative warning of a $50 floor illustrates how quickly sentiment can swing.
- Concentration and government exposure: Historically Palantir has had material exposure to government contracts. Changes in procurement cycles or budget timing can create lumpy revenue and guidance misses.
- Execution risk on commercial AI deployments: AI pilots turning into production is hard operational work. Customers could delay or cancel large projects if integration costs or results lag expectations.
- Competition and commoditization: Large cloud vendors and specialized AI firms are aggressively moving downstream. If core differentiation (data integration + operational workflows) erodes, pricing power and margins could compress.
- Regulatory / geopolitical risk: Palantir’s explicit policy to work only with Western-aligned customers mitigates some geopolitical risk but also limits total addressable market in some regions. Increased regulation around AI could change contract economics.
Counterargument I take seriously: The stock's multiple can be punished quickly if growth expectations are not cemented into multi-year visibility. If 2026 growth disappoints or renewals fall below expectations, a re-rating to much lower multiples is possible — which is why the proposed stop and staged targets are essential.
Conclusion & what would change my mind
Recommendation: Upgrade to a tactical Long (swing/position) with the trade plan above. Palantir has moved from a late-stage build phase into one where revenue growth, net income and operating cash flow are demonstrably positive. AI is an accelerant to contract economics for a company built on data integration and decisioning, and Q4 2025 results plus the larger 2026 revenue path are the near-term evidence.
What would change my view:
- If subsequent quarters show materially slower operating cash flow (quarterly OCF dropping below ~$300M) or bookings/TCV cadence weakens, I would return to Neutral or reduce exposure.
- If management guides to a conservative 2026 with no meaningful visibility into multi-year renewals/expansions, I would remove the upgrade and likely close positions ahead of a re-rating.
Quick readouts (reference datapoints)
- Price (snapshot close): ~$155.75 as of 02/03/2026 - Q4 2025 revenue (actual): $1,406.8M - Q3 2025 revenue: $1,181.1M - Q2 2025 revenue: $1,003.7M - Q1 2025 revenue: $883.9M - TTM revenue (sum of the four quarters above): ~ $4.48B - Q3 2025 net income: $476.7M - Q3 2025 operating cash flow: $507.7M - Q3 2025 R&D: $144.2M - Balance-sheet current assets (Q3 2025): $7,586.2M
Disclosure: This is not financial advice. The plan above is a tactical trade idea with entry, stop and targets. Size positions according to your risk appetite and use the stop-loss discipline outlined.