Originally published: August 3, 2026 | Updated: October 10, 2026 | By Jenna Lofton, StockHitter.com
The Short Version: Palantir’s latest reported quarter delivered 92.8% revenue growth and a Rule of 40 score of 155. The growth is striking. The valuation still deserves its own argument.
A strong business can still be a volatile stock. Our when-to-sell framework is built around checking the thesis, the price and the risks together. A good quarter does not settle all three.
Key Takeaways
- Q2 2026 revenue hit $1.94 billion, up 92.8% year over year, accelerating from Q1’s 85%. Growth picked up on an already much larger revenue base.
- U.S. commercial revenue reached $764 million, up 149% year over year. Remaining U.S. commercial deal value more than doubled to $6.24 billion, including contract options.
- The Rule of 40 score climbed to 155, up from 145 in Q1. Adjusted operating margin hit 62%, GAAP operating margin hit 47%.
- Full-year 2026 guidance was raised to $8.15-8.16 billion in revenue, representing 82% growth, with adjusted free cash flow guided to $4.50-4.70 billion.
- Q3 is the next financial checkpoint. Management guided to $2.160-2.164 billion in revenue; guidance is an expectation, not a reported result.
A Score That Was Not Supposed to Exist, and Somehow Got Weirder
Quick refresher: Palantir calculates its Rule of 40 by adding year-over-year revenue growth to adjusted operating margin. Other companies sometimes use a cash-flow margin, so check the definition before comparing scores. For Q2, the rounded figures were 93% plus 62%, giving 155. That is an extraordinary combination, but it is not a valuation model. The definition is in Palantir’s August 3 results release.
Palantir’s Rule of 40 score for Q2 2026 was 155. Last quarter it was 145; the quarter before, 127. Growth and adjusted operating margin are improving together. That is worth paying attention to without treating the score as a promise about the share price.
CEO Alex Karp emphasized demand for sovereign AI in the earnings release. That is the commercial opportunity to watch: whether customers keep expanding real production use of the platform.
The Scorecard in Context
The Rule of 40 trend is encouraging: 127 in Q4 2025, 145 in Q1 2026 and 155 in Q2. The same definition needs to be used across periods for that comparison to mean anything.
There is a caveat worth keeping in view. Adjusted operating margin excludes stock-based compensation and related employer payroll taxes. Shareholders still need to consider those costs and potential dilution.
A strong operating score belongs alongside valuation, cash flow and business risks. It cannot make a sell-or-hold decision on its own.
What the Q2 2026 Numbers Actually Say
The headline is $1.94 billion in revenue, up 92.8% year over year. That is an acceleration from Q1’s 85%, rather than the slowdown investors often expect as a business gets bigger.
U.S. commercial revenue is the number I genuinely care about most for this business, and it grew 149% year over year to $764 million. Remaining U.S. commercial deal value more than doubled to $6.24 billion. That measure includes contract options and assumes contracts continue without termination, so it should not be read as guaranteed future revenue.
Total contract value closed across the business reached $3.37 billion, up 49% year over year. GAAP net income attributable to common stockholders was approximately $1.062 billion, with diluted GAAP EPS and adjusted EPS both at $0.41. Adjusted free cash flow was approximately $1.22 billion.
Palantir raised full-year 2026 revenue guidance to $8.15 to $8.16 billion, representing 82% growth, and lifted U.S. commercial guidance to “in excess of $3.424 billion,” implying 134%+ growth for the year. Adjusted free cash flow guidance landed at $4.50 to $4.70 billion. For Q3, management is guiding to $2.160-2.164 billion in revenue, which, if you’re keeping score at home, is a bigger single-quarter number than the entire company did in a full year not that long ago.
What the Rule of 40 Actually Measures (And Why 155 Should Make You Sit Down)
Most investors have heard the term Rule of 40 tossed around. Fewer people could actually explain what it’s filtering for if you cornered them at a party, which, fair, nobody wants to be cornered at a party and asked to explain a SaaS metric. I get it. Let’s fix that anyway.
The metric puts growth and profitability on the same scorecard. Using an operating-margin version consistently, 60% growth with a negative 30% margin produces 30; 20% growth with a 25% margin produces 45. Keep the definition consistent, and read adjusted results alongside GAAP results.
A score of 155 captures unusually strong growth alongside a high adjusted operating margin. Palantir reported 92.8% revenue growth and a 62% adjusted operating margin on roughly $1.94 billion of quarterly revenue. That is a powerful combination. It does not prove the company has no peers or that any purchase price makes sense.
Government vs. Commercial: The Mix Shift Story Just Got Loud Enough to Hear From the Parking Lot
Palantir serves government and commercial customers in the U.S. and internationally. Both U.S. businesses are growing rapidly, with commercial revenue expanding faster in Q2.
Government business remains an important base. U.S. government revenue grew 90% year over year to $809 million in Q2. Deep integration into customer workflows can support retention, but contract renewals and public spending priorities still matter.
U.S. commercial revenue growing 149% year over year is the crossover thesis showing up in the numbers. The mix is worth watching, although faster growth alone cannot tell us what valuation multiple the shares deserve.
AIP and the Sovereign AI Partnership
Palantir’s Artificial Intelligence Platform, AIP, is central to its enterprise AI offering. It connects models with operational data and workflows, with controls intended to help organizations govern how AI is used. That is important when a demo has to become something a business can actually rely on.
Governance and customer control are central to the pitch. On September 8, Palantir named Nebius its preferred sovereign AI infrastructure partner. After integration, eligible customers are intended to access Nebius compute and inference within Palantir’s enterprise perimeter. No contract value was disclosed. Our Nebius stock analysis covers the infrastructure side of that partnership.
The Valuation Question: Still Expensive, Still Aggressively Growing Into It
Yes. Palantir is expensive. By any conventional software valuation framework, uncomfortably so. That has not changed, and I’m not going to pretend it has just because the quarter was good.
What matters is whether growth can keep supporting the expectations built into the price. Faster revenue growth can help a business grow into a high valuation, but the share price can rise faster too. The Q2 report strengthens the operating case without resolving the valuation question.
Traditional valuation tools still matter here. The difficult inputs are how long rapid growth lasts, where margins settle and what return investors demand. Small changes in those assumptions can produce very different answers. The spreadsheet does not get a free pass just because the quarter was good.
Wall Street Reality Check
Strong business results and a sensible purchase price are separate questions. Neither a falling chart nor an impressive growth rate answers both.
Read the operating numbers alongside the expectations already reflected in the price. Our guide to reading an earnings report walks through revenue, margins, cash flow and guidance together.
Risks Worth Taking Seriously After Q2
Palantir’s momentum is real. So is every risk I flagged last quarter, because a great print doesn’t retroactively delete the things that could still go wrong. That’s not how risk works, unfortunately.
- Valuation risk is still the big one. If growth meaningfully decelerates from here, multiple compression could get ugly fast regardless of how good the underlying business is. High-multiple growth stocks get punished disproportionately the moment growth disappoints, and the damage can be substantial.
- Government concentration hasn’t gone anywhere. A real shift in defense spending priorities or the loss of a major contract could still meaningfully dent a segment that’s still a substantial chunk of total revenue.
- Competition is getting louder, not quieter. Salesforce, ServiceNow, Microsoft, and an ever-growing pile of AI-native startups are all building competing enterprise AI deployment platforms. Palantir’s governance moat is real. It is not a permanent forcefield if competitors actually close the gap.
What I’m Watching for Q3
For the next report, four checks keep the discussion grounded in the business:
- U.S. commercial growth rate: watch whether rapid expansion continues from Q2’s 149% year-over-year baseline.
- Rule of 40 score: watch whether growth and adjusted operating margin sustain Q2’s combined score of 155.
- Revenue versus guidance: compare Q3 results with management’s $2.160-2.164 billion revenue range, rather than assuming another strong quarter.
- U.S. government growth: rose 90% year over year in Q2. Watch whether that momentum continues.
For Q3, I also want to watch how remaining deal value converts into recognized revenue. Contract duration, options and termination rights affect that relationship, so faster RDV growth is not automatically an execution problem. As of this October 10 update, Q2 is the latest financial report verified for this article.
Bottom Line
Palantir’s Q2 results make a strong operating case: rapid growth, expanding margins and rising commercial demand. The next question is how much of that progress investors are already paying for.
The valuation is still uncomfortable. A strong quarter is worth studying without turning it into permission to ignore risk. For the full picture of Palantir’s place in the broader AI infrastructure stack, see our AI Infrastructure Stocks 2026 playbook.
For investors tracking the broader AI infrastructure theme, Louis Navellier’s Growth Investor offers another perspective on earnings momentum. Read the research alongside company filings and your own valuation work.
Disclosure: The author holds a long position in Palantir Technologies (PLTR) at the time of publication. This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research before making investment decisions.